According to a securities filing on Dec. 2, Microchip Technology intends to close its wafer factory in Tempe, Arizona, by September 2025, citing high inventory levels and available capacity at its factories in Oregon and Colorado.
According to the filing, the closure will affect about 500 people and is anticipated to result in savings of about $90 million.
During a November earnings call, Ganesh Moorthy, the former CEO and president of Microchip, stated that the company’s customers, including those in the industrial and automotive sectors, are still “managing their inventory tightly and adjusting their purchasing plans in the face of a weak macro environment for manufacturing,” which includes high interest rates and inventory.
“Those turns orders have been slower than anticipated and we now expect our December 2024 revenue to be close to the low end of our original guidance which is $1.025 billion,” Steve Sanghi, Microchip’s interim CEO, said in a statement on the closure.
According to the filing, the Arizona fab’s process innovations are also used in its plants in Oregon and Colorado, both of which have the clean room space to grow.
According to the SEC filing, Microchip Technology’s short-term restructuring expenses are projected to be between $3 million and $8 million, with possible further expenses reaching $15 million.
In an email to Manufacturing Dive, Microchip Technology stated, “This action was not taken lightly, and Microchip is grateful to all the employees of Fab 2 for their dedication and service over many years.”
After Moorthy announced his retirement, the company appointed CFO and SVP Sanghi as interim CEO just three weeks ago. In addition to continuing to serve as board chair, which he has done since October 1993, Sanghi was Microchip’s CEO from October 1991 to March 2021.
The seasoned executive claimed that as soon as he took on the new position, he thoroughly investigated Microchip’s operations.
Microchip had intended to divide the funds between two previously announced factory expansion projects: a $72 million fabrication plant in Gresham, Oregon, and a $90 million fabrication facility in Colorado Springs, Colorado.
Moore said on the Nov. earning call, that the company is “cautiously optimistic” it would finalize its proposed $162 million in CHIPS and Science Act funding, awarded in January. Sanghi, however, said during a Dec. 3 UBS conference that the company has put negotiations with the Commerce Department about the award on hold, according to a Bloomberg report.