LSI scraps ASIC line, plans to sell DSP unit

SAN JOSE, Calif. — In a major restructuring effort, LSI Logic Corp. on Monday (March 6) announced that it will cease development of its RapidChip ASIC platform technology and said it would sell its digital signal processor (DSP) unit.

Consistent with its increased focus on storage, the company has also canceled its previously postponed plan for an initial public offering of its storage systems subsidiary, Engenio Information Technologies Inc.

As part of the moves, LSI Logic (Milpitas, Calif.) will cease further RapidChip ASIC development. RapidChip customer designs currently in production or under development will continue and are not affected by this action, according to the company.

The company's DSP unit, called ZSP, is expected to be sold. No timeframe for completion of this transaction is being announced at this time.

In effect, LSI Logic said that it is moving from a merchant ASIC provider to the storage and consumer markets.

"By focusing our resources on fewer markets, where our deep insight and unique silicon-to-systems capabilities can be fully leveraged, we anticipate delivering greater value to customers," said Abhi Talwalkar, LSI Logic’s president and chief executive, in a statement.

"Today, we are taking specific actions to significantly enhance our ability to target growing opportunities in the storage and consumer markets, where rapid information growth and the surging consumption of digital content play to our strengths in providing differentiated market solutions that incorporate silicon, systems and software," he said.

This represents the latest in a series of moves by the troubled company. Last year, semiconductor supplier LSI Logic reorganized its business to focus on the company’s key markets of custom integrated circuits, consumer products, and storage platforms and products.

The moves reflected the efforts of new president and chief executive Talwalkar. Last year, he succeeded company founder Wilf Corrigan.

Last year, LSI Logic also said it would sell its 8-in. wafer manufacturing plant in Gresham, Ore., as it continues to transition to a fabless manufacturing strategy.

Recently, the company reported a net income for the quarter of $38 million, or 9 cents per share, based on generally accepted accounting principles (GAAP), a sharp turnaround from net losses of $197 million for the fourth quarter of 2004 and $73 million for the third quarter of 2005. The company's third quarter 2005 results included a $91 million restructuring charge associated with the planned sale of its wafer fab in Gresham.

LSI reported fourth quarter 2005 revenue of $506 million, up 21 percent from $420 million in the same period of 2004 and a sequential increase of 5 percent compared to the $482 million reported in the third quarter of 2005.