To cope with the shortage crisis, Microchip increases capital investment

Recently, TSMC set its capital expenditure budget for this year at US$40 billion to US$44 billion, and Samsung also stated that it will invest US$30 billion to upgrade its semiconductor industry.

In fact, not only these large semiconductor companies have increased capital investment, but many mid-sized semiconductor companies have also invested in it. The global semiconductor shortage worsened by the COVID-19 pandemic has brought a major transformation to Microchip's Colorado Springs plant, which laid off more than 200 employees two years ago.

Microchip announced plans in January 2022 to spend $40 million to transform its Colorado Springs semiconductor plant, which will add 50 to 75 employees over the next six months. The Chandler, Arizona-based company said the Springs plant will upgrade from a 6-inch wafer fab to an 8-inch one, doubling its capacity.

“This will make the plant more cost-competitive in the future,” said Rod Schroeder, the plant’s director of operations. “Moving to 8-inch wafers will be transformative for this plant. We are advancing our technology generations forward. It allows us to be a long-term player in Colorado Springs and create a lot of opportunities here.”

Schroeder said the company plans to continue hiring 50 to 75 more people over the next six months and undertake another phase of expansion in the next two to five years. Brian Thorsen, a spokesman for Microchip in Arizona, said the details of hiring and expansion "are difficult to predict because the industry is in a state of supply shortage."

As part of the restructuring, Microchip laid off 200-275 employees in early 2020 and moved production capacity in Colorado Springs to Microchip's factories in Arizona and Oregon. According to a company statement at the time, these moves turned the Colorado Springs plant into "a specialized, boutique factory focused on manufacturing automotive, military and aerospace products."

The cuts were due to falling sales of chips produced in Colorado Springs as customers shifted to products based on more advanced technology. At the same time, the trade war between the United States and China led to a reduction in demand for chips, followed by a sharp drop in sales in the early days of the pandemic. By the time Microchip completed the move, the Colorado Springs plant employed about 500 people.

However, chip demand picked up at the end of 2020, and Microchip began recalling workers and adding new employees at the local plant in early 2021, increasing employment to about 700. The company plans to add 50-75 jobs later this year. Schroeder said the plant's employees are almost back to the level before the 2020 layoffs.

The plant makes chips for everything from garage door openers and clocks to the James Webb Space Telescope and rovers on Mars. Microchip is also moving production of radiation-hardened chips for space applications and silicon carbide diodes for electric vehicles to the plant as demand for chips accelerates, Schroeder said.

Microchip's sales are booming, rising 26% to a record $1.65 billion in the quarter ended Sept. 30, with profits more than tripling to $242 million, and Chief Executive Officer Ganesh Moorthy having said that it was "primarily limited by manufacturing capacity."