Suffering heavy losses after stopping supplying Huawei! US company MACOM cuts budget and announces restructuring

MACOM Technology Solutions Holdings, Inc. (MACOM), a leading U.S. semiconductor solutions provider, announced after the U.S. stock market closed on June 18 that it has initiated an organizational restructuring plan that, once fully implemented, will save an average of $50 million per year.

       According to the reorganization plan released by MACOM, there are two main points:

1. Permanent layoffs of approximately 250 employees, including temporary employees, full-time employees and managers, accounting for 20% of all MACOM employees. Mainly including R&D, production, sales, marketing and general administrative personnel. MACOM said that it has notified the above-mentioned affected employees and will provide the usual transition assistance after the reorganization.

2. Close seven R&D plants in various locations, including France, Japan, the Netherlands, Florida, Massachusetts, New Jersey and Rhode Island.

At the same time, MACOM also announced that it will no longer invest in the design and development of optical modules and subsystems for data centers. Looking forward to the future, MACOM will focus on becoming a supplier of semiconductor integrated circuits (ICs) and photonic devices, and provide semiconductor component-level support to optical module manufacturers.

“Decisions like this are not easy to make, however, they are necessary to strengthen our strategic plan,” said Stephen Daly, MACOM President and CEO.

It is understood that the company expects restructuring costs of approximately $14 million, including $7 million in employee termination costs, most of which are expected to occur in the third fiscal quarter of 2019. In addition, the company is conducting a recoverability assessment of its long-term assets, especially intangible assets that may be affected by the restructuring plan. As of March 29, 2019, the book value of MACOM's intangible assets was $472 million. To date, in addition to the above restructuring costs, the company has identified approximately $15 million in non-cash impairment charges related to these restructuring actions.

In addition, MACOM updated its third quarter 2019 financial guidance: revenue for the quarter is expected to be between $107 million and $109 million, compared with the previous forecast of $120 million to $124 million. The updated financial guidance reflects the impact of the suspension of shipments to Huawei and certain of its subsidiaries and affiliates due to the U.S. Department of Commerce's inclusion of Huawei on the Entity List. In addition, the updated financial guidance also reflects the reduction in shipments to certain MACOM channel partners.

MACOM's main business is semiconductors, providing more than 5,000 standard and customized devices, including integrated circuits, multi-chip modules, transistors, diodes, switches and switch limiters, passive and active components, complete subsystems, etc. It has been in serious losses from 2018 to the first quarter of 2019, with a full-year loss of US$167 million in 2018 and a loss of US$23 million in the first quarter of 2019!