Microchip Technology plans to lay off around 2,000 employees due to declining sales, aiming to cut costs and adjust its operations. This downsizing represents approximately 9% of its total workforce and will affect the manufacturing and corporate operations departments.
The semiconductor company, headquartered in Arizona, announced on Monday (March 3) that the layoffs will impact the Fab 4 factory in Gresham, Oregon, the Fab 5 factory in Colorado Springs, Colorado, and a production facility in the Philippines. Additionally, positions will also be reduced across business units and support departments.
The company anticipates that the layoffs will result in severance pay and employee benefit costs of $30 to $40 million, but in the long run, this measure is expected to save around $900 million to $1 billion annually.
Microchip had already begun restructuring its business earlier. Last December, the company announced the closure of the Fab 2 factory in Tempe, Arizona, with plans to cease production in May of this year, at which point the factory and equipment will be put up for sale. These actions are projected to decrease the company’s annual ongoing operating costs by about $90 to $100 million.
The company expects this restructuring to help alleviate cost pressures and address challenges stemming from declining demand in the automotive industry.
Microchip’s latest financial report shows quarterly net sales of $1.03 billion, a nearly 12% decrease from the previous quarter and a significant 42% drop compared to the same period last year. The company also went from a profit of $419.2 million in the same period last year to a loss of $53.6 million.
CEO Steve Sanghi stated that the company needs to take decisive measures to address the declining revenue and inventory backlog.
Currently, the company has not revealed which departments will be impacted by the layoffs, but it has confirmed that layoffs will occur in all business units and support departments.
Notices of the layoffs will be sent to affected employees within this month, and the company expects to complete the layoff plan by June.
(Reference: The Wall Street Journal and Investing)