Microchip Technology announces additional restructuring actions to reduce costs and resize its manufacturing operations

Microchip Technology (MCHP) disclosed:

On March 3, 2025, Microchip Technology Incorporated (NASDAQ:MCHP) (the "Company") announced additional restructuring actions to reduce costs and resize its manufacturing operations. The Company had previously announced, on December 2, 2024, that it was closing its manufacturing operations at its Tempe, Arizona wafer fabrication facility (referred to as "Fab 2"). With respect to the Fab 2 closure, the Company now expects to be able to shut down the manufacturing operations in May 2025 which is several months earlier than previously expected. The Fab 2 facility and equipment are available for sale by the Company.
In addition to the Fab 2 closure, commencing March 3, 2025, the Company is reducing headcount at its Fab 4 facility in Gresham, Oregon, its Fab 5 facility in Colorado Springs, Colorado and its backend manufacturing facility in the Philippines. The Company also is reducing headcount in various business units and support groups. The total headcount reductions from these actions will be approximately 2,000 employees and the Company estimates that it will incur between $30 million and $40 million of related costs, consisting of cash severance, other severance benefits and other related restructuring costs. The Company expects these actions to be communicated to employees in the March 2025 quarter and fully implemented by the end of the June 2025 quarter. Additionally, the Company expects these actions to reduce its ongoing operating expenses by approximately $90 million to $100 million on an annualized basis when fully implemented. In addition to the approximately $90 million in annual cash savings that the Company disclosed on December 2, 2024 related to its closure of Fab 2, the additional actions in Fab 4 and Fab 5 will reduce the Company’s employment related costs in its factories by approximately an additional $25 million. The Company also expects to incur charges of approximately $45 million in connection with the cancellation or modification of long-term supply agreements that the Company has with certain wafer foundries. These agreements are being cancelled/modified at this time as the Company does not expect that it will purchase the specified number of wafers within the time periods required in the agreements.

The estimates of the above restructuring costs will be refined over time as more information becomes available. The Company may incur additional expenses in connection with these actions that are not currently contemplated. The charges that the Company expects to incur in connection with these actions are estimates and subject to a number of assumptions, and actual results may differ materially. The Company has not yet determined if any accelerated depreciation or impairment charges will be recorded.