Microchip Tech sells idle 200mm fab

October 24, 2007 – Microchip Technology Inc. says it has sold its idle Fab 3 facility in Puyallup, WA, for $30M following an unsolicited offer received in September. The company will take a $16.5M loss on the sale, but add about 60 basis points to gross margins “in future quarters” and >$27.5M to treasury balance, net of disposal costs.

The company acquired the site in July 2000, intending it to be a 200mm facility utilizing 0.7 and 0.5-micron process technologies. But “deteriorating business conditions” delayed the intended production startup and the site was never ramped. Ultimately the company took a $41.5M asset impairment charge in Sept. 2002.

Steve Sanghi, president/CEO of Microchip Tech, pointed out that the company expects to reach $1.6B in sales utilizing its current production lines “with nominal capital equipment additions,” and adding more tools to Fab 4 in Gresham, OR (200mm, 0.5-micron, capable of sub-0.18-micron), and Fab 2 in Tempe, AZ (200mm, 0.35-0.5-micron), can push those two fabs to $2.2B. Plus increased business at foundries will augment available capacity to $2.5B in sales.

With these projected capacity changes, “we determined that we would not require Fab 3 for many years, allowing Microchip to accept the offer for Fab 3,” he said, in the company’s fiscal 2008 conference call.

Sanghi said during the call that the buyer was a “developer” with plans for all three components of the site — land, building, and empty fab shell — but “not a semiconductor manufacturer.”


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