Microchip Technology Incorporated (NASDAQ:MCHP), a leading provider of intelligent, connected, and secure embedded control solutions, provided updated lower revenue guidance for the quarter ending December 2024 and announced plans to restructure manufacturing.
“In the first two weeks of my new role as CEO and interim president, I have conducted a deep analysis of the company’s operations and determined that certain actions are necessary. I want to make clear to investors that I plan to remain in this role, although the title is interim, for as long as necessary, so there is no specific timeline for my successor,” said Steve Sanghi, Microchip’s CEO, president and chairman. “We indicated on our November 2, 2024 earnings call that significant turnaround requests were required to achieve the midpoint of our December 2024 revenue guidance range. Those requests were slower than anticipated and we now expect our December 2024 revenue to be close to the low end of our original guidance of $1.025 billion,” Mr. Sanghi added.
“With high inventory levels and sufficient production capacity, we have decided to close our Tempe wafer manufacturing facility, which we refer to as Fab 2,” Mr. Sangi added. “Many of the process technologies that operate in Fab 2 also operate in our Oregon and Colorado plants, both of which have sufficient cleanroom space for expansion. We expect to be able to close Fab 2 in the September quarter of 2025, at which time we expect it to generate annualized cash savings of approximately $90 million. Given the high inventory of products manufactured in Fab 2, we do not expect to see any P&L savings from the closure until the beginning of the June quarter of 2026 on a first-in, first-out basis. We expect the closure of Fab 2 to begin helping us adjust our inventory levels beginning in the March quarter of 2025. We expect near-term restructuring costs from these actions to be in the range of $3 million to $8 million, and we could incur additional restructuring and closure costs in the future of up to an additional $15 million. Our estimates will be revised.” Restructuring costs will increase over time as more information becomes available.”
“I want to assure investors of my confidence in Microchip’s long-term growth and profitability,” concluded Mr. Sanghi. “Our design momentum remains strong, driven by our comprehensive system solutions strategy and key market trends. The plant restructuring is a major step in resizing our manufacturing capacity, and we will continue to evaluate any additional actions needed to position Microchip for superior growth and financial performance.”
Microchip will participate and present at the UBS Global Technology and AI Conference on December 3-4, 2024.
This article was translated with the help of an artificial intelligence program and has undergone
