The big news in Pocatello, Idaho yesterday was the impending sale of AMI Semiconductor to Phoenix-based On Semiconductor. I got several emails from people that I used to work with at AMIS asking what I thought of the sale and what the impact on AMIS in Pocatello will be.

On Semiconductor bought the Gresham, Oregon fab from LSI Logic almost two years ago. I have some friends working at the Gresham fab and heard from them a little about the culture changes that took place as On Semiconductor took over the facility.

Based on that information, what I’ve read in the press (both print and online), and my own observations about AMIS, here are my predictions:

• AMIS has four fabs: a four-inch fab in Belgium which is in the slow process of being shut down, a five-inch fab in Pocatello which is doing fairly well, a six-inch fab in Belgium which is full, and an eight-inch fab in Pocatello which is running around half capacity. On will quickly shut down the four-inch fab and by mid 2009 there will be no fabs in Belgium and only one fab in Pocatello. I suspect the five-inch fab will stay and the eight-inch fab will be consolidated into On’s eight-inch fab in Gresham, Oregon.
• Currently AMIS employs about 900 people in Pocatello. By mid-2009 that will be less than 300 and most of them will be design engineers. That means more than 600 people will be laid off in Pocatello. Most of them will have to move somewhere else to find a job.
• AMIS has hired some pretty high-level talent over the past year or so, including a new President, a new CFO, a new Treasury person, and several others. These folks will be regretting having moved to Pocatello as their jobs will all go away.
• Most other corporate functions will move away from Pocatello, particularly finance and IT. That makes me very sad as there are some top-drawer IT people at AMIS.

This sale will not be good for Pocatello but it won’t be devastating or even have much of a lasting impact. For many years, GE would build plants in small-town America and staff them with lower-cost non-union labor found in these rural communities. Then Jack Welch came along. He initiated a huge consolidation resulting in shutting down most of these rural operations (for which he was nicknamed “Neutron Jack” in reference to the neutron bomb which eradicated people but left the buildings intact). These rural towns were devastated and the hulking shells of former GE buildings dot the landscape in the midwest in these small, almost ghost towns. The sale of AMIS will not have that impact on Pocatello, but it will definitely not be good for the city.

Shortly after AMIS recruited me to Pocatello, I came to realize that the values at AMIS were widely at variance with the values in general in the Pocatello area. The people in Pocatello are a bit more liberal than the Idaho average, but still quite conservative in comparison with the other blue states. They want stable employment with good benefits. They are interested in clean, environmental friendly manufacturing. They want some growth, but controlled and managed growth.

AMIS, on the other hand, has become a company that hires and fires constantly. Employment will ratchet up to about a thousand and then a couple hundred people will be laid off. One joke around town is that eventually everyone in the city will have been laid off by AMIS. The company has become very short-term focused rather than looking and planning for the long term. They’ve made several acquisitions in the past couple of years, spending a lot of money, for little gain (in fact, a couple of acquisitions have cost the company significant money). They have ventured into markets for which they were unprepared and have gotten spanked as a result. For instance, AMIS bought a company in Canada to make a move into the medical market. The main market for those products is in the United States and at the same time, some serious changes were underway in the U.S. about how products will be qualified and allowed to be sold. Those changes caught AMIS by surprise and the ballyhooed growth in the medical marketplace stalled, causing knee-jerk reactions when the quarterly results fell short. Rather than holding the executives accountable, the working folks got stiffed.

I’ve felt for a long time that AMIS was a company busy committing suicide. Yesterday they sold the gun to the company that will pull the trigger. Goodbye, AMI Semiconductor….