February 28, 2001–Chandler, Arizona–In response to current business conditions, Microchip Technology is reducing wafer capacity at its two Arizona wafer fabs, delaying the start date for its Puyallup, WA, wafer fab until December 2002, and idling its Hong Kong test facility during the June 2001 quarter by diverting test requirements to its Thailand facility. Additionally, the company will lay off approximately 400 employees worldwide.

“When we entered the December 2000 quarter, we were anticipating 9% growth during that quarter, and approximately 6% growth in the March 2001 quarter, and we had in place the operating capacity to meet these growth targets,” explains Steve Sanghi, Microchip’s president and CEO. “Based on the continued uncertainty of the March 2001 quarter, combined with the lack of visibility for fiscal 2002, we believe it is prudent to reduce our operating capacity at this time. During the December 2000 quarter, we began to experience a reduction in demand that we believed was driven from the inventory correction in our distribution channel. We now believe that the reduction in demand is also driven by a worldwide economic slowdown that may impact demand for an extended period. The actions we are announcing today are extremely difficult for us and are not being undertaken lightly, but we believe that the end result will match operating capacity to demand, improve operating efficiencies, and prevent further growth in inventories that occurred over the past few quarters.”

Microchip is headquartered in Chandler, AZ, with design facilities in Mountain View, CA, and Bangalore, India; semiconductor fabrication facilities in Tempe and Chandler, AZ, and Puyallup, WA; and assembly and test operations near Bangkok, Thailand.