Microchip Technology to layoff 2,000 workers worldwide | Business

More than 200 Microchip Technology employees in Colorado Springs will receive pink slips this month, part of the chipmaker’s plans to lay off about 2,000 of its workers amid declining demand from automakers.

Microchip’s Colorado Springs chip manufacturing facility will have 238 employees permanently laid off, the company notified the state Tuesday in a written letter under the Worker Adjustment and Retraining Notification (WARN) Act. The law requires employers, in most cases, to provide employees with 60 days’ notice of job eliminations.

The layoffs are expected to begin May 3, but Microchip is placing affected employees on paid leave immediately, the company said in the letter.

Chandler, Ariz.-based Microchip Technology announced the sweeping job cuts this week as part of broader cost-saving measures and a restructuring that is expected to save the company multimillions of dollars in annual operations and employment-related expenses. The planned layoffs will cut about 9% of Microchip’s total global workforce; Microchip employs about 1,000 people in Colorado.

Reuters reported on Monday that Microchip’s automotive customers are having difficulty reducing their excess chip inventories; many of them stocked up during the COVID-19 pandemic amid ongoing supply chain disruptions.

Semiconductor chips are crucial components for vehicle manufacturing and safety. They analyze engine data, help ensure systems like anti-lock braking systems work correctly and that airbags are deployed effectively. They can also improve gas mileage and other areas of car performance.

The company is focusing the job reductions at its chip factories in Colorado Springs and in Oregon, Microchip President and Chief Executive Officer Steve Sanghi said in a Monday presentation that provided business updates.

Layoffs are also expected at Microchip’s backend manufacturing facility in the Philippines, and in various business units and support groups, company spokesman Brian Thorsen said in a Tuesday email.

He declined to specify the number of employees that will be laid off at each of these facilities and units, but added that the Colorado and Oregon facilities “remain key to Microchip’s long-term production and capacity plans.”

Most of the planned job cuts in Colorado Springs — 125 — are for production specialists, according to the WARN letter. Microchip plans to eliminate 44 process enhancement specialist positions and between one to eight employees each in various other jobs, to include product and design engineers, materials handlers, engineers, department managers and technical staff, among others.

Other cuts

Microchip’s latest job cuts come shortly after the company’s December announcement it is closing its water fabrication plant in Tempe, Ariz. That closure, originally estimated to be complete by September, is now on track to be completed in May, Thorsen said.

Microchip is transferring product manufacturing and technologies from the Tempe factory and other outside foundry partners to the Colorado Springs and Oregon chip production facilities, he added.

Microchip expects its layoff-related costs will total between $30 million and $40 million, Reuters reported. However, the layoffs are projected to save Microchip between $90 million and $100 million in annual operations costs and $25 million in employment-related costs, the presentation shows. 

“Microchip has been navigating an inventory correction that’s occurring in the midst of a semiconductor downcycle. While the company has taken steps to rightsize inventory and reduce expenses — including temporary pay reductions and mandatory shutdowns — these measures have not been enough,” Sanghi said in a written statement Tuesday.

The president and CEO noted the company “tried to avoid” layoffs, but they are necessary for Microchip to effectively compete in the global market, he said. 

“We did not make this decision lightly and deeply regret the impact it will have on our employees,” Sanghi said.

Layoffs temporary?

The WARN letter states the Colorado Springs layoffs will be permanent.

But Sanghi’s Monday presentation states the chip factories in Colorado Springs and Oregon “will be sized down to below the near-term demand rate and when excess inventory is corrected, we will ramp back up to meet the demand rate.” Microchip declined to provide further details on Tuesday.

It is unclear if the layoffs could affect Microchip’s plans to upgrade its Colorado Springs chip manufacturing plant to the tune of $880 million.

The U.S. Department of Commerce announced in January 2024 it planned to award the company $90 million in federal tax incentives to fund the Colorado Springs plant’s upgrades. That improvement project, announced in February 2023, has now been on hold for almost a year amid a semiconductor glut.

Microchip’s layoffs aren’t likely to significantly impact the regional economy.

Colorado Springs Chamber of Commerce & Economic Development Corp. spokeswoman Jayne Mhono Dickey said Tuesday Colorado Springs’ economy is strong and diverse. Thriving sectors like aerospace and defense and advanced manufacturing “continue to absorb highly skilled and technical workers,” she said.

Mhono Dickey pointed to recent reporting by Deloitte, a business management consulting firm, stating that increasing use of technology like artificial intelligence and 5G will likely “drive growth in the global semiconductor industry, with estimated sales of $697 billion in 2025, increasing demand for similar jobs.” 

“The Colorado Springs economy is thriving, and many businesses continue to find our region as an ideal investment location,” Mhono Dickey said.

The chamber has announced 26 economic development projects since 2022, spanning industries from aerospace and defense to advanced manufacturing and technology industries, she said. The projects have brought in more than 5,000 jobs and attracted $1.8 billion in capital investment to the region.