Dive Brief:
- Microchip Technology plans to shut down its Tempe, Arizona, wafer facility by September 2025, citing high inventory levels and available capacity at its Oregon and Colorado factories, according to a Dec. 2 securities filing.
- The closure will impact approximately 500 employees and is expected to save approximately $90 million after the closure, according to the filing.
- The chipmaker’s customers, including in industrial and auto markets, are continuing to “manage their inventory tightly and adjust their purchasing plans in the face of a weak macro environment for manufacturing,” such as high interest rates and inventory, Microchip’s former CEO and President Ganesh Moorthy said on a November earnings call.
Dive Insight:
A demand downturn is pushing Microchip to rightsize its inventory.
“Those turns orders have been slower than anticipated and we now expect our December 2024 revenue to be close to the low end of our original guidance which is $1.025 billion,” Steve Sanghi, Microchip’s interim CEO, said in a statement on the closure.
The Arizona fab’s process technologies also run in its Oregon and Colorado factories, which both have sufficient clean room space for expansion, according to the filing.
With the closure, Microchip Technology’s near-term restructuring costs are estimated at $3 million to $8 million, with potential additional costs up to $15 million, the SEC filing stated.
“This action was not taken lightly, Microchip is grateful to all the employees of Fab 2 for their dedication and service over many years,” Microchip Technology said in an emailed statement to Manufacturing Dive.
Just three weeks ago, the company selected CFO and SVP Sanghi as interim CEO after Moorthy announced his retirement. Sanghi previously served as Microchip's CEO from October 1991 to March 2021 and will continue to serve as board chair, a position he has held since October 1993.
The experienced executive said he did a deep dive into Microchip’s operations as soon as he stepped into the new role.
“I want to clarify for investors that I plan to stay in this role, even though the title is interim, for as long as it is necessary, so there is no definitive timeline for my successor," Sanghi said in the Dec. 2 press release.
Moore said on the Nov. earning call Microchip Technology is “cautiously optimistic” it would finalize its proposed $162 million in CHIPS and Science Act funding, awarded in January. Sanghi, however, said during a Dec. 3 UBS conference that the company has put negotiations with the Commerce Department about the award on hold, according to a Bloomberg report.
Microchip had planned to split the money across two previously announced factory expansion projects: $90 million for a fabrication facility in Colorado Springs, Colorado, and $72 million on a fab in Gresham, Oregon.
