ST closing 3 plants, impacting 4,000 jobs

By Ann Steffora Mutschler, Senior Editor -- Electronic News, 7/10/2007

Following the decision to spin-off its flash memory business last December, Geneva-based semiconductor supplier STMicroelectronics announced this afternoon that it will close three of its manufacturing operations over the next two to three years.

The shut-downs will occur after all products manufactured at these sites are re-qualified at other facilities, the company noted. The plants to close down are a 6-inch (150-mm) wafer fab in Carrollton, Texas, an 8-inch (200-mm) fab in Phoenix, Arizona and its back-end packaging and test facility in Ain Sebaa, Morocco.

ST said these moves will allow it to further optimize asset utilization and enhance performance for shareholders and customers, as well as allow focus on customer satisfaction and ensure a seamless transition in the supply of products from different sites.

These measures follow the migration of most of ST’s global 6-inch wafer production to operationally less-expensive 6-inch fabs in Singapore or to finer-geometry 8-inch facilities around the world, and as a result of this earlier program, most of ST’s 6-inch fabs in Europe were phased out or converted to 8-inch manufacturing and ST realized savings of more than $150 million per year, the company reminded.

The Carrollton, Texas-based 6-inch wafer manufacturing facility has been largely spared from earlier rounds of consolidation, but not this time.

The wafer production plant in Phoenix is described as a “relatively small” 8-inch facility that uses mature technology, and given its size and technology, the fab would have required substantial capital expenditure to be upgraded to the state-of-the-art technology necessary to continue efficient operations over the long term, ST explained. Capacity from this plant will be shifted to other ST plants or subcontractors in Asia and Europe.

In regard to the Ain Sebaa (Casablanca) plant in Morocco, ST said it will enhance utilization at its more advanced Bouskoura 2000 testing and packaging facility also in Morocco by transferring most of the operations from the older facility, which is unsuitable for upgrading, and some mature product lines will be transferred to subcontractors.

Carlo Bozotti, president and CEO of STMicroelectronics said in a statement, “The semiconductor industry requires unrelenting progress and we’re continuing our drive to grow revenue by developing and introducing exciting new products, by emphasizing our existing major-customer initiative, and by expanding our customer base…we’re also committed to improving our cost structure by reducing the number of our manufacturing sites and, as a result, trimming excess capacity and lowering manufacturing overhead.”

ST also noted that its commitment to American customers remains stronger than ever and will concentrate efforts on supporting customers through its wide-ranging North America-based network of R&D, product development and application centers.

These closures will impact approximately 4,000 employees worldwide. ST said it expects to offer transfers or transition-based incentives to most of those effected, and anticipates that most will remain in their jobs throughout the transition period.

Once complete, ST expects these measures to save the company approximately $150 million per year in the cost of goods sold, which is good news following its fiscal Q1 income drop of 73 percent.

The related pre-tax impairment and restructuring charges are expected to be $270 to $300 million, including approximately $250 million in cash charges.