Glenrothes-based Micronas will close for good in April as part of a restructuring process, with the loss of 83 jobs.
The company, which produces electronic sensors for the automotive industry, is owned by German group TDK-Micronas.
Staff have been informed of the decision and a consultation process has begun.
Micronas opened in Glenrothes in 1994, based the Southfield Industrial Estate.
Fife Council will offer workers support through PACE, which was set up by the Scottish Government to help those affected by redundancy.
Peter Grant, MP for Glenrothes, said the closure was “a huge blow”, noting that only two years ago the company was considering moving work from Germany to the Fife town.
He said he has contacted Micronas and called on the company to give "a full and open explanation“ on what has gone wrong.
