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Micron To Reduce Workforce, Cut Memory-Chip Production

A global oversupply of NAND Flash memory, which is used in a variety of consumer electronics, such as the Apple iPod and digital cameras, has driven prices below manufacturing costs.
Micron Technology on Thursday said it would cut production of memory chips and reduce its workforce by 15%, citing falling prices and the economic downturn that has lowered demand.

The company said that the global oversupply of NAND Flash memory, which is used in a variety of consumer electronics, such as the Apple iPod and digital cameras, has driven prices below manufacturing costs. Therefore, Micron's joint venture with Intel, IM Flash Technologies, would stop making the chips at Micron's Boise, Idaho, facility.

The plant shutdown would reduce IMFT's NAND flash production by about 15%. The fabrication facility makes chips on 200 millimeter wafers, which have higher production costs than the 300 mm wafers used in IMFT's other plants.

As a result of the production cut, Micron would reduce its global workforce of 19,000 people by about 15% during the next two years. Most of the reduction would come from the Boise facility.

The cutbacks are expected to reduce next year's expenses by $175 million, the company said. Micron, however, expected to spend $60 million in severance payments and other restructuring expenses.

Despite the cost-cutting moves, Steve Appleton, chairman and chief executive of Micron, insisted the company was in a "strong position relative to our competitors."

"But we are not immune to the difficult global market conditions that are affecting us all," he said in a statement. "Operation shutdowns and related workforce reductions are always painful, but we are pursuing these actions to maintain the competitiveness of the company."

In April, market researcher iSuppli slashed by two-thirds its 2008 forecast for global revenue growth in the NAND memory market. The major reason for the drop was weakening consumer spending.

Micron, the largest U.S.-based manufacturer of memory chips, has reported seven consecutive quarters of losses. The company already has announced plans to delay the outfitting of a NAND factory in Singapore, The Wall Street Journal reported. In addition, the company has cut senior executive pay by 20%.