Intel plans to lay off as many as 1,000 workers when it stops producing flash memory chips at an outdated fabrication plant in New Mexico this August, the company said.

Intel has been losing money for years on its flash products, which are used to store data in portable electronic products such as mobile phones and digital cameras, and increasingly used to improve the efficiency of PC hard drives. The company has come under increasing pressure from Wall Street analysts to improve conditions in its flash memory group, which has reported sinking revenue and a growing loss.

The division lost $283m on revenue of $469m during the first quarter of 2007, compared to a loss of $125m on revenue of $544m a year earlier.

"We've been working hard to get the flash business profitable. So we made the decision to curtail production of our 135 nanometre products. This relates to bringing our costs under control because there is not sufficient demand to support that production," said Intel spokesman Chuck Mulloy.

Intel will continue to sell 135nm flash chips made at other factories, but sees rising demand for memory chips made with smaller, more efficient components, such as the 90nm chips already in production and 65nm chips Intel is beginning to sample, he said. The company also showed prototypes last month of PRAM (phase-change RAM)Fl technology, a potential long-term replacement for both flash memory and DRAM (dynamic RAM).

Intel warned the workers at its Fab 11 plant in Rio Rancho, New Mexico, this week that it could lay off as many as 1,000 of the 1,500 employees when it shuts down the assembly line. The company invited those workers to seek another job at Intel or take a severance package including job search training.

The news is very different in Fab 11x, the building next door, where Intel announced in February it would spend $1bn to equip the factory to produce the company's next-generation 45nm processors. Intel plans to start producing those chips in Fab 11x during the second half of 2008.

The layoffs are not directly related to the company's reorganisation, which led CEO Paul Otellini to announce in 2006 that the workforce would shrink from 102,000 to 92,000. But it is "very consistent" with Otellini's goals of controlling costs and making the company leaner, Mulloy said.