MIGDAL HAEMEK, Israel -- Silicon foundry supplier Tower Semiconductor Ltd. today reported a 21% sequential drop in sales to $9.9 million in the third quarter from $12.5 million in Q2. The revenue shortfall resulted in a loss of $12.4 million in the third-quarter period, ended Sept. 30.
Tower also announced it was implementing a number of cost-reduction measures, including salary cuts and mandatory vacations. The Israeli chip foundry also said it was attempting to lower the cost of its new 200-mm wafer fab, which is now under construction in Migdal Haemek.
"Focused on returning to profitability, Tower is undertaking further aggressive cost reduction measures, including a reduction in salary ranging from 6% for most employees and up to 13% for senior managers," said Yoav Nissan-Cohen, Tower's co-CEO. "Additionally, we are implementing mandatory vacation in the upcoming quarter and are in the process of renegotiating significant price reductions and better payment terms with our suppliers."
Tower's co-CEO said Fab 2 is moving forward on schedule. The company is hoping the completion of the 200-mm (8-inch) fab will be completed and technology transferred to the plant when the foundry business is in a recovery from its worst downturn ever, he said.
Pilot line operations have begun to transfer the 0.18 micron CMOS logic technology from our technology partner Toshiba Corp., and we expect to begin manufacturing first customer prototypes in the first quarter of 2002," he said. "We are also taking decisive actions to adapt to the current market situation and significantly reduce the overall project cost, and are encouraged by the positive response from equipment vendors and other suppliers of our Fab 2 project."
No details were released today about the amount of cost reduction being sought by Tower. Previously, the company had said the Fab 2 plant would cost about $1.25 billion when fully equipped.
Last month, four of Tower's investment partners in Fab 2 had reached an agreement with the foundry supplier to take 4.2 million in stock in lieu of credits for future purchases of processed wafers because the slump in chip demand (see Sept. 17 story).
"We are currently in advanced discussions with our banks and suppliers to adapt our financing arrangements to the current market situation," Nissan-Cohen said. "We are confident that these discussions will result in satisfactory modifications to our current arrangements and allow us to enhance our ability to complete the Fab 2 project according to our plans."