GENEVA--STMicroelectronics today announced it was cutting its capital spending plans to $1.5 billion from a previous budget of $1.9 billion this year and closing down its production wafer fab in Ottawa in response to the semiconductor downturn.
STMicroelectronics acquired the Ottawa fab from Nortel Networks Corp. last year as part of a six-year joint-development and supply agreement with the Canadian communications systems supplier. The European chip maker paid $100 million for Nortel's semiconductor production operation as part of the deal (see May 5, 2000, story).
While it looks for "alternative arrangements" for the wafer fab, ST said it will continue to maintain its R&D operation in Ottawa. This unit has been focused on high-speed chip technologies for optical networks, said the company.
The wafer fab's closing and transfer of production to other ST plants around the world will be completed by December, according to the chip maker. STMicroelectronics said will the action will involve special cash and non-cash charges totaling $30 million in the current second quarter.
ST officials said the Ottawa plant has been operating well below capacity. Moving production to larger, lower-cost facilities will make products move cost competitive, said the company. ST said the closing of the fab will have no impact on its year-old strategic alliance with Nortel.
About 450 workers are now employed by the Ottawa fab.
In the first quarter, ST's sales sequentially dropped 12% to $1.92 billion compared to $2.19 billion in Q4 of 2000, and company officials said they were expecting another 6-to-14% decline in revenues during the second quarter (see April 19 story).
Two months ago, STMicroelectronics cut its capital spending plans to from an original 2001 budget of $2.5 billion to $1.9 billion, and the company implemented a hiring freeze, but at the time it said no layoffs were planned (see March 31 story). ST's capital spending last year totaled $3.2 billion.