Lam cuts 600 jobs, capital equipment industry takes another hit

Following on the heels of Applied Materials' and KLA-Tencor's layoffs, wafer fabrication equipment provider Lam Research says it will trim 15% of its total workforce.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 11/21/2008

Lam Research Corp has become the latest capital equipment industry company to announce layoffs, this week stating it would cut 600 jobs.

The workforce reduction represents approximately 15% of Lam's total headcount and will impact regular, temporary, and contract employee positions, according to an SEC (Securities and Exchange Commission) filing made Thursday.

Calling the effort a restructuring plan, Lam said the cuts are expected to be completed during the first calendar quarter of 2009 and are expected to result in annualized cost savings of approximately $60 million.

Lam said it is implementing further cost-reduction activities that are targeted to result in annualized cost savings of approximately $20 million for a total annualized cost savings of approximately $80 million. The company did not detail those activities in its SEC filing.

Lam said all of the charges related to the layoffs will result in cash expenditures and will be recorded in the current and following quarter. The company did not estimate those charges.

The move was not entirely unexpected. Lam President and CEO in late October described the industry slump as "the second worst downturn, in terms of size and scale and scope, that I've had the opportunity to witness," and that "the length and volatility of this downturn are unpredictable at this time." Newberry made the comments after the Fremont, Calif-based provider of wafer fabrication equipment and services reported revenue for the September quarter of $440.4 million, compared to revenue of $566.2 million for the June quarter.

The job cuts also come after fellow capital equipment industry companies Applied Materials and KLA-Tencor this month both announced workforce reductions, slicing 1,800 employees and 900 employees respectively.

Indeed, there has been a well-noted decline in capital equipment demand. Gartner Inc this week reported that its 2009 capital spending expectations have been reduced from $41.1 billion to $39 billion and its 2009 total equipment spending expectations have been reduced from $30.5 billion to $26.8 billion. Gartner estimated that the capital equipment industry will see a quarterly revenue bottom in mid-2009, at $6.3 billion, which is a level not seen since Q4 2003.

SEMI also reported this week that October bookings and billings levels for North America-based manufacturers of semiconductor equipment were comparable to those of 2003.

Estimates for the total semiconductor industry have also been revised downward, with the SIA this week stating Q4 will show the first decline in revenues since 2001 and iSuppli projecting full-year 2008 will show a decline in revenue. Most market research forecasts call for a 2009 single digit decline in sales.