Memory chipmakers, the hardest-hit of the silicon suppliers, this week faced bankruptcy, layoffs, and bleak prospects.
Micron Technology kicked things off by announcing that it would cut as many as 2,000 jobs. Micron and other memory chip manufacturers are all singing the same sad song: slumping revenues amid a steep downward price spiral.
The largest U.S. maker of memory chips said decreased demand for specialty DRAM products had "created additional challenges" for its Boise, Idaho, manufacturing operations. As a result, Micron said it will phase out 200-millimeter wafer manufacturing operations at the company's Boise facility.
The same day, flash memory chipmaker Spansion, previously a joint venture of Advanced Micro Devices and Fujitsu, announced layoffs totaling approximately 3,000, or 35 percent of the company's total workforce.
Spansion's CEO, John Kispert, said the Sunnyvale, Calif., company has been forced to "bring our costs in line with the current expectations for significantly reduced revenues."
Kispert also mentioned that he is positioning the company for a "restructuring and/or sale." The company expects the reduction in workforce to provide it with annual cash cost savings of approximately $225 million.
But this wasn't the worst of it. Qimonda, an affiliate of Germany-based Infineon Technologies, said on the same day that it was seeking bankruptcy protection under Chapter 11 for its U.S. unit. In January, Qimonda filed for insolvency protection in Germany after it was not able to secure government financing.
Intel topped off the bad news on Wednesday by disclosing that it was considering getting out of the flash memory-manufacturing business. Intel CEO Paul Otellini made this statement at a Goldman Sachs investor's conference: "It may not be essential for us to have our own NAND factories to build (flash memory). We could probably specify the product that we want and buy it from third parties," he said.
Is there any upside to all this bad news? Maybe.
"A lot of the end-market conditions for all electronics are awful, but we know all this already, and to a certain extent, that is looking backward," said Avi Cohen, managing partner of Avian Securities, which tracks the memory chip market. "Several component (suppliers) and semi(conductor) guys have echoed the fact that February is not getting worse, which is a nice improvement."
Micron Technology is cutting as many as 2,000 more jobs because of slumping demand for its products, as the shakeout in the memory chip business continues.
The largest U.S. maker of memory chips said Monday afternoon that decreased demand for specialty DRAM products has "created additional challenges" for its Boise, Idaho, manufacturing operations. As a result, Micron said it will phase out 200 millimeter (mm) wafer manufacturing operations at the company's Boise facility.
"This action will reduce employment at Micron's Idaho sites by approximately 500 employees in the near term and as many as 2,000 positions by the end of the company's fiscal year," the company said in a statement. Its fiscal year ends in August. Micron added that it has sufficient manufacturing capacity remaining and "does not expect any disruption in product supply required for customer needs."
These job cuts are on top of the workforce reduction announced in October in its flash memory chip operations, the company said. "These workforce changes were not anticipated or included in Micron's earlier 15 percent global workforce reduction announcement last October."
This news follows quickly on the heels of an announcement by German memory chipmaker Qimonda, which said earlier Monday that its U.S. operations would seek Chapter 11 bankruptcy protection.
Micron said that market conditions are not improving for memory products. "We remained hopeful that the demand for these products would stabilize in the marketplace and start to improve as we moved into the spring. Unfortunately, a better environment has not materialized," said Steve Appleton, Micron chairman and CEO, in a statement.
The company will continue to operate its 300mm research and development fabrication facility at the Boise site and perform a variety of other activities.
Cash restructuring charges will be approximately $50 million, which will generate a gross annualized operating cash benefit of $150 million, the company said. The net operating cash flow effect will be neutral for fiscal year 2009.
In the fiscal first quarter ended December 4, Micron posted a net loss of $706 million.
The memory chip industry overall has been caught in a particularly brutal downward price spiral that is hurting even the largest players, including companies like Samsung and Hynix.
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