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Downturn forces Fairchild to shut down fabs

Posted: 30 Mar 2009 ?? ?Print Version ?Bookmark and Share

Keywords:Fairchild fab shutdown? fabrication wafer? job cut?

Hit hard by the downturn, Fairchild Semiconductor Inc. announced plans to close two fabs and eliminate at least 200 jobs in an effort to cut costs.

The company will close its wafer fabrication plant in Mountaintop, Pennsylvania, and will shutter that site. In addition, roughly 200 jobs will be eliminated at the Mountaintop site. It will also close one of its fabs in Bucheon, South Korea. The South Korea site will close its 4-inch line and transfer associated manufacturing to its 5- and 6-inch wafer fabs.

Most products currently made at the Mountaintop-based fab will be transferred to other internal sites. A small office will be maintained for technology and product line functions in the Mountaintop area.

The moves reduce the number of fabs in the company from six to four, and the number of front-end manufacturing sites from four to three. It also represents the second layoff for the company in recent months.

The company anticipates the consolidation of the South Korea fabrication processes and the closure of the Mountaintop facility will be completed by June of 2010. Fairchild expects to incur approximately $18 to $23 million of cash charges, primarily for severance and other costs associated with transfer activities beginning in Q2.

The company will also take additional non-cash charges of approximately $25 to $30 million for impairments and accelerated depreciation over the course of the next six quarters. Once completed, the company expects to realize annual savings ranging from $20 to $25 million as a result of these closures.

Bleak outlook
"Sizing our manufacturing footprint and keeping our cost structure competitive are requirements for the long term health of our company and drive this production consolidation," said Mark Thompson, president, chairman and CEO, in a statement.

"These actions reduce the number of wafer fabs in the company from six to four, and the number of front end manufacturing sites from four to three," he added. "We are committed to staying cost competitive in these hard economic times, and these changes will simplify operations, improve productivity and reduce costs."

In December, Fairchild announced a restructuring effort that was expected to cut worldwide workforce by approximately 1,100 people, or 12 percent.

Fairchild, a supplier of power semiconductors, recently announced results for Q4 and full year ended Dec. 28, 2008. Fairchild reported Q4 sales of $320.9 million, down 25.1 percent from the prior quarter and 25.7 percent lower than Q4 07.

Fourth quarter net loss was $218.1 million or minus $1.76 per share, compared to net income of minus $26.7 million or minus $0.21 per diluted share in the prior quarter and net income of $34 million or $0.27 per diluted share in Q4 07.

Included in this net loss are a $203.3 million non-cash goodwill impairment charge, a $19 million non-cash impairment of auction rate securities and a $15.9 million charge related to previously announced restructuring actions of which $4.5 million are non-cash asset impairments. In addition, it revised our estimates relating to potential litigation outcomes and released $3.3 million of reserves.

For Q1, Fairchild expects sales to range from $225-to-$245 million.

Mixed signals
There are mixed signals in the analog and mixed-signal front. On one hand, Fairchild, Maxim Integrated, National Semiconductor, Texas Instruments and others are struggling.

On the other hand, Linear and others are seeing a slight rebound in the business.

"2008 was difficult for the semiconductor industry as a whole, and the suppliers of analog products were no exception, with the entire market dropping 2 percent, from $36.5 billion in 2007 to $35.6 billion in 2008," according to Databeans Inc.

- Mark LaPedus
EE Times

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