Reading Works - 2005 - From The USA

From The USA

The last USA based Agere Systems manufacturing plant in Orlando, Florida, which once employed 1,800, was closed on September 30, 2005, after 20 years of semiconductors manufacture and sold in 2007. The company has plants in Singapore and Thailand, and operated 22 sales offices and 16 research and development facilities throughout the world. Its key centers are in Ascot, U.K.; Bangalore, India; San Jose, CA, U.S.; Shanghai, China; and Singapore as well as the world headquarters in Lehigh Valley, PA.

Agere Systems still maintained its position as a key chip supplier for cell phones and hard disk drives. However, the chips it supplied were purchased from outside chip foundries or made offshore rather than made locally. In 2003, 3,000 of the best jobs in town disappeared when Agere Systems closed the Reading Works. But the jobs won't come back when the economy does; like many other high-tech companies, Agere Systems moved production overseas.

Outsourcing is a new name for a long-standing phenomenon: the movement of jobs from the USA to countries where wages, benefits and the cost of living are much lower. In the 1970s and 1980s, heavy manufacturing jobs went to other countries by the tens of thousands. The result was cheaper goods for U.S. consumers and less pollution in many of the nation's industrial cities. Economists who backed the trend envisioned a new "knowledge economy" in which well-trained Americans would become the world's designers, innovators and administrators. The dirty work would be sent overseas.

Not to take advantage of those countries' pools of highly educated, relatively low-wage workers would be foolish, Agere Systems officials said. "Our customers are very demanding," says John Harris, an engineer and marketing manager at Agere's Allentown, Pennsylvania, headquarters. "They're under intense pressure to deliver extremely high quality at extremely low cost. That pressure comes right back on us."

On December 4, 2006, Agere's President and CEO, Rick Clemmer, announced that it would be bought by LSI Logic Corporation of Milpitas, California in an all-stock transaction. On March 29, 2007, this merger was approved by shareholders of both companies, making it official. The companies together own a patent portfolio consisting of more than 10,000 issued and pending U.S. patents. Spun off by Lucent Technologies in 2001, Agere Systems was the creation of a corporate behemoth, while LSI was born 25 years ago as a tiny startup. LSI Logic already has decided to dump the Agere name, which once symbolized the Lehigh Valley's aspirations to become a technology hub. Compared to Agere Systems, LSI Logic has run a tight ship. It generates roughly 20 percent more revenue — $2 billion — with fewer employees worldwide: 3,900, compared to Agere's 5,300. LSI Logic will use the Agere Systems facilities as the center of its research operations, but the combined company's headquarters will be in Milpitas, California.

LSI Logic has come a long way since 1981, when Wilfred Corrigan founded the company with $6 million of venture capital. Corrigan, a native of Liverpool, England, moved to the United States to pursue a career in electronics. He climbed the ladder at Motorola in Phoenix, Arizona, before becoming CEO of Fairchild Semiconductor in Mountain View, California, in the mid-1970s. The launch of LSI Logic marked his transition to entrepreneur. The company went public in 1983. By the mid-1990s, LSI Logic was selling chips to Sony for its PlayStation video game machine. And in 2001, it made its first major acquisition, C-Cube Microsystems, in a stock deal valued at $851 million.

In recent times, LSI Logic has followed a strategy similar to Agere Systems. This year, the company sold an Oregon semiconductor manufacturing facility and acquired two smaller companies, in Israel and India. Now it's swallowing up Agere Systems, which is nearly its equal, in terms of revenue but not productivity. Hence ends the saga of the semiconductor plant that was built in Reading in 1952.