After cutting executive pay last week, Micron Technology is now paring staff as it scales back flash memory chip production.
On the heels of reporting a $344 million fourth-quarter loss last week--when Micron said it was cutting executive pay 20 percent--the Boise, Idaho-based memory chip maker said Thursday that it was restructuring its memory operations.
Micron will reduce its global workforce by approximately 15 percent during the next two years. Most of the workforce cuts will occur in Boise.
"The combination of declining customer demand and product oversupply in the marketplace has driven selling prices for NAND flash memory significantly below manufacturing costs," Micron said in a statement.
As a result, IM Flash Technologies (IMFT), a joint venture between Micron and Intel, will discontinue the supply of NAND flash memory from Micron's Boise facility. The NAND operation shutdown will reduce IMFT's NAND flash production by approximately 35,000 (200 millimeter) wafers per month, Micron said.
NAND flash is used in flash drives for digital cameras and digital music players as well as solid-state drives.
Micron and Intel have other facilities that make NAND flash, including one in Lehi, Utah.
"Micron is in a strong position relative to our competitors...but we are not immune to the difficult global market conditions that are affecting us all," said Micron CEO Steve Appleton in a statement.
Cash restructuring and other related expenses are anticipated to be approximately $60 million and "next year's cash operating margin benefit is expected to exceed $175 million," Micron said.
Last week's red ink was Micron's seventh straight quarterly loss--and it reported a net loss for the entire 2008 fiscal year of $1.6 billion.
The memory chip industry overall is caught in a particularly brutal downward price spiral that is threatening the viability of even the largest players, including companies like Hynix.
Micron's earnings pain will pass directly to executives. Micron Technology attributed a $344 million loss in the fourth quarter to a cratering memory market and said it would slash executives salaries as a result.
This was Micron's seventh straight quarterly loss. The largest memory chip manufacturer in the U.S. reported a net loss for the entire 2008 fiscal year of $1.6 billion, or $2.10 per diluted share on net sales of $5.8 billion.
Executives will feel the pain. "We are implementing a 20 percent reduction in salary compensation for Micron senior executives," Steve Appleton, Micron's CEO, said in a statement. "The global memory market continues to experience severe oversupply and price degradation, and it remains a challenging period for all of us competing in the industry."
Amid the dire market conditions, Micron said it would "diligently work...to ensure the competitiveness and long-term success of the company."
Sales of memory products in the fourth quarter decreased 4 percent compared with the third quarter. Sales of DRAM products decreased slightly compared with the preceding quarter, the company said.
For NAND flash memory products, sales decreased 10 percent, compared with the prior quarter, due to a 20 percent drop in the average selling price. Micron is a major manufacturer of flash memory and recently launched a line of solid state drives that will reach 256GB in capacity this year.
Micron is also in a flash chip manufacturing joint venture with Intel--IM Flash Technologies--that fabricates chips for both Micron's and Intel's solid state drive lines, among other products.
One bright spot: Sales of CMOS (complementary metal-oxide-semiconductor) image sensors in the fourth quarter of fiscal 2008 increased slightly compared with the third quarter and represented 12 percent of the company's total sales in the fourth quarter, Micron said.
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