Price skid forces fab closure

Electronic News, Jan 19, 1998 by Dylan McGrath

Durham, N.C.--The long, slow fall of memory prices has created another casualty as Mitsubishi Semiconductor America Inc. (MSAI) said last week it plans to close its wafer fabrication facility here. Mitsubishi officials said the decision to close the facility on March 16 reflects a change in business strategy as the company refocuses on discrete assembly and test of wafer processing. The Durham fab currently manufactures 1MB and 4MB DRAM chips.

Michael Bocian, senior VP and memory division manager, characterized it as business as usual. "It's really just a decision to phase out an older fab," Mr. Bocian said.

Masataka Takehara, MSAI president and CEO, said, however, that MSAI plans to expand its design engineering staff by at least 60 people in the next two years and concentrate on ASIC, memory and microcontroller (MCU) design "while expanding our module and maintaining our assembly/test capabilities at the level of 2 million-plus new-generation DRAM chips per month."

According to Jim Bowen, section manager for administration, the decision to close the Durham DRAM facility was finalized after the holidays. "The profitability just wasn't there anymore," he said. "The decision to shut it down may have come as a surprise to the community, but the employees understand that it's just the nature of the semiconductor business." Approximately 200 people, mostly wafer fab personnel, will be laid off as a result of the closure.

As DRAMs have matured, the older 1MB and 4MB devices manufactured at Durham have become all but obsolete. Today, DRAMs are growing in complexity, with 16MB and 64MB being the standard. "Mitsubishi Semiconductor America's capability to integrate discrete configuration and module assembly gives Mit- subishi tremendous flexibility for our customers and will be a key to Mit- subishi Electric achieving its goal of 10 percent worldwide DRAM market share," Mr. Bocian asserted.

MSAI will offer the opportunity to an undetermined number of the fab's 200 employees to transfer to other departments, based on business requirements and seniority. The company contracted Right Management Consultants of Raleigh, N.C., to provide job transition assistance.

"I personally regret that we had to make this decision," Mr. Takehara said. "However, the worsening semiconductor market and the difficult business situa- tion we have experienced due to low DRAM chip prices during the past two years have made our fab unprofitable."

"Anytime a layoff is involved it is unfortunate," Mr. Bocian said, "and the timing of this announcement, coincident with the current memory market situa- tion, may be perceived to be a negative signal regarding Mitsubishi Elec- tronics America and parent company Mitsubishi Electric's' future plans. However, Mitsubishi is continuing to ramp memory production. Volume production for 64-MB DRAMs is currently at 3 million units per month and will grow to 8 million per month by year end."

The fab closing is consistent with Mitsubishi's strategy of moving to high capacity levels of discrete assemble and test and module manufacturing closer to its customers.

In a related development, Reliability Inc. of Houston, Texas will close its Durham plant in April. The facility has been providing testing services for MSAI on a contract basis for 10 years. A Reliability spokesperson said 10-20 percent of the facility's 45 employees will be offered the opportunity to stay with the company by relocating to Houston. The company will help the others find work elsewhere, the spokesperson said.

"MSAI has been a good, loyal customer for many years, and I thank the manage- ment of MSAI for continuing to work with us as we phase down our facility in Durham," said Larry Edwards, Reliability president and CEO. "I personally appreciate the contributions that all of our employees have made, and I regret that we have had to make this decision."

Mr. Edwards said the Durham closure will have no impact on Reliability's 1997 revenues, but Reliability will record a reserve, related to the closure, of approximately $500,000 in 1Q98. MSAI has had wafer operations in Durham since 1983, when the company opened a small semiconductor test facility. The fab was completed in 1989. In 1996, MSAI completed work on a 40,000-square-foot design engineering building. The design center works with customers in developing application-specific memory chips and microcontrollers.