NXP to slash R&D and manufacturing

On the day that companies such as Texas Instruments celebrate the 50th anniversary of the integrated circuit, NXP Semiconductors has said it will slash its R&D and manufacturing base.

The company claimed the changes come in response to a challenging economic environment, a weak US dollar, and the reduction in size of the company after moving its wireless business into a joint venture with STMicroelectronics. NXP said the layoffs programme will affect approximately 4500 people globally and will save $500bn annually, but cost $800m to implement.
NXP CEO Frans van Houten said in a prepared statement: “This restructuring is a tough measure and it is regrettable that we need to let people go. However, the changes will make NXP a strong, profitable and growing company, with a positive cash flow. NXP is transforming into a globally competitive semiconductor company with scale and leadership in its core businesses.  Measures include increasing the competitiveness of our manufacturing base and reduction in our work force, resulting in a leaner, customer focused company, well positioned for growth in our core businesses.”
The programme means NXP will migrate products to more advanced production processes. The company will reduce its own, mature-process production capacity. NXP plans to consolidate the majority of its production to two of its more advanced European fabs: Nijmegen, The Netherlands and Hamburg, Germany. Production will also be moved SSMC in Singapore.
As a result four factories are planned to be sold or closed. The fab in Fishkill, New York, USA will be closed in 2009.  Additionally, two other factories are planned to be closed by 2010: the ‘ICN5’ part of the NXP facility in Nijmegen, Netherlands, and part of the ‘ICH’ fab of the Hamburg facility. NXP’s fab in Caen, France will be put up for sale. In the event that a buyer is not found the facility could be closed as well during 2009.

The plan aims to increase the loading in the remaining fabs to more than 90 per cent, as well as result in expected savings of $300m per year by the end of 2010.

Cuts in central R&D are intended to cut costs by $250m. These changes are expected to affect employees primarily in the Netherlands, France and Germany. After the restructuring NXP will invest 16 to 17 per cent of sales in R&D, which the company said is in line with other semiconductor companies. NXP said it sees redundancies as inevitable.

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