ORLANDO, Fla.—Orlando microchip maker Cirent Semiconductor launched an unprecedented cost-cutting campaign late Tuesday, eliminating 263 hourly jobs, freezing future hiring and plotting other ways to save money.
Cirent began the first job cuts in its five-year history Tuesday night, handing out dismissal notices to evening-shift factory technicians and operators. The rest of the workers whose jobs were cut will receive pink slips today and Thursday.
Like chipmakers worldwide, Cirent has been hurting for almost six months, so the cutback came as little surprise, employees said. But they still found themselves stunned at the news.
"I've been here 17 years, basically since the place opened, from the time it was owned by AT&T until Cirent came along in 1996," said Tom Christian, a factory technician and president of the technicians and operators union. "This is the largest single layoff our union has ever had and the first one since 1989."
And more job cuts may be ahead in other departments, Cirent officials said. Its parent company, Agere Systems Inc. of Allentown, Pa., also is planning a major downsizing.
Agere may down-size
"Agere will make a companywide workforce announcement that will likely affect some management and engineering employees in Orlando," Cirent spokesman Steve Goldsmith said. "The size and scope and time frame for that announcement has not been determined."
Once Central Florida's fastest-growing high-tech player, Cirent is reeling from a series of events, ranging from slumps in telecommunications and PC manufacturing -- the main markets for its chips -- to Lucent's spin-off last month of Agere, which inherited $2.5 billion in debt.
Agere, formerly Lucent's microelectronics manufacturing arm, is already projecting a multimillion-dollar loss this year, attributable to a significant wipeout of orders from the PC business and telecom-switching equipment industry.
"Overall demand in the semiconductor industry is very, very soft and our business is no different," Goldsmith said. "We are looking very carefully at managing our business during this period, and we are looking at many ways to reduce our costs."
Other cost-cutting measures under way at Cirent include:
Elimination of 48 jobs left behind by operators and technicians who accepted a voluntary retirement package in February.
Cutbacks in the use of independent contract workers, which affected an unspecified number of jobs.
Budget reductions for employee travel, building improvement and other discretionary-spending items.
Goldsmith said Cirent also has closed the older of its two microchip factories -- known as cleanrooms -- and consolidated all chip-making activity in the newer, more advanced plant. The company had planned to upgrade the older plant with new manufacturing technology.
Cirent's job cutbacks are not expected to disrupt its multimillion-dollar incentive package from Orange County and the state of Florida, company officials said. During its fast-paced expansion in the late 1990s, Cirent received more than $22 million in job-creation tax breaks related to a $1.6 billion plant expansion and 700 new jobs.
The 10-year plan provides tax credits only on the basis of Cirent's performance, said county economic administrator John Lewis.
"The incentives are based on a percentage of the taxes they pay," he said. "If what they pay in taxes goes down, we pay less. We don't pay for what we don't get. The deal counts on a certain level of jobs and taxes paid."
But one part of the incentive agreement states that if Cirent lays off more than 10 percent of its work force, the tax breaks could be reduced, Lewis said.
Local industry officials said the down cycle Cirent and other chip makers are going through should turn around by year's end.
"It's not unexpected this would happen with the telecom chipmakers, given all the challenges facing the telecom carriers today," said Darrell Kelley, former president of the Economic Development Commission of Mid-Florida Inc. and now president of Milcom Technologies Inc. in Maitland.
"With so many new players entering the telecom business, there is a severe supply-and-demand problem, and the industry is poised for a big shakeup. Once that occurs, new technologies will be introduced, new demand will be created and companies such as Cirent will prosper in the long term."