July 24--Tech giant Broadcom Corp. is ditching its once-lucrative cellular baseband chip unit -- a move that will lead to 2,500 job cuts or 20 percent of its total global workforce, the company reported this week.
The Irvine-based company has been an outfitter of chips, or the "brains," for iPhones since the device's second generation. Apple, one of Broadcom's biggest clients, at one point comprised up to 15 percent of its revenue, based on analyst estimates just two years ago.
The money-making partnership was sweet while it lasted.
However, increasing competition from Asia and the firm's decision to focus on Apple instead of the more ubiquitous Android market are likely what led to the impending death of its baseband division, said Patrick Tafua, a lead recruiter at Jobspring.
The tech juggernaut also was late to enter the 4G market.
"If you notice in the mobile war of iPhone versus Samsung and iPhone versus Android, there are more Android products than iPhone," Tafua added. "There's not enough product for (Broadcom). The Android market is more eclectic and cheaper, more hands are touching it."
Tafua, who is based in Newport Beach, said local engineers who are part of Broadcom's baseband team have been worried for their jobs ever since news broke in June the company was mulling a sale or wind-down of their unit.
Such layoffs may come by the quarter's end and cascade from the company's Norway or Switzerland locations, according to Tafua's conversations with local Broadcom workers.
The chip company has already shed 250 sales and administrative positions, according to its quarterly report filed this week. Broadcom, however, declined to say where those jobs were based.
The next step is to cut 2,250 more worldwide, shutter or merge as many as 18 offices and nix certain contracts, the filing adds.
Broadcom also declined to say where its baseband operations are concentrated. But at least 80 employees are tied to that team in Irvine, Tafua said.
They include embedded-software engineers, electrical engineers and some quality-assurance employees.
The mobile-chip market is by no means dead. Industry leader Qualcomm dominates the 4G-chip market. Also wanting a share is Taiwanese semiconductor company MediaTek, which has decided to set up a San Diego branch to compete with Qualcomm.
Broadcom's move to abandon its cellular baseband division could result in $700 million savings annually, the company said in its quarterly report.
Of that, $50 million will be reinvested into projects involving broadband, infrastructure and whatever remains from its mobile and wireless units, President and Chief Executive Scott McGregor said in Tuesday's investor conference call.
A new focus will be the much-hyped "Internet of things" sector, which refers to the connection of inanimate objects, such as home thermostats and lighting systems, to the Internet, allowing for automation.
A study by McKinsey Global Institute estimates this segment could have an economic impact of up to $6.2 trillion annually by 2025.
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