Microchip Technology to lay off 2,000 employees amid weak automotive demand

Microchip Technology said on Monday it will cut around 2,000 jobs, or about 9 per cent of its workforce, as the chipmaker restructures its business to combat slowing demand from automakers. 

The Chandler, Arizona-based company has been grappling with tepid demand from automotive customers that are struggling to clear existing chip inventory, dragging Microchip's shares down more than 36 per cent last year. 

The headcount reductions will be concentrated in the company's chip factories, commonly referred to as fabs, in Gresham, Oregon and Colorado Springs, Colorado. It will also conduct layoffs at its backend manufacturing facility in the Philippines. 

The company expects to incur between $30 million and $40 million of costs related to the layoffs, consisting of cash severance and related restructuring expenses. 

The layoffs will be communicated to employees this month and fully implemented by the end of the June quarter. 

The company will also be shutting down operations at its Arizona chip manufacturing facilities in May, several months earlier than previously expected. 

These actions are expected to reduce its ongoing operating expenses by about $90 million to $100 million on an annualized basis, the company said. 

In addition to the about $90 million in annual cash savings related to its closure of the Arizona fab disclosed in December, the additional layoffs at various facilities will reduce its employment-related costs in its factories by another $25 million. 

The company forecast fourth-quarter net sales and profit below Wall Street estimates last month, while logging in its fifth consecutive quarter of revenue declines. 

Microchip also expects to incur charges of about $45 million due to the cancellation or modification of long-term supply agreements with wafer foundries. 

The company also said it is reducing headcount in various business units and support groups, without providing further details on the segments where it will be laying employees off.     

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