Chartered Semiconductor cuts 600 staff as downturn worsens

Singapore's Chartered Semiconductor cut 600 workers as demand for chips falls.

Singaporean contract chip maker Chartered Semiconductor will lay off 600 workers as the company grapples with sinking demand for semiconductors, executives announced Friday.

The latest round of layoffs, which represent about 8 percent of the chip maker's current workforce, will save the company an estimated US$16 million annually. The staff cuts raise the number of workers laid off since the third quarter to 1,300, according to the company.

Chartered, like most other technology companies, is feeling the effects of the economic downturn, and executives expect things to get worse before they get better. The chip maker expects to record a loss of US$147 million for the first quarter of 2009, compared to a loss of $114 million during the fourth quarter of 2008. The company reported fourth-quarter revenue of $352 million.

As a signal of how low chip demand will fall, Chartered expects its capacity utilization rate to hit 37 percent during the first quarter, a sharp fall from 59 percent during the fourth quarter. Revenue during the period will fall by as much as 34 percent, to around $238 million.

To cope with the slowdown in demand, Chartered cut its capital expenditure budget for 2009 to $375 million, a reduction of 35 percent compared to last year. That figure includes $240 million worth of equipment that has already been delivered as well as existing orders.

Chartered's two largest customers are Broadcom and Qualcomm, which each represent more than 10 percent of the chip maker's total revenue. Both customers are seeing sales drop as a result of the economic downturn.

Qualcomm, which reported a quarterly profit of $341 million [M] this week, said demand for its products is falling, with sales expected to fall up to 14 percent compared to the same period last year. Broadcom, which suffered a loss of $159 million during the fourth quarter, also expects sales to fall.

"As we look into the first quarter of 2009, we believe the current economic slowdown will continue to negatively impact our business as demand continues to decrease and settle into new levels and channel inventory adjusts accordingly," Broadcom CEO Scott McGregor said in a statement released Thursday.

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