Chartered Semi makes swinging job cuts

  Financial Times, UK
February 13 2003
By John Burton in Singapore

CHARTERED Semiconductor, the loss-making Singapore state-owned chipmaker, on Thursday, Feb 13, said it would sack 14 per cent of the workforce and close its oldest plant in one year. Chartered, the world's third largest producer of customised chips, has lost $801m in the past year and has embarked on a tough cost-cutting programme to survive a deep slump in the global semiconductor market.

The new job cuts affecting 500 workers come on top of 300 jobs that were eliminated last October. Chartered has 3500 employees.

The closure of Fab 1 plant, opened in 1989, is meant to phase out outdated technology, leaving Chartered with four plants.

The group said it would save $25m annually from the closure of Fab 1, which accounts for nearly a fifth of total capacity, after writing off $22m in extraordinary costs over the next year.

Chartered is using only 40 per cent of production capacity, reflecting depressed semiconductor demand in the past two years.

It recently signed an agreement with IBM to lease the US computer maker's advanced chip facilities in the US in order to postpone building a new plant by a year. It has also reduced capital spending for this year.

"Chartered is buying time in the hope that the chip market will recover," said an analyst.

Fab 1 uses technology that produces wafers that are 150 milimetres in diameter, when advanced chipmakers are using 300mm wafers, which are more cost efficient.

The rest of Chartered's plants use 200mm wafers, which is one reason why it has seen its market share fall to 7 per cent. It lags far behind its bigger Taiwanese rivals, Taiwan Semiconductor Manufacturing and United Microelectronics.

Chartered's problems have caused its share price to fall by 81 per cent over the past year, making it the worst performing stock on the Straits Times share index. By midday, Chartered shares were down 1.4 percent at S$0.68.