Microchip Technology of Chandler, Arizona, announced on Monday that it plans to cut about 2,000 jobs, accounting for 9% of its workforce, in response to the slowdown in automaker demand. Microchip shares have fallen more than 36% over the past year as part of the company’s restructuring business plan to address sluggish demand caused by a backlog of chips in automotive customers.
The layoffs are focused on the company’s chip-manufacturing facilities in Gresham, Oregon, and Colorado Springs, Colorado, commonly known as wafer fabs. The company will also make layoffs at its back-end manufacturing facilities in the Philippines. Microchip Technology expects the layoffs to incur related expenses of approximately US$30 million to US$40 million, including cash severance payments and restructuring expenses.
The company plans to notify employees of the layoffs this month and expects to complete all layoffs by the end of June. In addition, Microchip intends to close its chip manufacturing facility in Arizona in May, months earlier than expected. As a result of these measures, the company expects to reduce its annual operating costs by approximately $90 million to $100 million.
In addition to the approximately $90 million in cash saved by announcing the closure of the Arizona fab last December, the layoffs will further reduce employee-related costs at the company’s facility by approximately $25 million. Microchip Technology last month expected fourth-quarter net sales and profit to fall short of Wall Street expectations, while the company’s revenue has declined for five consecutive quarters. In addition, the Company expects to incur approximately $45 million in costs due to the cancellation or modification of long-term supply agreements with foundries.
Microchip also said it cut staff across business units and support teams but did not disclose which departments were involved.
