National Semi streamlines manufacturing operations

January 6, 2005 – National Semiconductor Corp. announced it has initiated a global program to reduce expenses, which will affect approximately 550 people, most of whom work in National’s manufacturing plants in the US, Europe, and Asia. The program will also streamline manufacturing operations in line with the current utilization of National’s factories, and adjust factory levels required to support its ongoing higher value-added analog business model.

As a result of these actions, the company expects to incur approximately $22-$26 million of severance and related expenses, most of which will be recorded in the third quarter of fiscal 2005.

National’s capacity utilization percentage in its wafer fabrication plants ran in the mid-90s for most of fiscal 2004. However, during National’s fiscal 2005 second quarter, which started August 30, 2004, the company’s wafer fabrication utilization rates declined to the mid-60s due to significant inventory reductions in the distribution channel and lower demand than expected in some markets. In addition, as the company continues to strategically de-emphasize its lower margin and commodity businesses, more of the company’s manufacturing capacity becomes available for higher margin Analog products.

“These actions reflect our continuing focus on higher value-added Analog products and our de-emphasis on commodity products,” said Brian L. Halla, National’s chairman, president, and CEO. “We will, of course, make available excellent outplacement support, financial advice and counseling to all affected employees.”

In addition to adjusting personnel levels in its factories, National is eliminating approximately 100 positions from several product lines and support functions at various sites, including National’s corporate headquarters in Santa Clara. In total, the personnel reductions will lower National’s global workforce by approximately 6 percent.

National’s third quarter financial announcement and conference call are scheduled for March 10, 2005, at which time the company will discuss 3Q results as well as the impact of these actions on the company’s costs going forward.


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