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Oct 5, 1998

October 5, 1998-National Semiconductor Corporation (NSM:NYSE) today announced plans to consolidate its wafer manufacturing operations in Greenock, Scotland and said it is currently seeking investors to spin out the remaining operations there as an independent foundry operation.

The Greenock facility near Glasgow currently has two manufacturing lines designated as Fab 1, which processes 4-inch diameter wafers, and Fab 3, which processes 6-inch wafers. The plan announced today will close Fab 1 and consolidate all manufacturing at this site into Fab 3. Employment at Greenock will not be affected for at least six months, but expectations are that the consolidation will reduce total employment there from 1,000 to 400, starting in March 1999. The full transition to Fab 3 is expected to take another 12 months after that to reach completion. Some product lines and personnel will also be transferred to other National facilities with excess capacity. The action has no impact on the company's Product Development/Design Center in Greenock, which employs 40 people. National said negotiations for the spin out will go forward simultaneously as part of the company's efforts to establish the Greenock site as a new foundry business in Scotland.

National attributed the actions to continuing weakness in the global semiconductor market, which has resulted in underutilization of the company's wafer manufacturing sites worldwide, excluding the company's new 0.25-micron facility in South Portland, Maine, which is operating at full capacity.

"This decision in no way reflects on the outstanding performance of our Scottish workforce," said Brian Halla, president and chief executive officer of National Semiconductor. "We greatly value the contributions they have made to our operations and deeply regret the impact of this action on this highly skilled and motivated workforce," he added.

"We currently have the equivalent of one factory too many to meet the business level of the next four to five years," Halla said. "The decision to consolidate our operations at Greenock and seek investors to operate the facility independently is a direct result of continuing softness in the semiconductor market and of factory utilization rates below 50 percent. We believe our restructuring plans for Greenock offer the best prospects to ensure continuation of manufacturing operations there and to preserve the employment opportunities of the greatest possible number of current employees," he added.

National said that even its best forecasts of market growth over the next several years would not support current capacity levels at Greenock but added that the flexibility of a foundry relationship would be a more viable approach to meeting periods of peak market demand.

As a result of the restructuring, the company said it will take an additional one-time charge of approximately $25 million in the current quarter, which ends November 29, 1998.

National said it is prepared to support the spin out by buying back wafers and providing support services for a period of time to be negotiated. The company has previously completed similar successful transfers of manufacturing and other operations in the United States and Israel, including the spin out of its Fairchild Semiconductor businesses in 1997, and the transfer of its manufacturing operations in Israel to Tower Semiconductor in 1993.