Feeling the brunt of weakness in the memory market coupled with a challenging global environment for technology products overall, Micron Technology said yesterday it is restructuring its memory operations including a 15% workforce reduction and scaling back on NAND production after posting last week a $1.6 billion net loss for fiscal 2008.

Micron noted that cash restructuring and other related expenses are expected to be approximately $60 million, with the next year's cash operating margin benefit expected to surpass $175 million.

Echoing the memory market conditions, market researchers at iSuppli reminded that it has significantly downgraded its outlook for memory revenue by 5.8%, and DRAM by 5.4%, and since memory is expected to account for nearly 10% of global semiconductor revenue this year, this represents a major drag on global semiconductor revenue.

Citing new signs of weakness in the DRAM market in recent times, iSuppli in September cut its rating of near-term conditions for DRAM suppliers to "Negative," down from "Neutral." Long suffering from a glut of parts, the DRAM market began to note a weakening in demand from the key PC market in September, the company said.

As part of its restructuring, Micron said it will reduce its global workforce by approximately 15% over the next two years, most of which will be in the company's Boise headquarters as part of a NAND operation shutdown, and will begin with a voluntary program.

In terms of the NAND shutdown, the company cited a combination of declining customer demand and product oversupply in the marketplace which has driven selling prices for NAND flash memory significantly below manufacturing costs, particularly for 200mm manufacturing lines.

As such, the Micron-Intel joint venture, IM Flash Technologies (IMFT), will discontinue the supply of NAND flash memory from Micron's Boise facility with the NAND operation shutdown to reduce IMFT's NAND flash production by approximately 35,000 200mm wafers per month.

"Micron is in a strong position relative to our competitors, as evidenced by our balance sheet and cash flow, but we are not immune to the difficult global market conditions that are affecting us all. Operation shutdowns and related workforce reductions are always painful, but we are pursuing these actions to maintain the competitiveness of the company," concluded Steve Appleton, Micron Chairman and CEO, in a statement.

By Ann Steffora Mutschler, Senior Editor - Electronic News

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