STMicroelectronics Limits 2001 Capital Investments

May 30, 2001 by Jeff Shepard

STMicroelectronics (Switzerland) announced that it is limiting its 2001 capital investments to $1.5 billion and is transferring its Ottawa front-end wafer-fabrication production to its other manufacturing facilities around the world. Capital expenditures, which were earlier forecast to be approximately $1.9 billion, have been reduced.

In addition to these measures, ST announced that it is taking action on its Ottawa wafer fab. The Canadian facility and manufacturing line were acquired by ST last year as part of a joint-development and supply agreement with Nortel Networks Inc. (Canada). The transfer is expected to be completed by December 2001, and will involve special cash and non-cash charges totaling approximately $30.0 million, which will be recognized in the second quarter of 2001.

Excluded from the transfer are the research and development capabilities that ST acquired in the Nortel agreement. ST emphasized that these capabilities, which had previously been named ST's “Center of Excellence,” would remain in Ottawa and continue to receive investment.

The transfer of production rationalizes ST's front-end manufacturing. The Ottawa plant is reported to have been operating well below capacity, and production will move to larger, lower-cost facilities that ST believes will keep its products cost competitive. At the same time, however, ST will continue to maintain and invest in its “Center for Excellence” in order to demonstrate commitment to its strategic relationship with Nortel. The move affects about 450 people, but several positions will be offered relocation to other ST sites.