SALEM - The Sumitomo Mitsubishi Silicon Group announced it will close its two plants here by the end of 2004, eliminating 620 jobs.

The company will shift production of silicon wafers to other plants in Asia and the United States. The company said it had no formal timeline for the closure. It said its work force would be reduced gradually in the next six to 12 months as equipment and operations move to other facilities.

Sumco, as the company is known, is Salem's largest industrial employer, and its decision is a crushing blow to an already weakened local economy.

The company's 400 production workers in Salem are paid $15.62 to $18.97 an hour, while its 220 salaried employees earn an average of $71,000 a year.

Sumco also pays annual property taxes totaling $5 million.

At its peak employment in 2000, Sumco had about 1,380 employees. Even after a series of layoffs trimmed its work force to 620, Sumco's payroll has continued to pump about $20 million into local coffers.

"It was very easy to sense what was going to happen," said Zbigniew Helak, who has worked in the company's information technology department for eight years. "It's bad news, but yes, we were preparing for this."

Sumco will provide severance pay based on length of employment as well as some benefits coverage and job-placement help, the company said. Employees also will be eligible for Trade Adjustment Act benefits, including unemployment and retraining benefits.

It's been decades since Salem has taken an economic hit on a par with Sumco's decision to leave town. City officials said the shutdown of Boise Cascade's pulp mill in the 1970s, then Salem's largest private employer with more than 200 workers, may be the closest comparison.

"We recognize that this decision will have an impact on the Salem community, which has strongly supported Sumco and its predecessors for many years," said Kaz Nagano, president and chief executive officer of Sumco USA. "By consolidating our Salem production into other Sumco facilities worldwide, we can achieve economies of scale and reduce our overall costs."

The Tokyo-based company was formed by the January 2002 merger of Sumitomo Metal Industries and Mitsubishi Materials.

Sumco's plant in north Salem, which opened in 1982, manufactures smaller silicon wafers that are falling out of favor. Its south Salem plant, opened in 1996, makes larger wafers, but it never recovered from a 1997 downturn.

Silicon manufacturing is the weakest sector of the beleaguered chip industry. Many wafer-makers never have righted themselves after an industry downturn that started in 1997, and they have faced brutal price competition for five years as a result of excess production capacity worldwide.