American chipmaker Fairchild Semiconductor to cut 12 per cent of workforce

Fairchild Semiconductor International Inc. will cut 1,100 jobs, or 12 per cent of its work force, as the chipmaker looks to cut costs and boost cash flow. The South Portland, Maine-based company also cut its revenue outlook for the fourth quarter and said it expected more downward pressure on margins.

Fairchild shares were up roughly 4.5 per cent in midday trade, after the company unveiled the plan to cut jobs before the market open, amid growing uncertainty in the chip industry and the broader technology market.

The maker of power management and analog microchips, which had about 9,300 employees, said it expects to incur one-time cash charges of $12 million to $16 million during the current quarter and the first quarter of 2009. The restructuring actions would reduce payroll expenses by about $33 million on an annualized basis, the company said.

"We are vigorously managing our business to reduce operating expenses and capital spending to drive cash flow," CEO Mark Thompson said. "While current market conditions are definitely a catalyst, the restructuring should be viewed as part of an ongoing commitment to increasing the efficiency of our operations."

Fairchild, whose chips are used in computers, telecommunications gear and automobiles, becomes the latest company in the sector to cut estimates. Earlier this week, Texas Instruments Inc., National Semiconductor Corp., Altera Corp. and Broadcom Corp. slashed projections because of weak market conditions.

Fairchild said it expects sales of $320 million for the current quarter, as its backlog has stabilized over the last two weeks after dropping steadily earlier in the quarter. Last month, the company had expected sales of $338 million to $360 million. It also expects gross margin to be 25.5 per cent to 27 per cent, below its November prediction of 27.9 per cent to 28.9 per cent.

Present day Fairchild Semiconductor International, Inc. is a spin-off company resulting from reconstitution of assets in National Semiconductor. It inherits the Fairchild name of the original Fairchild Camera and Instrument, which had been the cornerstone of the semiconductor industry since 1957. The original Fairchild had been acquired by Schlumberger, which then sold it to National Semiconductor.

The company has locations in San Jose in California, West Jordan in Utah, Mountaintop in Pennsylvania, Bucheon in South Korea, Penang in Malaysia, Suzhou in China, and Cebu in Philippines; among others. Its corporate headquarters is located in South Portland, Maine.