This US-based auto chipmaker cuts 2,000 jobs as demand slows down

Microchip Technology has announced it will cut around 2,000 jobs, or about 9% of its workforce, in response to slowing demand. According to a report by Reuters, the chipmaker's headcount reductions will primarily affect its factories in Oregon and Colorado in the US. Layoffs will also occur at the Arizona-based company’s backend facility in the Philippines, the report noted.
As per the report, Microchip is also planning to close its Arizona factory to address the decreased demand and reduce excess inventory. With this move, the company expects to cut overall inventory by over $300 million by March 2026.
However, Microchip anticipates incurring between $30 million and $40 million in costs related to the layoffs, including severance and restructuring expenses, the report added. The company also said the job cuts will be revealed to employees this month and fully implemented by the end of the June quarter.
All this is expected to cut the company’s ongoing operating expenses by nearly $90 million to $100 million per year, the report claims. In addition to the nearly $90 million in annual cash savings from the Arizona fab closure disclosed in December, further layoffs at various facilities are projected to reduce employment-related costs at Microchip's factories by an additional $25 million.

Microchip’s automotive customers have faced challenges clearing their chip inventories after stockpiling supplies during pandemic-related disruptions. As a result, the chip company's shares dropped by over 36% in 2024.
Microchip has also revealed plans to sell its integrated circuit die to a Chinese partner. The partner will test, assemble, and market the products under a Chinese brand. Similarly, rival chipmakers like Allegro Microsystems have initiated efforts to localize their supply chains in China.
Meanwhile, rising US-China tensions are also posing risks for chipmakers that rely on revenue from China, a key market for many auto industry suppliers.