- The Washington Times - Thursday, February 13, 2003

SINGAPORE, Feb. 13 (UPI) — Chartered Semiconductor Manufacturing, the world's third-largest contract computer chip maker announced Thursday a restructuring plan to help it returned to profitability.

As part of the plan, Chartered said it will close a microchip plant in Singapore by 2004 resulting in the loss of 500 jobs, or 14 percent of its workforce.

"The speed at which Chartered can return to profitability continues to be paced by a capacity and cost base which were put in place several years ago, when our customers were expecting much higher growth in their markets," said Chia Song Hwee, president and chief executive officer of Chartered.

"While Chartered believes it can grow faster than the overall semiconductor market this year, the industry remains depressed as it continues to slowly recover from the worst downturn in its history and the global economic outlook remains clouded. Our strategy addresses these issues and opportunities."

The announcement comes a few weeks after the company reported its eighth consecutive quarterly loss, and forecast continuing weak chip demand in the first half of this year. The state-controlled company reported a narrower than expected net loss of $108.7 million for the fourth quarter, but posted a net loss of $417.1 million for the year, compared with the net loss of $384.0 million in 2001.

Foundry capacity worldwide is expected to exceed demand by 3-8 percent this year but increased competition from China is expected to drive down wafer prices.

Chartered explained that the next phase of its return-to-profitability strategy was targeted at improving top-line growth and optimizing its capacity base. The company will focus on business opportunity in advanced technology, while continuing to serve the markets for mature technologies.

As a result of the sharp contraction in the semiconductor market over the last two years, the worst in the industry's history, Chartered has excess capacity. The company also feels that to fully capitalize on its enhanced technology position, it needs more leading-edge capacity. The fab rationalization plan aims at reducing excess capacity and rapidly expanding capability for advanced technologies, it said.

To support the company's growth potential in advanced technologies, Chartered said it has developed a "cost-effective plan to upgrade its capacity base."

Under the plan, which will be paced by market demand, Chartered intends to increase capacity for 0.18-micron and below from 15 percent in 2002 to 50 percent by the end of 2004, and do so without increasing Chartered's total capacity base.

Chartered also intends to address the issue of utilizing mature capacity by continuing its thrust in developing niche technologies; close the company's only 150mm fab plant, consolidating its business into another plant; target partnerships for volume production and work toward establishing a manufacturing presence in China.

Although the one-time expenses associated with the Singapore plant closure will cost about $18 million-$22 million, which it will record over several quarters, the plan should lead to annualized cost savings of about $25 million.

(All figures in U.S. dollars.)




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