Nucor earnings beat by $0.08, revenue fell short of estimates
CHANDLER, AZ - Microchip Technology Incorporated (NASDAQ:MCHP), a leading provider of microcontroller and analog semiconductors with a market capitalization of $31.66 billion, announced today a significant restructuring plan that includes the closure of several manufacturing operations and a reduction of approximately 2,000 employees. This move is part of the company’s efforts to reduce costs and resize its manufacturing footprint. According to InvestingPro data, analysts anticipate sales decline in the current year, with 15 analysts recently revising their earnings expectations downward.
The Chandler, Arizona-based company revealed that it would be accelerating the closure of its Tempe, Arizona wafer fabrication facility, known as Fab 2, with operations expected to cease in May 2025, months earlier than initially planned. The facility and its equipment are currently listed for sale.
Concurrently, Microchip Technology is reducing its workforce at its Fab 4 facility in Gresham, Oregon, Fab 5 in Colorado Springs, Colorado, a backend manufacturing facility in the Philippines, and various business units and support groups. The company estimates the total cost of these actions to be between $30 million and $40 million, covering severance and other related restructuring expenses.
These cutbacks are expected to be communicated within the March 2025 quarter and completed by the end of June 2025. The company anticipates an annual reduction in operating expenses of approximately $90 million to $100 million once these measures are fully implemented. Additionally, the actions will decrease employment-related costs in its factories by roughly $25 million annually.
Microchip Technology also expects to incur charges around $45 million due to the cancellation or modification of long-term supply agreements with certain wafer foundries, as the company will not meet the required purchase volume within the specified time frames.
The company has stated that the estimated costs associated with the restructuring may be refined over time and that additional expenses not currently anticipated may be incurred. There is also uncertainty regarding whether any accelerated depreciation or impairment charges will be recorded.
This announcement follows the company’s previous disclosure on December 2, 2024, regarding the closure of Fab 2, which was projected to yield approximately $90 million in annual cash savings.
Microchip Technology’s restructuring plans come amid a backdrop of economic challenges and industry shifts, with the company aiming to better align its operations with current market demands. The information provided is based on a press release statement.
In other recent news, Microchip Technology announced the retirement of Robert A. Rango from its Board of Directors, effective February 19, 2025. The company has not yet named a successor or indicated any changes to its board composition following his departure. Meanwhile, several analyst firms have adjusted their outlooks on Microchip Technology. Truist Securities lowered its price target to $56, maintaining a Hold rating, and expressed caution following the company’s earnings miss and guidance that fell short of projections. Piper Sandler also reduced its price target to $65, keeping an Overweight rating, citing ongoing challenges in the semiconductor industry and excess inventory concerns.
Similarly, Needham cut its price target to $60 while retaining a Buy rating, noting pressure on gross margins due to underutilization and capacity charges. Mizuho (NYSE:MFG) adjusted its price target to $58, maintaining an Outperform rating, after Microchip reported December quarter revenue of $1.03 billion, slightly below expectations, and projected a 6% decline for the March quarter. The company is preparing for a strategic review scheduled for March 3, 2025, which will focus on inventory status and business roadmap. Despite these challenges, analysts have pointed out potential signs of recovery later in 2025, with some optimism about Microchip’s strategic plans and product wins.
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