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Texas Instruments, the biggest maker of chips for mobile phones, announced a restructuring of its operations on Monday as it struggled with weak demand and growth focused on low-end handsets rather than higher priced “smart” phones.

TI said it would save around $200m a year by working collaboratively with its foundry partners on next-generation manufacturing processes rather than creating its own core technology.

This would cut its research and development budget and increase its responsiveness to customers, it said. An older digital factory would also be closed and its equipment moved to analogue factories. There would be 500 jobs cut by the year-end, with restructuring charges of $55m spread across the year.

TI said it suffered “unseasonably weak” demand in the fourth quarter with revenues of $3.46bn down 8 per cent on the third quarter. It said it had limited production to reduce inventories.

Earnings per share of 45 cents included a 5 cents benefit from a research tax credit. Without this, they were at the top end of its December forecast of earnings of 37 to 40 cents a share.

“Challenges continue in the first quarter as we operate in an environment where customers want lower levels of inventory and where growth in the wireless market is skewed to low-priced, basic-featured cell phones instead of higher-priced, full-featured phones,” said Rich Templeton, chief executive.

TI predicted sales of $3.01bn to $3.28bn in the first quarter – below analyst expectations of $3.32bn.

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