Based in Chandler, Arizona, Microchip has faced challenges due to sluggish demand from automotive customers, who are currently working through excess chip inventories. This downturn contributed to a more than 36% drop in the company’s share price last year.
The job cuts will primarily affect employees at the company’s semiconductor fabrication plants (fabs) in Gresham, Oregon, and Colorado Springs, Colorado. Additionally, layoffs will occur at its backend manufacturing facility in the Philippines. Microchip estimates that the restructuring will incur costs between $30 million and $40 million, covering severance payments and related expenses.
Employees will be notified of the layoffs this month, with the process expected to be completed by the end of the June quarter. Furthermore, the company will cease operations at its Arizona chip manufacturing facilities in May, ahead of its original timeline.
These measures are projected to reduce annual operating expenses by $90 million to $100 million. Combined with the $90 million in annual savings from the previously announced closure of the Arizona fab in December, the additional workforce reductions are expected to cut factory-related employment costs by another $25 million.
The announcement follows Microchip’s recent financial performance, which fell short of Wall Street expectations. The company reported its fifth consecutive quarter of declining revenue last month and anticipates fourth-quarter net sales and profits to remain below market estimates.
Microchip also disclosed that it will incur approximately $45 million in charges related to the cancellation or adjustment of long-term supply agreements with wafer foundries. Additionally, the company is reducing headcount across various business units and support groups, though specific details about these cuts were not provided.