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Microchip Technology is cutting approximately 2,000 jobs—about 9% of its workforce—due to declining automotive demand and surplus chip inventories. The move is part of a broader restructuring plan in response to falling sales from automotive customers who are grappling with excess inventory accumulated during the pandemic.
As part of the restructuring, the Arizona-based company will sell its integrated circuit die to a Chinese partner for testing, assembly, and branding, following similar moves by competitors like Allegro Microsystems. This decision comes amid rising US-China tensions, which have complicated the relationship between chipmakers and the Chinese market, a key revenue source for automotive suppliers.
Key Steps in the Restructuring:
- Job cuts will primarily impact Microchip’s manufacturing plants in Gresham, Oregon, and Colorado Springs, Colorado. The company is also accelerating the closure of its Arizona factory.
- Microchip expects to reduce its inventory by over $300 million by March 2026, following a previous $82 million write-off.
- Restructuring costs are estimated between $30 million and $40 million, which will include severance payments and other expenses. The job cuts are expected to be completed by the end of the June quarter.
- These actions are projected to reduce operating costs by up to $100 million annually, with further savings from factory closures.
