NXP Semiconductors announced a redesign program which the company states will bring it to a healthy financial situation and position the company for future growth. The company claims that the changes come in response to a challenging economic environment, a weak US dollar, and the reduction in size of the company after moving its wireless business into a joint venture with STMicroelectronics.
The redesign program includes major reduction of NXP’s manufacturing base, its central R&D, and support functions. This program is expected to affect approximately 4,500 people globally and will result in annualized savings of USD $550 million. The restructuring cost will result in an estimated cash out of $800 million.
Moving forward, NXP states that it will focus on its Automotive, Identification, Home, and MultiMarket businesses where it claims that it has a high share of innovative products and market leadership positions. It is stated that the redesign measures will establish NXP with a strong base to achieve its mid-term targets to deliver profitable growth with 15% EBITA and positive cash flow.
Commenting on the redesign plans NXP Chief Executive Officer Frans van Houten said, "This restructuring is a tough measure and it is regrettable that we need to let people go. However, the changes will make NXP a strong, profitable and growing company, with a positive cash flow. NXP is transforming into a globally competitive semiconductor company with scale and leadership in its core businesses. Measures include increasing the competitiveness of our manufacturing base and reduction in our work force, resulting in a leaner, customer focused company, well positioned for growth in our core businesses."
Changes to the manufacturing operations reflect NXP’s long term asset-light strategy, the need for a balanced geographical cost base and commitment to ongoing customer programs. The program entails the migration to more advanced production processes, reduction of excess capacity in older technologies, together ensuring a much more competitive operation, while maintaining a strong manufacturing presence in Europe. NXP plans to consolidate the majority of its production to two higher capability European fabs: Nijmegen and Hamburg, and to SSMC in Singapore.
As a result four factories are planned to be sold or closed. The fab in Fishkill, New York, USA will be closed ultimately in 2009. Additionally, two other factories are planned to be closed by 2010: the "ICN5" part of the NXP facility in Nijmegen, Netherlands, and part of the "ICH" fab of the Hamburg facility, Germany. NXP’s fab in Caen, France will be put on the market for sale. The company is open to offers for this facility from prospective buyers, however, in the event that a buyer is not found the facility could be closed as well during 2009. This plan targets to increase the loading in the remaining fabs to over 90%, as well as result in expected savings of $300 million on a run rate basis by the end of 2010.
The changes will lead to a reduction in annual operating expenses of $250 million and are expected to be implemented mostly during 2009.
