High profile customers like Amazon will need to find alternative platforms for devices like the Kindle Fire.
Texas Instruments said it will lay off about 1,700 workers, or about 5% of its total workforce, as part of a restructuring that will see it exit the market for mobile chips that power smartphones and tablets, including Amazon's Kindle Fire.
The company said it would instead focus its OMAP (Open Multimedia Applications Platform) business on embedded systems that power business tools and other products that don't evolve as rapidly as mobile gadgets.
"We have a great opportunity to reshape our OMAP processor and wireless connectivity product lines to concentrate on embedded markets," said Greg Delgadi, TI's senior VP for embedded processing, in a statement. "These job reductions are something we do with a heavy heart because they impact people we care deeply about."
Delgadi said employees who get pink slips will be offered job placement assistance and other benefits.
Texas Instruments had hoped to compete with Qualcomm, Nvidia, Intel, and other heavyweights who make energy efficient chips for tablets and smartphones. But the company was dealt a significant blow earlier this year when a major customer, Toshiba, cancelled plans for a Windows RT tablet that was to have used an ARM-based chip from TI.
Also contributing to the company's decision to abandon the market was the fact that many phone and tablet makers are producing their own chips. Apple makes its own ARM processors for the iPhone and iPad, while Samsung does the same for the Galaxy S III smartphone and Nexus 10 tablet.
Texas Instrument's move could create complications for some existing high-profile customers. Amazon uses the company's OMAP4 4400 series to power its line of Kindle Fire tablets.
TI has pledged to continue supplying chips to Amazon and other customers for as long as is necessary. Ultimately, Amazon will have to port Kindle Fire to a new platform, presumably an ARM chip from either Qualcomm or Nvidia.
Texas Instruments said the job cuts and other cost-savings moves will initially result in a charge against earnings of $325 million, to be recorded in the current quarter, but that it expects to realize $450 million in annual savings, starting at the end of 2013. The company's fourth quarter outlook, released Oct. 22, did not account for the restructuring charge.
Shares of Texas Instruments were up .54%, to $28.92, in morning trading Thursday.
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