Microchip Technology has announced plans to reduce its workforce by approximately 2,000 roles, equating to about nine per cent of its global staff, as part of a strategic restructuring initiative. The move comes in response to weakening demand from the automotive sector, which has been struggling to clear existing semiconductor inventory.
The Chandler, Arizona-based chipmaker has faced significant challenges over the past year, with its stock value plummeting by more than 36 per cent due to sluggish demand from automotive customers. As a result, the company is taking decisive steps to streamline operations and curb expenses.
The workforce reductions will primarily affect the company’s semiconductor fabrication plants—commonly referred to as ‘fabs’—located in Gresham, Oregon, and Colorado Springs, Colorado. Additionally, layoffs will be implemented at Microchip’s backend manufacturing facility in the Philippines.
Restructuring Cost
Microchip anticipates restructuring costs to range between $30 million and $40 million, largely comprising cash severance payments and related expenses. Employees impacted by the cuts will be informed throughout March, with the full implementation expected by the end of the June quarter.
As part of its broader cost-saving measures, Microchip will also accelerate the planned shutdown of its chip manufacturing operations in Arizona, bringing forward the closure to May, several months earlier than initially scheduled. The company estimates that these actions will result in annual savings of between $90 million and $100 million.
In addition to the anticipated $90 million in yearly cost reductions from the Arizona fab closure, Microchip expects to save a further $25 million by cutting employment-related costs at various facilities worldwide.
The restructuring follows a disappointing financial outlook, with Microchip forecasting fourth-quarter revenue and profit figures below analysts’ expectations. This marks the company’s fifth consecutive quarter of declining sales. Furthermore, it expects to incur charges of approximately $45 million due to the modification or termination of long-term wafer supply agreements.
Microchip has also confirmed that headcount reductions will extend beyond its manufacturing division, affecting various business units and support teams. However, the company has yet to provide specific details regarding these additional layoffs.
(With inputs from Reuters)