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17 December 2008


RFMD idling 4” Greensboro fab and laying off 150 staff

RF Micro Devices Inc of Greensboro, NC, USA has announced actions intended to streamline operations and reduce GaAs manufacturing costs (taking effect in the March 2009 quarter).

At RFMD’s Greensboro, NC campus, its original, 4-inch wafer fabrication plant (which currently accounts for less than 10% of the firm's GaAs manufacturing capacity) will be idled and kept in a clean environment (for possible future re-start, if demand requires). All GaAs manufacturing will be transitioned to the site’s 6-inch fab. In addition to 150 job cuts, the firm hence expects significantly lower direct material costs and higher utilization rates, resulting in lower total manufacturing costs.

In addition, in November RFMD began significantly reducing 6-inch GaAs wafer production and associated costs at its pHEMT switch fab in Newton Aycliffe, UK (formerly Filtronic Compound Semiconductor Ltd until December 2007), reducing operating expenses in the quarter to end-March 2009 by 25% on a year ago. Compared to the previous 24/7 environment, the plant will be operated on 8-hour shifts, 5 days a week.

Up to a third of the fab’s 300-strong workforce (100 staff) are being made redundant (effective 19 December). Together with the 150 job losses in Greensboro, RFMD estimates that, between December and March 2009, about 250 staff (5% of the firm’s global workforce) will be affected.

The job losses are part of a company-wide cost-cutting scheme that includes a freeze on hiring and pay. The cuts come in response to weaker demand due to the global economic downturn and customers pushing out orders from this quarter into 2009 as inventory builds up in the supply chains. On 4 December, RFMD cut its revenue guidance for fiscal third-quarter 2009 (to end-December 2008) to 15-20% below the low-end of the $253-271m guidance it provided on 28 October (i.e. $202-215m, down a massive 21-26% on last quarter’s $271.7m and down similarly on $268.2m a year ago).

“RFMD is taking prudent and decisive actions to match manufacturing capacity to anticipated demand during the current recessionary environment,” says president & CEO Bob Bruggeworth. By reducing its manufacturing cost structure, these actions are expected to positively impact RFMD's cash flow by about $15m in fiscal 2010 (starting 29 March 2009). “Because existing facilities will be reduced or idled, RFMD will retain the capacity and flexibility necessary to respond to increases in customer demand as the recession wanes and as the company’s markets return to growth,” concludes Bruggeworth.

See related items:

RFMD lowers revenue guidance and announces cost cutting

RFMD improves operating income after restructuring

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