IDT To Cut 700 From Penang And Manila Plants

By Julian Matthews, Newsbytes

18 Jun 2001, 3:27 PM CST

Chipmaker Integrated Device Technology Inc. [NASDAQ:IDTI] will ax 700 of its 2,600 staff from its assembly and test plants in Penang, Malaysia and Manila, Philippines.

The 700 represent the bulk of 900 staff it planned to cut from its 4,900-strong global workforce announced on Wednesday.

This is the second blow in the week for Penang, Malaysia's electronics manufacturing enclave, as Taiwanese computer giant Acer Inc. earlier reported that it would also give 700 staff their walking papers.

IDT President and CEO Jerry Taylor attributed the cuts to the industry-wide inventory correction and slowdown in demand. "The company needs to reduce operating costs in order to stay competitive and improve financial performance, while continuing to invest in products that represent growth opportunities," said Taylor in an e-mail reply.

He stressed that IDT is still "very committed" to its business in the Asia-Pacific region, which represents about 10 percent of company's revenues, as of the last quarter ended March 31.

"Asia Pacific is not down as much as the rest of the of the business, maybe only 25 percent or so from the prior quarter. Our offices in Asia Pacific are the revenue-producing ends of our organization, and we will continue to support them to grow and be profitable. We will also continue to invest in customer relationships and the resources to service new opportunities," he said.

In May, IDT management revised the company's revenue outlook for the first quarter of its fiscal 2002, ending July 1, to $120 million from the prior quarter's $213 million. It attributed the 44 percent downturn to ongoing inventory reductions by customers.

The current staff reduction exercise, to be implemented by the end of the month, is expected to cost $2.5 million.

In Asia, apart from Malaysia and the Philippines, the Santa Clara, Calif.-based company has two design centers in Sydney, Australia and Shanghai, China, and various sales offices across the region.

Taylor said IDT's acquisition of telecommunications provider Newave Semiconductor Corp. in April this year for $80 million cash was representative of IDT's strong focus in the Asia Pacific markets, particularly China.

The producer of high-performance logic, memory and communication chips plans to leverage on Newave's design center, with over 70 engineers in Shanghai, for strategic expertise in analog and mixed-signal circuit design critical to voice-and-data integrated solutions.

"We expect our Newave design center in Shanghai will contribute strongly to IDT's future product developments in the communications IC space," he said.

Taylor said IDT is convinced that its "aggressive actions" of late will enable it to recover from the current poor market conditions.

"Our cash position is very strong at about $750 million. We have also taken other aggressive actions to reduce costs such as freezing non-essential capital spending, requiring non-manufacturing personnel to take time off, freezing nearly all hiring, eliminating most temporary positions at non-manufacturing locations, sharply restricting non-essential discretionary spending and scheduling shutdowns in each of our four plants worldwide," he said.

Taylor said the strategy for the company in the coming quarters will be primarily to focus on its product execution for existing products, as well as its emerging businesses in integrated communications processors, IP co-processors and telecommunications products.

IDT mainly produces FIFO (first-in-first-out) memories, multiport memories, SRAMs, high-performance logic and clock management devices. In 1999, the company exited the x86 microprocessor market under the WinChip and Centaur brands, and successfully transitioned into making networking, switching and communication products.

"IDT's greatest market opportunity is the build-out of the emerging communications infrastructure in China and other Asia Pacific countries with opportunities in a converged wired and wireless infrastructure," he said.

On the possibility of outsourcing its manufacturing, Taylor said the company had a "long heritage of manufacturing capability" and planned to maintain that in the long-term. He indicated, however, that IDT had not ruled out "augmenting its manufacturing to third-party resources on a limited and strategic basis."

IDT's manufacturing front-end includes an 8-inch wafer design facility in Hillsboro, Ore., and a 6-inch wafer-processing plant in Salinas, Calif., the latter of which was affected by the rolling blackouts early this year.

IDT opened trading at $29.49 today, well below its 52-week high of $104.

Reported by, .

15:27 CST
Reposted 19:09 CST


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