Overcapacity writedowns at IDT:
A service of Semiconductor Business News, CMP Media Inc.
Story updated 7:30 a.m.EDT/4:30 a.m. PDT, 9/9/98
IDT's Oregon fab overproduces resulting in a big write-down
SANTA CLARA, Calif.--Integrated Device Technology Inc. here is planning to
take non-recurring charges of $205 million to $240 million in the company's
current fiscal quarter because its Oregon wafer fab is producing too many
products for the marketplace.
Ironically, the wafer fab in Hillsboro, Ore., has done such a good job converting
over to 0.25-micron technology that IDT said it is still significantly over producing
products despite a recent decision to close the company's chip-processing plant
in San Jose (see July 22 story). IDT said it was taking non-recurring charges of
$50 million to $60 million for the shutdown of the San Jose plant.
But now, the company said an audit revealed that it still has too much production
capacity partly because of the size of the Hillsboro fab and the fact that it is now
producing more ICs with the quarter-micron process technology. The increase in
output coupled with weak global demand for its products has caused IDT to take
an additional write-down of the asset carrying value related to the Hillsboro plant.
"The Oregon facility is key to IDT's future success," said Len Perham, president
and chief executive officer of the Santa Clara company. <b?"However, the global
slowdown in the semiconductor industry, the proliferation of foundries in Asia,
and the increase in 'hidden capacity' resulting from technology advancements
have created widespread overcapacity.
"This situation and IDT's own technology advancements have created significantly
more capacity than we can reasonably absorb in the near term," he said. "During
the past two years, the impact of the costs reported on IDT's statement of
operations associated with excess capacity has been significant, and revenue has
not grown to absorb the cost of the company's manufacturing assets."
Of the charges being taken, $15 million to $20 million represent anticipated cash
payments associated with deinstallation of equipment, facility decommissioning
and restoration, and employee severance costs, according to IDT. Previously, the
company said it expects to take an operating loss in the current fiscal quarter.
"Our action acknowledges this overcapacity and is consistent with other
operating initiatives taken to bring IDT's costs and revenue in line," Perham said.
"While our recent decisions have been difficult to make, these steps and the
continued funding of new product development will help ensure IDT's long-term
viability and success."
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