Chartered Semi to cut 600 jobs after record quarterly loss (Update 2)

Update 1:
90 per cent of the around 600 job cuts announced on Friday by chipmaker Chartered Semiconductor Manufacturing will be in Singapore, chief executive Chia Song Hwee told BT in a telephone interview. Read More

Read: Bulk of Chartered’s job cuts in Singapore (Update 1)

Update 2:

The job cuts will be across all levels, ‘from manufacturing to managerial to executive’, said Chartered’s chief executive officer Chia Song Hwee on Friday.

Laid off Singaporean employees who have been with the company for three years or more will receive one months pay for every year of service; those with shorter length will get half a month’s pay for each year of service.

The company will also be giving out an ex-gratia payment to these employees, and has engaged consultants to help them with outplacement, said Mr Chia, stressing that it had this step as a last resort.

Read More

Download Chartered Semiconductor Press Release

Chartered Semiconductor Manufacturing Ltd. said it would cut 600 jobs, about 8% of its global work force, as it swung to a fourth-quarter net loss amid a drop-off in demand and delayed deliveries.

Its American depositary shares rose 4.5% to $1.63 in after-hours trading as the Singapore-based chip foundry posted its second consecutive quarterly loss. The stock price has fallen 77% since May.

Chartered said it expects to save about $16 million a year with the latest job cuts. It plans a $8 million related charge in the first quarter.

Chief Executive Chia Song Hwee said the job cuts, which total 1,300 since the third quarter, are “a prudent business decision” and part of managing cash and liquidity. The company also plans to reduce capital spending by 35% to $375 million this year from a year earlier.

In the fourth quarter, the semiconductor company reported a net loss of $114 million, or 46 cents per American depositary share, compared with net income of $5.9 million, or 1 cent per ADS, a year earlier. Revenue slid 0.3% to $351.7 million.

Chartered cut its forecast last month to a loss of 30 cents to 34 cents a share on revenue of $343 million to $353 million.

Gross margin fell to 3.9% from 17.2%. Shipments declined 9.1%, while the average selling price of eight-inch equivalent wafers rose 1.1%.

Capacity utilization fell to 59% from 81%.

Macquarie warned in an analyst note last week that Chartered risks breaching debt covenants if its utilization doesn’t improve.

Along with others in the industry, Chartered, which makes chips for set-top boxes, video-game devices, and MP3 and DVD players, is facing declining demand and increasing competition. It has cut contract jobs and 2009 capital spending, eliminated overtime and temporarily closed plants, and lowered salaries on a short-term basis.

The company has been rumored to be in search of a strategic investor but two possible buyers, United Microelectronics Corp. and Taiwan Semiconductor Manufacturing Corp., recently expressed no interest. Privatization by Singapore’s state investment fund Temasek Holdings Pte. Ltd. , which owns 67% of the company, is a possibility.

Looking ahead, Chartered expects a first-quarter loss of 57 cents to 61 cents per ADS on revenue of $232 million to $244 million.

via Wall Street Journal

Jan. 30 (Bloomberg) — Chartered Semiconductor Manufacturing Ltd., the world’s third-largest maker of customized chips, forecast a record quarterly loss and will cut more jobs to weather the deepening global recession.

The net loss in the first quarter will probably be $141 million to $153 million, Singapore-based Chartered said today after reporting its largest deficit since the first quarter of 2002. Sales may slump as much as 40 percent to as low as $232 million, it said.

Chief Financial Officer George Thomas said customers are reducing “even more aggressively” as inventory levels pile up amid the broadening slump in demand. The collapse in chip sales led Toshiba Corp., Japan’s largest maker of semiconductors, to predict a record annual loss yesterday.

“We’re in unprecedented times. This is a demand-driven downturn and everything from handsets to PCs to consumer electronics is going to decline by 5 to 10 percent this year,” said Steven Pelayo, a Hong Kong-based analyst at HSBC Holdings Plc. “Combine that with clients and chipmakers having excess inventories and you have these ugly times.”

Chartered, which makes chips used to power Microsoft Corp.’s Xbox 360 game console, fell 4.1 percent to close at 23.50 Singapore cents in local trading yesterday. Its American depositary receipts dropped 4.3 percent to $1.56 before the earnings announcement.

Unpredictable

“In this environment, it is difficult to predict with accuracy how the quarter will turn out,” Chartered’s Thomas said.

The fourth-quarter loss of $114 million, or 46 cents per ADR, included a reversal on a $34 million tax credit. The $81 million median loss estimate in a Bloomberg survey of five analysts didn’t factor in the tax-credit reversal. Sales slipped 0.3 percent to $351.7 million. Chartered will give a mid-quarter update on March 13.

Chartered said it will cut 600 employees, or 8 percent of its workforce to save $16 million a year. It will book an $8 million one-time charge in the first quarter. The latest reduction brings the total eliminations to 1,300 positions, or 18 percent of its workers, the chipmaker said.

The company, which counted Broadcom Corp. and Qualcomm Inc. as its largest clients in 2008, said it plans to slash capital spending this year by 35 percent to $375 million, its lowest since 2003.

Collapse in Demand

Qualcomm, the world’s largest maker of mobile-phone chips, on Jan. 28 cut its annual sales outlook and said it won’t give an outlook for profit because of the unpredictability of demand.

A collapse in demand for electronics ranging from mobile phones to computers has forced Intel Corp. to say its 87-quarter streak of profitability may end. Samsung Electronics Co., the second-largest chipmaker after Intel, this month reported its first quarterly loss.

Taiwan Semiconductor Manufacturing Co., the top producer in the so-called foundry industry that Chartered competes in, last week forecast its first quarterly loss since 1990.

“Demand’s not coming back,” said Stuart O’Gorman, who helps manage $800 million in technology shares at Henderson Global Investors Ltd. in Edinburgh. “Most of the chipmakers are going to go out of business and it’s a very long road.”

via Bloomberg

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