Advanced Micro Devices (AMD) is to cut 2300 jobs, around 15 per cent of its workforce, and close its two oldest fabrication plants in the US.
Some 1000 of the cuts result from the closure of the Texas-based factories, with the remainder stemming from the restructuring of the firm's operations in Malaysia.
Scheduled to be completed by next summer, AMD said the move would cost between $80m and $110m and would save around $125m annually.
The chip firm has lost several customers recently as it fought a price war with Intel in a shrinking market. On Tuesday, Gateway became the latest PC vendor to say it would phase out its AMD lines and adopt an Intel-only approach. Micron and IBM have both dropped AMD lines in recent months.
Analysts, who predict that the chip market could fall by between 25 and 35 per cent this year, said AMD was lagging behind Intel and would continue do so until it introduced its next generation of Athlon processors, expected next summer.
Despite claiming that its processors provide more performance at lower clock speeds than Intel's, now up to 2Ghz, the speed gap has eaten into AMD's credibility.
Shares in the company had fallen 7.8 per cent to $9.05 when the New York Stock Exchange closed on Tuesday.
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