Chrysalis-ITS Wednesday said it would lay off 102 workers as it shut down its semiconductor division to focus on its systems business.

The Ottawa-based company said tough times in the chipmaking industry, coupled with design problems of its Luna processors, had forced its hand. The Luna series, which were essentially security processors designed to offload packet throughput from external processors, were initially set back by production delays.

Chrysalis spokeswoman Connie Costigan said she couldn’t specify the nature of the problems, but that they were detected early on.

“When it came back from the fabrication there were some initial problems and they had been working that out for some time,” she said. “We were also involved in the production of other chips too; it’s not like our entire division was working on that.”

Security processors, which include their own packet processors that can be programmed to handle a variety of packet types, has quickly become a fiercely competitive market. Hifn and SafeNet also entered into this area, offering OEMs the chance to include only the security chip and the host CPU.

Costigan said the company’s systems business would continue to concentrate on Internet security hardware products and that customers would be unaffected by the division’s closure. There are no plans to offer laid off employees positions in other departments.

“Our divisions are quite different,” she said. “When we started this kind of design team they’re very skilled ASIC designers. They write software for this. We have already have a custom systems division that does development for our systems-level products like PKI and e-commerce. They were quite separate as it was. Unfortunately, as a result of the market conditions we’ve reduced staff all over.”

Chrysalis-ITS indicated industry research had influenced its decision. A public statement quoted a Gartner’s Dataquest from July pointing out that corporate revenue for semiconductor companies fell sharply in the second quarter, triggering price erosion, declining order backlogs and no improvements in orders overall.

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