Spansion to close Austin Fab for 3 weeks, idle 1,100 workers

California-based Spansion announced Tuesday that it would be idling its Austin facility for three weeks. The Austin Fab on East Ben White Boulevard makes silicon chips used in flash memory cards, cell phones, digital cameras, and other portable electronic devices. The company’s approximately 1,100 local workers will be placed on furlough starting Saturday and will not be paid during that period.

 

According to a statement issued by the company, “In anticipation of a weak holiday season and deteriorating macro economics, Spansion’s Austin facility will be closed for two weeks during Q4 ‘08. This decision is consistent with other chip manufacturers and reflects the overall impact that the worldwide financial crisis has had on the demand for semiconductors in the Flash memory industry.” Officials in the City of Austin’s Economic Growth and Redevelopment Services say the company has told the city the furlough will in fact be three weeks, with the third week continuing into January of 2009.

 

Other semiconductor manufacturers have taken similar steps, citing decreased demand. Texas Instruments also announced plans to shut down its Fabs for three weeks starting later this month. Spansion’s outlook for the fourth quarter, issued last month, predicted that net sales for the period would be down by 20 percent from the same period last year. Last week, New York-based Fitch Ratings predicted several more difficult months for the high-tech sector. The firm predicted a worldwide decline in spending on information technology of between two and three percent, with the biggest decreases coming in spending on hardware and semiconductors.

 

Spansion, which began as a joint venture of AMD and Fujitsu, has been working for the past year to improve efficiency and re-equip its Austin Fab. As part of that effort, the City of Austin and Travis County agreed to nominate Spansion for participation as an Enterprise Project within the State of Texas Enterprise Zone Program. That program allows the company to receive a refund of a portion of its state sales and use taxes based on the number of jobs created by the improvements. Since it is a state program, the company does not receive tax rebates from the city or county.

 

The magnitude of Spansion’s investment in improvements at the Austin facility, more than $300 million, put it at the highest level of projects within the Enterprise Zone Program. It was rated as a “triple jumbo” project, meaning the company would qualify for up to $3.75 million in rebates over the life of the expansion project if it complies with requirements to fill at least 25 percent of new jobs with applicants who qualify as economically disadvantaged or who live in specific census tracts.