The cutback will span 'all job functions' but largely involves manufacturing positions
By ONG BOON KIAT
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(Singapore)
FALLING demand and a deteriorating global economy has forced Chartered Semiconductor Manufacturing into axing around 600 jobs, of which 90 per cent - or around 540 jobs - will be from Singapore.
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The exercise, to be carried out in the coming week, will span 'all job functions' but largely involves manufacturing positions, and also affects Chartered's workforce in Taiwan, Europe and the US, chief executive Chia Song Hwee told BT yesterday, following the chipmaker's fourth quarter results announcement.
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'We are trying to resize our workforce to our (plant) utilisation levels. After this cut, we will have around 6,400 people in Singapore,' Mr Chia said.
Chartered posted a net loss of US$114 million for the three months to Dec 31, 2008, reversing the year-ago Q4 net income of US$5.9 million.
Revenue fell by 0.3 per cent to US$351.7 million.
The Temasek Holdings-linked foundry, which counted Broadcom and Qualcomm as top customers in 2008, had earlier projected a less severe Q4 net loss of between US$76 million and US$84 million.
Full year net loss for 2008 came to US$92.6 million, falling from the year-ago net income of US$101.7 million. Full year revenue rose 22.5 per cent to US$1.66 billion.
There was more bad news ahead: in its customary quarterly guidance, Chartered projected a Q1 net loss of between US$142 million and US$152 million. If that projection holds sway, it would be the firm's biggest ever quarterly loss. Q1 sales could fall by as much as 40 per cent to US$232 million.
Mr Chia said that market demand will likely shrink more, and the company's three near-term priorities are 'lowering our break-even utilisation level; positioning for early phase of demand recovery; and preserving our cash and liquidity position'.
The company also plans to reduce capital expenditure by 35 per cent from 2008 to US$375 million this year.
Chartered shares closed unchanged yesterday at S$0.235.
Assessing Chartered's loss-making full year performance, Mr Chia blamed several factors, including price erosion due to competition and the fall in plant utilisation in the second half of the year. Another reason was having to operate its 12-inch wafer fab facility at a sub-optimal product mix, due to slow demand for 65nm products. 'The good news is that this situation can be easily corrected, and it is improving,' he said.
Chartered's troubles reflect a worldwide semiconductor industry sagging under the weight of a recession-hit economy. STMicroelectronics said this week it will cut as many as 4,500 jobs, while Advanced Micro Devices Inc (AMD) has said that it will slash 1,100 jobs. Samsung Electronics Co logged its first ever quarterly loss this month, while Taiwan Semiconductor Manufacturing Co recently forecasted its first quarterly loss since 1990.
Market researcher iSuppli recently revised its global semiconductor industry outlook, projecting a 9.4 per cent revenue drop this year to US$241.5 billion.
'It is going to be very tough for the semiconductor industry, especially now that a large chunk of demand comes from the consumer electronics market - this makes it a lot more cyclical and prone to cutbacks in discretionary spending,' said Carey Wong, research manager for OCBC Investment Research. 'At best, most economists are looking at a mild economic recovery in late 2009 or early 2010, so a recovery in the semiconductor sector in mid to late 2010 is a possibility.'
He added that cost-cutting remains a temporary fix, as the issue is still the lack of demand.
Chartered said its latest move to reduce workforce by 600 - or 8 per cent of its global workforce - will help save around US$16 million a year. It expects to incur a one-time charge of around US$8 million in the first quarter due to the reduction.
The move brings Chartered's total workforce reduction to around 1,300 positions since the third quarter of 2008, or around 18 per cent of its workforce.
According to a statement issued by the United Workers of Electronic and Electrical Industries yesterday evening, laid-off Chartered workers will receive fair retrenchment packages and help in looking for new jobs. The union said it has closely engaged Chartered since November last year to 'explore various cost-cutting measures to save jobs'.
For Chartered, job cutting is a 'good move to re-size its operation, but still a baby-step given the severity of the current downturn,' said Ng Sze Ho, director of Asia-Pacific technology research at BNP Paribas Peregrine Securities. 'A full-year loss is inevitable, which will put the company's full focus back on cash preservation. We expect a more meaningful recovery to come only in 2010.'
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