December 4, 2007 – Israeli foundry Tower Semiconductor says it is implementing a new cost-cutting plan, saying it will save about $20M through a combination of moves including job cuts and renegotiated deals with suppliers.
An estimated >$5M in “payroll cost savings” will impact primarily non-operational and service related functions and outsourcing noncore functions, including some internal transitions and “organizational changes.” No detail about how many jobs would be affected, or where, were provided.
Meanwhile, Tower says it will achieve another ~$10M in cost savings by actively pursuing multiple sourcing of materials and spare parts, plus intensify pricing negotiations with suppliers, and even “substitution of expensive materials and parts by less expensive alternatives.” Also, the company says it will reduce sustained capex through “better program efficiencies” and longer-term supply contracts. Further reductions in costs will be achieved by acquiring used tools from “winding-down” fabs of other IDMs, notably Intel and AMD.
“While we continue our expansion and project further growth in sales, we are mindful to continuously promote and improve corporate efficiencies,” said Tower CEO Russell Ellwanger, in a statement. “Every measure is taken to accomplish the aggressive cost reduction goals whilst improving Tower’s ability to perform and deliver. We are confident that these measures, coupled with the business expansion initiatives, result in a stronger and more competitive Tower and hence help accelerate our move to profitability.”
Tower is currently expanding its 200mm Fab 2 facility, which at the end of last quarter was running at >90% utilization of its 24,000 wafers/month capacity. The Fab2 expansion/upgrades also will help Tower’s margins, since production cost/wafer was kept flat (no additional headcount despite a 50% manufacturing capacity increase, and 3x sales run rate increase since 2005).
Meanwhile, Tower says it has qualified first prototypes for International Rectifier, with functional product and yields that “met the customer’s expectation.” Volume production will start by year’s end at the foundry’s Fab 2 facility. The two started work in Sept. 2006.