IBM Corp.’s struggling semiconductor business will lay off 600 workers and require employees to take a week of unpaid vacation, an IBM spokesperson said Monday.

Of the 600 jobs, about 500 will be cut from the company’s Essex Junction, Vt., facility, said Bill O’Leary, an IBM spokesperson. Most of the affected employees work in manufacturing support services for IBM’s semiconductor business, he said.

Workers are being notified Monday, and will have 60 days to apply for other jobs within IBM, O’Leary said. If those employees are unable to find another position after that time, they will be cut loose with a severance package of two weeks’ pay for every year of service, up to 26 weeks, he said.

Revenue from IBM’s Technology Group, which makes semiconductors for its own servers as well as for outside companies, dropped 34 per cent in the second quarter, IBM said when reporting its second-quarter earnings in July. Monday’s job cuts are intended to reduce IBM’s long-term costs and improve profitability, O’Leary said.

The Armonk, N.Y., company will address short-term costs with the unpaid leave strategy, O’Leary said. A cross-section of IBM employees, including managers and executives, will be required to take the unpaid week, he said.

The Vermont facility is IBM’s largest chip-making plant, but is a little behind the times, O’Leary said. IBM recently opened a state-of-the-art fabrication plant in East Fishkill, N.Y., that produces 300 millimetre silicon wafers using IBM’s 0.13-micron process technology.

The Essex Junction plant also makes silicon wafers at 0.13 microns, but on 200 millimetre wafers, O’Leary said. Semiconductor manufacturers can cut more chips from larger wafers, improving the efficiency of the manufacturing process.

Newer process technologies, enabling the creation of chips with features as small as 90 nanometers in size, will also be rolled out in East Fishkill, O’Leary said.

The Essex Junction plant makes a wide variety of semiconductors that are used for more mature technologies, which makes it even more important that IBM reduce costs at that location to keep up with semiconductor manufacturing companies in Taiwan with lower costs, O’Leary said.