On Tuesday, Motorola executives in Schaumburg, Ill., said the company's struggling Semiconductor Products Sector was embarking on a new strategy that will close down an unspecified number of chip plants, layoff an additional 4,000 workers worldwide, and eventually outsource 50% of the company's CMOS-based products.

The disclosure was made while Motorola confirmed its fourth-quarter estimates for corporate revenues being sequentially flat-to-3% higher from $7.24 billion in Q3 (see Dec. 18 story). Motorola still expects to report an operating loss of $0.04-to-$0.05 per share, prior to charges, and it will not return to profitability until the second half of 2002, according to Christopher B. Galvin, chairman and chief executive officer of the company.

Motorola said it now plans to eliminate a total of 9,400 additional jobs in the next 12 months, with the greatest cutbacks being the Austin-based Semiconductor Products Sector.

Under its new "asset light" plan for the chip business, Motorola is aiming to return the semiconductor group to double-digit operating margins, said company president Robert L. Growney, during a conference call with analysts on Tuesday evening. He would not issue a forecast for semiconductor sales, but he said more details on Motorola's semiconductor plan and guidance will be presented in January.

"Going forward, you will see us concentrating in those unique product areas where we can bring true leadership and moving to an outsourcing process--a model where we don't have to keep the same number of fabrication facilities running standard-type products," he told analysts while fielding questions. Growney said the "asset light" semiconductor model will earmark capital investments for production in "high-technology unique processes."

When pressed for more details, Motorola executives provided little details about the new semiconductor plan, which has been in the works since the middle of this year when the Austin-based sector was given a timetable to turnaround its business. Earlier this year, Growney triggered a number of news stories when he told analysts that Motorola would not rule out selling or spin-off its struggling semiconductor sector, but he later emphasized that the group was not being singled out for divestiture, yet (see Aug. 21 story).

In fact, during Tuesday's conference call, Growney said it is expected that Motorola's Semiconductor Products Sector could reach the target of double-digit operating margins with the new round of cuts and manufacturing outsourcing strategy that's now underway. He also said Motorola could reach its corporate goals for 2002 without any major divestiture--including semiconductors.

Motorola did not release details about which semiconductor fabs or plants would be closed as a result of the new "asset light" model. Executive indicated that actions would be taken in the first quarter, and it has begun notifying some semiconductor employees that their jobs will be eliminated next year.

In the summer of 1998, Motorola also told financial analysts that it was embarking on a bold new plan to shift 50% of its chip production to third-party foundries and manufacturing companies in the next four years. In 1998, about 7% of the company's chip production was handled by outside suppliers. However last year, Motorola semiconductor executives indicated that the company had backed off the 1998 plan and was only targeting 12-to-15% of its wafer processing at foundries. But then the severe downturn hit the chip industry and sent Motorola semiconductor operations into a tailspin.

"In the fourth quarter of last year, we came close to double-digits operating margins in that business before the significant downturn," said Motorola chairman Galvin. "The new business model for semiconductor contains more liberal licensing of intellectual property to generate royalty income and associated cash flow which is essentially needed to focus on highly integrated proprietary products--such as the new chip set reference platform for 2.5 and 3G," he said, referring Motorola's move to open up access to all of its cellular phone technologies for chip customers and next-generation handsets (see Sept. 17 product launch story).

"The 'asset light' model is an attempt to reduce the fixed expenditures in the business more significantly than we did before," Galvin explained. "We will not build 300-mm fabs ourselves. We will do that in a partnership. We will outsource 50% of our CMOS business over a period in time in partnerships with foundries, but we would continue to invest in the specialized technologies, like gallium arsenide and silicon germanium and other III-V compound materials that are quite unique and unavailable for outsourcing, which gives us differentiation.

"That way we think we are able to size the capital investment and still innovate in the business and make it more profitable in the long-term future," Galvin told analysts.