Microchip Technology to cut 2,000 jobs as automotive demand wilts

BENGALURU: Microchip Technology said it will cut around 2,000 jobs, or about 9% of its workforce, as the chipmaker restructures its business to combat slowing demand from automakers, sending its shares up nearly 4% on Monday.

Automotive customers of Microchip have struggled to clear their chip inventories after aggressively building up stocks during pandemic-led supply snags. Shares of the Chandler, Arizona-based company slumped more than 36% in 2024.

Microchip also announced plans to sell its integrated circuit die to a Chinese partner, which will test and assemble the products and sell them under a Chinese brand. Rival chipmakers such as Allegro Microsystems have also undertaken steps to localize supply chains in China.

Escalating Sino-US tensions are threatening chipmakers that rely on revenue from China, a strong market for most suppliers of the auto industry.

Microchip’s headcount reductions will be concentrated in the company’s chip factories, commonly referred to as fabs, in Gresham, Oregon and Colorado Springs, Colorado. It is also running ahead of schedule on the planned closure of its Arizona factory which could help address waning demand and clear inventory.

It expects to reduce overall inventory by over $300 million by March 2026, after writing off $82 million of excess inventory in the December quarter.

The company will also conduct layoffs at its backend manufacturing facility in the Philippines.

Microchip expects to incur between $30 million and $40 million of costs related to the layoffs, consisting of cash severance and related restructuring expenses.

The layoffs will be communicated to employees this month and fully implemented by the end of the June quarter.