Microchip Technology has announced plans to reduce its workforce by approximately 2,000 employees as part of a broader cost-cutting and restructuring initiative.
The US-based semiconductor company’s automotive clients have faced challenges in reducing their excess chip inventories, which accumulated due to aggressive stockpiling during the supply chain disruptions caused by the pandemic, reported Reuters.
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The layoffs will affect its Fab 4 facility in Gresham, Oregon; Fab 5 facility in Colorado Springs, Colorado; and its backend manufacturing site in the Philippines.
Additionally, reductions will be made across various business units and support functions.
In an SEC filing, the company said it expects to incur restructuring costs between $30m and $40m, covering severance and other related expenses.
However, once fully implemented by the end of the June 2025 quarter, the cuts are projected to save between $90m and $100m annually in operating expenses.
The Chandler, Arizona-based company plans to inform employees about these measures during the March 2025 quarter.
The announcement follows Microchip’s December 2024 decision to shut down its Fab 2 wafer fabrication plant in Tempe, Arizona.
The company now anticipates the closure to be completed by May 2025, ahead of the initial timeline.
The Fab 2 facility and equipment have been listed for sale.
Beyond the $90m in annual cash savings announced from the Fab 2 closure, additional measures at Fab 4 and Fab 5 are expected to cut factory employment costs by a further $25m.
In addition to headcount reductions and plant closure, Microchip plans to modify or cancel long-term wafer supply agreements, anticipating charges of approximately $45m.
The company cited a lower-than-expected need for wafer purchases within the required contractual periods.
Microchip noted that restructuring cost estimates may change as more information becomes available, and additional expenses could arise.
