NEW YORK — Fairchild Semiconductor International Inc. continued to pursue its aggressive cost-cutting initiatives with plans to shut two of its manufacturing facilities.
Fairchild said it will eliminate its internal 5-in and reduce its 6-in. wafer fabrication lines by next year. As a result, Fairchild will close its manufacturing and assembly facilities in West Jordan, Utah, and Penang, Malaysia, as well as the remaining 5-in. wafer fabrication lines in Bucheon, South Korea.
Fairchild, which makes power-management ICs, said it will continue to operate its 8-in. wafer fabs in South Portland, Me., and Mountain Top, Pa., as well as its 6-in and 8-in. fabs in South Korea. It will also continue to operate its assembly and test facilities in Cebu, Philippines and Suzhou, China.
"The realignment we are announcing today will maximize the utilization of eight-inch factories and reduce the complexity of our manufacturing footprint, while creating the flexibility to support ongoing customer demand through a greater use of external manufacturing sources," said Mark Thompson, Fairchild's chairman and chief executive, in a prepared statement.
The company expects to achieve between $45 million and $55 million in annualized savings after it completes the cost-cutting measures. In addition, it said that it will incur approximately $36 million in restructuring costs, and plans to record a non-cash charge of $25 million.
Fairchild in San Jose, Calif., has been working on a strategy to improve its manufacturing execution that it hopes will boost its gross-profit margins to nearly 40% by the end of 2015. Indeed, its gross margins continue to climb. In its second quarter of 2014, gross margin was 33.4% compared to 30.3% in the first quarter of 2014 and 29.1% in the second quarter of 2013.
In 2013, Fairchild closed its 8-in. line at its Salt Lake wafer fab facility and transferred manufacturing to its 8-in. lines in Korea and Mountaintop, Pa., according to 10-Q documents filed with the Securities and Exchange Commission. Earlier this year, Fairchild said that it was refocusing its efforts on integrated power components for mobile and green electronics, promising to tighten lead times for its products.
During the company's recent earnings call with analysts, Thompson said the company has improved its operations, supply chain, marketing and sales to "enable the steady improvement in revenue and financial performance. In operations, we have reduced cycle times in our factories, significantly improved our management of the supply chain and increased flexibility within our internal and external manufacturing. This has enabled us to maintain short lead times and be more responsive to our customers."
Fairchild posted second-quarter sales of $371.6 million, up 8% from the prior quarter and 4% higher than the second quarter of 2013. Net income was $17.8 million compared to a net loss of $9.3 million in the prior quarter and a net loss of $7.5 million in the second quarter of 2013.