ON Semiconductor to close 1 Pocatello fab center 

ON Semiconductor will shut down one of its two Pocatello microchip fabrication centers earlier than originally planned this year as part of drastic cost-cutting measures it announced on Jan. 7. At least 150 workers are employed in Fab 9, the oldest of its two fabs in Pocatello, where ON is one of the city’s largest employers.

In December 2007, it was announced that Pocatello-based AMI Semiconductor had reached an agreement to be acquired by Phoenix-based ON Semiconductor in a buyout that was finalized in March 2008, when 50 to 60 Pocatello employees were immediately laid off and most of AMI’s top executives departed from what had been its world headquarters.

At that time, AMIS employed about 900 locally. Since then, the number of employees in its finance, legal, human resources and other local departments has been sharply reduced, but its engineering and manufacturing departments heretofore largely have been spared.

ON announced Jan. 7 that about 1,500 employees globally or about 10 percent of its total payroll expenses will be eliminated this year, but it did not indicate how many of those will be in Pocatello. Fab 9 was scheduled to be closed by the end of this year, but its closure has been moved to mid-year. Fab 10 is ON’s newest fab in Pocatello and has been operating for about 12 years.

ON is evaluating front-end manufacturing locations with the objective of closing an additional location by the end of 2009. It said there will be factory shutdowns for four to six weeks in the first and second quarters of 2009, but did not designate where. ON also operates a fab at Greshem, Ore.

Other cost reductions announced by ON included six weeks of unpaid time off for senior executives in the first half of 2009 or a 23 percent cut in base salary, and four weeks of unpaid time off or a four-day work week for other employees in the first half or about a 15 percent cut in pay.

There also will be no merit increases or bonus payments this year. ON expects these and other actions will reduce total fixed costs by from $40 million to $50 million a quarter of which $10 million to $15 million will be from temporary actions. Operating expenses are expected to be cut by about $20 million.

ON Semiconductor President and CEO Keith Jackson said the company’s updated fourth quarter 2008 revenue outlook reflects a reduction in demand experienced as a result of deteriorating conditions in the global economy.

“Based on the limited visibility we have for the first quarter of 2009, we anticipate another challenging quarter for the semiconductor industry and the company, with revenues down more than normal seasonality,” Jackson said.

“While we are hopeful that the economy will improve as we move through 2009, we have and will continue to examine our overall spending and are prepared to take additional actions to ensure we remain competitive and are positioned to generate positive free cash flow in the challenging environment.”

In the fourth quarter of 2008, ON started to cut costs by reducing 2009 planned capital expenditures by $80 million to $50 million or $60 million – down from $130 million to $140 million. It also imposed temporary site shutdowns during the fourth quarter, a hiring freeze, elimination of 2008 second half bonuses, and strict controls over all discretionary spending.

ON announced on Jan. 7 it anticipates fourth quarter revenues to run from $480 million to $490 million or down by 17 percent from the third quarter of 2008. That is down from the $500 million to $550 million revenue projection made in October.

ON’s stock dropped 20 cents a share or nearly 5 percent on Jan. 7 to close at $4.04. In the past 52 weeks, its value has ranged from a high of $10.85 to a low of $2.35.

NEW! Online only subscription. 24/7 access to premium online subscriber content for only $79.00 a year!
CLICK HERE TO SIGN UP TODAY!

Comments are closed.