Microchip to close fab as inventory hits
The newly returned CEO of Microchip Technology has cited a significant inventory overhang for his decision to close a fab in the US.
The decision by Steve San? To close Fab 2 in Temple, Arizona, also hits proposed funding of $192m under the US Chips and Science Act.
Chairman Sanghi took over as CEO two weeks ago from Ganesh Moorthy, who retires this week at age 65, and intends to stay in the role as well as chair. He was previously CEO from 1991 to 2021.
“In the first two weeks of my newly appointed role as Interim CEO and President, I have done a deep dive into the operations of the Company and determined that certain actions are necessary. I want to clarify for investors that I plan to stay in this role, even though the title is interim, for as long as it is necessary, so there is no definitive timeline for my successor.” said Sanghi.
“With inventory levels high and having ample capacity in place, we have decided to shut down our Tempe wafer fabrication facility that we refer to as Fab 2. Many of the process technologies that run in Fab 2 also run in our Oregon and Colorado factories, which both have ample clean room space for expansion. We expect to be able to shut down Fab 2 in the September 2025 quarter at which time we expect that it will generate annual cash savings of approximately $90 million.
The fab runs up to 15 legacy process technologies, including the company’s foundry services for custom devices.
“Due to the high inventory of the products which are manufactured in Fab 2, we do not expect to see savings from the shutdown until the start of the June 2026 quarter based on a First-In First-Out basis. We expect that the Fab 2 closure will begin to help us moderate our inventory levels beginning in the March 2025 quarter,” he added.
The restructuring costs are expected to be between $3 million and $8 million from these actions, and there could be other costs of up to an additional $15 million as more information becomes available.”
“The fab restructuring is a big step in right-sizing our manufacturing footprint, and we will continue to evaluate any further actions that are required to position Microchip for outsized growth and financial performance.”
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