As more IC makers cut capital expenditures in favor of outsourced production, semiconductor equipment suppliers face the possibility of losses stretching through the end of this year into next.
Last week, Applied Materials Inc., the No. 1 global supplier of semiconductor manufacturing equipment, signaled that it doesn't expect a sales rebound this year by reducing its workforce, the second cutback in five months.
Sales at Applied Materials swung up briefly in the middle of 2002, buoyed by expectations of a stronger electronics industry recovery and preparations at many suppliers for a transition to 300mm process technology. Applied Materials' sales jumped 26%, to $1.5 billion, in its fiscal third quarter ended July 28, from $1.2 billion in the year-ago quarter, and new orders soared 47%, to $1.8 billion from $1.2 billion.
Last week, in a reversal of fortune, the company began handing out pink slips to 2,000 employees, or 14% of its workforce, citing lower demand for its products. The layoffs come on top of 1,750 positions eliminated in November.
"The combination of changes in the industry and the extended downturn have led Applied Materials to take decisive action that will enable us to generate increased profits at current levels of revenue while maintaining strategic product development capability," said James C. Morgan, chairman and chief executive, in a statement.
This time, Applied Materials, Santa Clara, Calif., is going beyond job attrition. It will shutter up to 30 offices and 19 facilities. The closings, the company said, will save it $60 million in the third fiscal quarter and $100 million by the first quarter of fiscal 2004.
Applied Materials expects revenue of $4.2 billion in the fiscal year ending Oct. 31, down more than half from the peak of $9.6 billion in 1999, according to First Albany Corp., San Francisco.
"It's difficult for the company to support existing products and customers globally while developing increasingly complex technology when revenues are down 62% from the peak," said Auguste Richard, a First Albany analyst.