Siemens shuts down Tyneside plant

Siemens today confirmed that its semiconductor plant in Tyneside will close. Up to 1,100 staff will be laid off, although the company said it hopes to save 20 per cent of jobs through relocation.

The company has set up a taskforce with the UK government to review all the options for the future of the plant, and maintains it still might be saved, although a 'white knight' buyer from Taiwan dropped out after eleventh hour negotiations.

Siemens said: "The global semiconductor market conditions left us with no option but to reduce manufacturing capacity worldwide." The company denied the strong pound was the only reason for the facility's demise. The decision comes less than two weeks after the company forecast a loss of £350m for its entire chips business.

Alan Wood, chief executive of Siemens, said the plant will start to wind down from the end of September "if the joint task force is unable to achieve a suitable alternative". He added he "deeply regrets" the effect of the decision, and said he has been speaking to the Department of Trade and Industry and Peter Mandelson, Secretary of State for Trade and Industry, about the possibility of rescuing the plant.

Alan Donnelly, the MEP for Tyne & Wear, expressed his shock and disappointment at the decision, but said: "I will be giving my full support to the government's task force to either encourage a buyer for the site or persuade Siemens to investigate other avenues."

Dr Ulrich Schumacher, chief executive of Siemens' semiconductor group, admitted the move is a major embarrassment for the company. He said: "This was last of our options to bring our semiconductor business back to profitability."

He added he was not sure how South Korean semiconductor manufacturers can sustain their operations and suggested they benefited unfairly from a recent IMF (International Monetary Fund) bail-out package. He said Siemens lobbied the EU, calling for a ban on dumping of cheap semiconductors by Korean chipmakers.

Siemens is also in the process of closing its Munich factory in Germany, costing 450 jobs, which the company claims is also a result of the unfavourable market conditions.