In response to the worldwide economic slowdown, Microchip Technology Inc., Chandler, Ariz., announced today that it will close its Hong Kong testing facility, laying off 400 employees, reducing overall capacity, and cutting operating costs and capital spending.
Microchip is immediately reducing wafer capacity at its two wafer fabs in Arizona to match operating capacity with demand. The company also has delayed the start date for its Puyallup, Wash., wafer fab until December 2002.
The Hong Kong test facility, which Microchip acquired in its purchase of TelCom Semiconductor Inc. in January, will close during the June quarter, and thhose test requirements will be transferred to Microchip's Thailand facility.
Further measures include continued reductions in operating costs and capital spending associated with these manufacturing consolidations and the reduction of approximately 400 employees worldwide.
"When we entered the December 2000 quarter, we were anticipating 9% growth in the December 2000 quarter and approximately 6% growth in the March 2001 quarter, and we had in place the operating capacity to meet these growth targets," said Steve Sanghi, Microchip's president and chief executive officer, in a statement.
"Based on the continued uncertainty of the March 2001 quarter, combined with the lack of visibility for fiscal 2002, we believe it is prudent to reduce our operating capacity at this time.
During the December 2000 quarter Microchip Technology began to experience a reduction in demand that the company believed was driven from the inventory correction in its distribution channel. Sanghi now believes that the reduction in demand is also driven by a worldwide economic slowdown that may impact demand for an extended period.
"The actions we are announcing today are extremely difficult for us and are not being undertaken lightly, but we believe that the end result will match operating capacity to demand, improve operating efficiencies, and prevent further growth in inventories that occurred over the past few quarters," he said.