US microchip maker to buy mothballed Siemens plant

A US microchip company is planning to buy the North Tyneside plant closed by Siemens with the loss of 1,200 jobs two years ago. The new buyer, Amtel, is expected to confirm today that it will invest £700m in the plant, which it is buying for £35m.

A US microchip company is planning to buy the North Tyneside plant closed by Siemens with the loss of 1,200 jobs two years ago. The new buyer, Amtel, is expected to confirm today that it will invest £700m in the plant, which it is buying for £35m.

The turnaround in the fortunes of the factory reflect a massive world shortage of memory chips. Demand for the chips is soaring because of booming sales of devices such as mobile phones, television set top boxes, digital cameras and home computers.

According to some analysts, the shortage, in a market notoriously prone to boom and bust, will be the worst for years thanks to the strength of the world economy. The price of some types of chip has doubled in about 18 months.

Two years ago, at the height of the global financial crisis, the fear was that massive over-capacity afflicted the industry. As well as the controversial Siemens decision, LG Electronics and Hyundai both mothballed plants they had planned in the UK, factories that together would have employed around 8,000 people, as a result of the crisis affecting the Asian economies.

Ironically, Siemens has had to scale back its production of mobile phone handsets this year because it has been unable to buy enough memory chips. The component shortage led to a cut of 10 per cent in its planned production of 30 million handsets.

Today's expected announcement about the Wallsend plant will be particularly welcome because the North-east remains one of the highest unemployment areas of the country.

The region, a Labour heartland, has been one of the hardest hit by the strength of the pound, which has eaten into its traditional maufacturing exports. Although employment has been rising, most of the new jobs being created are in services such as call centres.

Amtel, a California-based company, is planning to manufacture chips for digital radios. The talks to buy the plant were first reported earlier this month.