Fairchild Semiconductor plans to eliminate its 5-inch wafer fabrication lines and significantly reduce its 6-inch fab lines while increasing its reliance on foundries and its 8-inch factories in what the company hopes will result in greater supply chain flexibility.
As a result of realignment, Fairchild will close its manufacturing and assembly plants in West Jordan, Utah and Penang, Malaysia and will eliminate the 5-inch line in its Bucheon, South Korea facility. Fairchild said the closure of the facilities and lines are planned to take place during the second quarter and fourth quarter of 2015. A Fairchild spokesman said the closure of the two sites will result in a 15 percent reduction in workforce of the roughly 9,000 total Fairchild employees.
With the closure of the facilities and lines, Fairchild now has an end of life (EOL) product policy so customers will continue to get parts without disruption during the closing. Fairchild’s spokesman said that product change notices (PCNs) will be issued starting this month through mid-2015 as qualification and transfer work is completed at the new sites. The PCNs will include a list of parts affected by the changes, the current manufacturing facility and the new manufacturing facility.
Fairchild will also increase its use of foundries moving forward. Currently, foundries manufacture less than 10 percent of Fairchild’s total wafer output. However, after the realignment, Fairchild will use foundries for 25 percent to 30 percent of its wafer output. Fairchild will continue to operate its 8-inch wafer fabs in South Portland, Maine and Mountain Top, Penn. as well as the 6- and 8-inch facility in Bucheon. 8-inch production is expected to increase from 30 percent of total wafer output today to 75 percent of total wafer output after realignment, Fairchild said.
"Closing down the 5-inch and 6-inch manufacturing lines is a positive thing from a cost perspective," said Len Jelinek, senior manager and chief analyst of semiconductor manufacturing at IHS Technology. "By transitioning all of their manufacturing by the end of 2015 to 8-inch, this will position the company to be in a better cost position. It will also help in their goal to expand into the analog space and away from discrete."
Due to the closures, reduction in workforce and other realignment costs, Fairchild will incur an approximate $36 million hit in cash as well as a $25 million non-cash charge for accelerated depreciation. However, Fairchild said it expects to realize annual savings of $45 million to $55 million from a second quarter 2014 financial baseline.
“An adaptive supply chain must be the foundation of any global manufacturer’s operations in the increasingly dynamic semiconductor solutions market,” said Mark Thompson, Fairchild’s chairman and CEO, in a statement. “The realignment we are announcing today will maximize the utilization of 8-inch factories and reduce the complexity of our manufacturing footprint, while creating the flexibility to support ongoing customer demand through a greater use of external manufacturing sources.”