by Andrew Johnson - Feb. 5, 2009 12:00 AM
The Arizona Republic
ON Semiconductor Corp.'s manufacturing presence in metro Phoenix will be nil by next year, when the chipmaker will close its remaining Valley fabrication plant.
The semiconductor manufacturer on Wednesday said that it will close the facility, which makes filters, diodes, rectifiers and transistors for electronic devices, by the end of the first quarter of 2010. Its other fabrication plant in Phoenix closed last year.
The announced closure eliminates 350 manufacturing jobs in metro Phoenix. Production will be moved to ON's plant in Malaysia.
ON currently employs about 1,100 workers in the Phoenix area, including the workers affected by the announcement.
The company also operates an engineering and design center in Chandler. That facility and ON's corporate headquarters in Phoenix are not affected.
In an earnings conference call with analysts on Wednesday, Keith Jackson, president and chief executive officer, said that the plant closure would result in a cash charge of $8 million to $10 million but eventually will result in annual savings of $36 million.
For the fourth quarter that ended Dec. 31, ON reported a net loss of $519.6 million, or $1.27 per diluted share, compared with a profit of $61.1 million, or 20 cents per diluted share, in the same period a year ago.
The Phoenix plant, which has been in operation since the 1960s and makes chips on six-inch wafers, is located at ON's corporate headquarters, 5005 E. McDowell Road.
ON is one of several semiconductor manufacturers to close plants and reduce headcount amid plummeting chip sales, as the recession hampers demand for consumer electronics, mobile phones, automobiles, home appliances and other products that contain the chips.
Annual semiconductor sales fell in 2008 for the first time in seven years. Industry analysts expect sales to continue declining this year.
ON's fourth-quarter sales actually increased 19.8 percent year-over-year, to $488.7 million. However, they decreased 16 percent from the third quarter.
"The end of 2008 and the beginning of 2009 have been a challenging time for the semiconductor industry . . . and we are expecting further declines in the first quarter 2009," Jackson said. "We are uncertain as to the depth or duration of the current recession."
ON's shares closed up 22 cents, or 5.4 percent, to $4.27 Wednesday.
The sluggish environment is prompting manufacturers to shutter aging facilities in favor of newer U.S. plants and fabrication plants overseas where labor and other manufacturing costs are lower.
Last month, ON said it planned to lay off 1,500 workers across the company during the year, cut merit increases and require employees to take a two-week unpaid furlough.
ON also said it was accelerating three previously announced plant closures this year - two in Slovakia and one in Idaho - and close a fourth plant. The fourth plant turned out to be the Phoenix facility.
The closures are partly the result of two acquisitions ON made in 2008, spokeswoman Anne Spitza said.
After the four plant closures, ON will have 10 fabs around the world. The company currently has about 14,500 employees worldwide.
Several other semiconductor manufacturers with Arizona operations have announced layoffs, salary cuts and furloughs in recent weeks, including Intel Corp., Texas Instruments Inc., Freescale Semiconductor Inc., Microchip Technology Inc. and STMicroelectronics.
Market analysts and trade groups are hopeful President Barack Obama's proposed stimulus plan of $900 billion, which includes several billions of dollars for infrastructure projects, could give the semiconductor industry a much-needed boost.
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