Wednesday December 10, 2008

Chartered Semiconductor forces block leave, stops bus services, mulls 4-day working week

The latest developments over at Chartered Semiconductor, reeling from an unprecedented economic crisis and a huge slowdown in the electronics sector, hint at extreme cost-cutting efforts, each one seemingly more aggressive than the last. These measures are coming hot on the heels of the recent 5-10% pay cut :

1. Forced block leave - the employees are being asked to take around 2 weeks of leave over the holiday periods of Christmas 2008 and Chinese New Year 2009. If they do not have enough days of annual leave, it will be treated as unpaid leave. The facilities will likely be shut down to save costs.

2. Free shuttle bus services suspended - there used to be a whole fleet of buses for the roughly 5000 employees to bring them from various places around Singapore to the workplace in the morning and back in the evening. These have mostly been stopped except for shorter-haul services to nearby Woodlands and Johor. This will cut costs but inconvenience the employees, as well as transfer the cost of transportation onto them.

3. 4-day working week - with fab utilization down (way, way down), it will start making sense for the company to implement a 4-day working week, perhaps Monday to Thursday, shutting down the facilities and probably cutting pay further by another 20%. This idea has been floating around for a while, but it seems increasingly likely.

Obviously I do not have precise fab-by-fab figures from the company, but from some news sources I am hearing of only 45% capacity utilization, which is very bad. From other sources, I have been hearing of figures even worse than that. Semiconductor fabs typically need at least 70-80% or even higher (90% or more) utilization in order to have the high volumes to make some profit and to pay off the huge loans on their very expensive capital equipment. It's a high volume, high stakes, thin margin game with little room for error. At these low production levels, it is a loss-making enterprise. If there is to be a turnaround, it will probably be from a very low base.

See also :

1. Junk bonds : Chartered Semiconductor debt rating lowered to junk By Fitch
2. Chartered Semiconductor salary cut - all employees pay reduced by 5-10% on economic slowdown

(2008-12-10 18:10:37 SGT) [Biz] Permalink

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