LSI Logic Adopts Fabless Manufacturing Strategy

-- LSI Logic Corporation (NYSE: LSI) today announced plans to adopt a fabless manufacturing model to better serve its global customer base, reduce production costs and adopt leading-edge process technologies.

The company's new manufacturing strategy foresees the expansion of its working relationships with major foundry partners and the adoption of a roadmap leading to the production of advanced semiconductors utilizing 65- nanometer and below process technology on 300-mm or 12-inch wafers.

LSI Logic intends to sell its world-class, eight-inch Gresham, Oregon manufacturing facility. Throughout this transition from a fab-lite to a fabless model, LSI Logic will continue to meet the production needs of its worldwide customer base through the use of its Gresham factory and its foundry suppliers. LSI Logic will work diligently with its public sector partners, Multnomah County and the City of Gresham, to continue its partnership through the planned sale of the company's Gresham campus.

"Leading-edge foundries have consistently demonstrated that they have the capability to manufacture the advanced solutions required by our standard-cell ASIC, Platform ASIC and standard product customers," said Abhi Talwalkar, LSI Logic president and chief executive officer. "Our customers are demanding technology leadership from LSI Logic in the drive toward 65-nm process technologies and lower, and that is exactly the course we are going to follow.

"At the same time, we are seeking a buyer for our Gresham facility, which is capable of manufacturing designs at 0.13-micron and higher. We are putting retention plans in place so our Gresham employees can assist us in providing uninterrupted service to our customers. The adoption of a fabless model, the expansion of our foundry partner relationships, and the pursuit of a 65-nm process technology roadmap is the right manufacturing strategy for LSI Logic to better serve its customer base, reduce manufacturing costs to bolster its competitiveness and to enhance value for its shareholders."

LSI Logic presently employs a fab-lite global manufacturing strategy, serving the manufacturing needs of its customer base at its Gresham, Oregon campus and at its foundry partners, TSMC, UMC, SMIC and ROHM Co Ltd. When the transition to a fabless model is completed, LSI Logic will meet the manufacturing requirements of its customers exclusively through engagements with its major foundry partners.

The company estimates it will record restructuring and other charges of approximately $75 million to $110 million in the third quarter of 2005 for fixed asset write-downs, severance and other expenses associated with the planned sale of the Gresham manufacturing facility. The company anticipates incurring related restructuring charges of less than $3 million per quarter in the fourth quarter of 2005 and the first two quarters of 2006.

LSI Logic is holding an analyst conference in New York tomorrow (September 14) to discuss its business plans, including today's announcement of the company's newly adopted manufacturing strategy, and to introduce its new leadership team.