Spansion lays off 500, continues to keep eye on manufacturing expenses

After a $52 million sequential reduction in manufacturing service expenses with foundries and subcontractors in Spansion's fiscal Q1, the flash maker announces 500 job cuts as it looks to further cut costs.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 6/5/2008

Spansion Inc today announced it is eliminating approximately 500 positions worldwide as part of its ongoing reorganization, one that could impact its fab partners TSMC and SMIC.

The move includes planned consolidations, attrition, and a reduction in regular, contract and temporary workers in manufacturing, engineering, management, and administrative support functions, and it part of the flash maker’s greater effort to improve overall costs and productivity.

That effort led to a $52 million sequential reduction in manufacturing service expenses with foundries and subcontractors in Spansion’s fiscal Q1. Indeed, the company boasted in March that its Fab25 in Austin continued to exceed expectations in both yield and output on 90-nm products, while its SP1 fab in Japan had ramped up on 300-mm wafers, reaching starts of 2,000 wafers per week on 65-nm MirrorBit technology flash memory products.

Spansion in its statement today claimed that with better factory utilization, the company has been able to reduce its workforce and lower costs while maintaining its focus on next-generation technology development and serving its customers. This greater internal utilization has lead many industry observers to believe that the Sunnyvale, Calif-based will be cutting back on its fab work with partners TSMC and SMIC, particularly as the flash market continues to drag in ASPs (average selling prices).

"Spansion is dedicated to creating an organization that is highly efficient, structured for maximum productivity and focused on our core competencies," said Bertrand Cambou, Spansion’s president and CEO, in the statement. "Our priority is to continue to push the leading-edge of flash memory technology and reshape the flash memory industry. With our recent increase in manufacturing output and yields, as well as productivity enhancements throughout the company, we can streamline our organization and further reduce costs, while continuing our rapid pace of innovation."

Spansion further said it is pursuing its strategy to increase the ratio of its engineering and administrative functions in lower cost regions, such as Malaysia and China. Spansion believes that with its ongoing focus on continuous improvement and operational efficiency, the company can continue its technology innovation at a lower overall cost.