New York, Aug 19: IBM on Monday said it cut 600 jobs in its money-losing chip-making division and that it would require 3,000 employees to take a week of unpaid leave. The Armonk, New York-based company has been hard hit by the worst downturn on record in the semiconductor industry and has struggled with production issues at a new $3-billion microchip plant in East Fishkill, New York.

Its technology division, which includes microelectronics and engineering design services, posted a loss of $110 million in the second quarter and is expected to lose money for 2003.

"These moves are designed to make us more competitive and improve our profitability," an IBM spokesman said.

The job cuts are less than 0.2 per cent of IBM's total work force of about 316,000 and about 3.5 per cent of the technology division's work force. About 500 of the 600 cuts are at the company's Burlington, Vermont, microchip facilities and include manufacturing support positions like maintenance workers.

The other 100 are split among other technology division locations including East Fishkill, Poughkeepsie and Endicott, New York; Austin, Texas; and Raleigh, North Carolina, Sykes said.

The 3,000 employees being asked to take unpaid vacation include executives and manufacturing support employees.

IBM shares were up $1.19, or 1.5 per cent, to $82.98 in midday New York Stock Exchange trading while the broader American Stock Exchange Computer Hardware Index was up 1.7 per cent. Bureau Report