Due to falling automotive demand, Microchip Technology plans to cut 2000 jobs, restructure operations, and sell integrated circuits to a Chinese partner.
Microchip Technology has announced plans to cut approximately 2000 jobs, about 9 per cent of its workforce. This restructuring effort is a response to declining sales from automotive customers struggling with surplus chip inventories following aggressive stockpiling during the pandemic, according to Reuters.
In addition to the workforce reductions, the Arizona-based company will sell its integrated circuit die to a Chinese partner for testing, assembly, and branding, following similar moves by competitors like Allegro Microsystems.
This decision comes amid heightened US-China tensions, which have created challenges for chipmakers reliant on the Chinese market, a key revenue source for automotive suppliers.
The job cuts will primarily affect Microchip’s manufacturing plants in Gresham, Oregon, and Colorado Springs, Colorado. The company is also accelerating the closure of its Arizona factory, aiming to address inventory issues and declining demand.
Microchip expects to reduce its overall inventory by more than $300 million by March 2026, following a write-off of $82 million worth of excess stock in the previous quarter.
The company anticipates incurring restructuring costs of between $30 million and $40 million, including severance and other related expenses. The layoffs, which will be communicated to employees this month, are expected to be completed by the end of the June quarter.
These actions are expected to reduce operating costs by up to $100 million annually, with additional savings from the factory closures.
