News Article

Skyworks Slows 6-inch Wafer Conversion

Cost cutting and production ramps for energy management and smartphones help the radio-frequency chipmaker to profit.

Skyworks Solutions plan to begin manufacturing its GaAs products on 6-inch wafers has taken a knock as it looks to rein in costs.

The wireless component maker comfortably held on to profitability in the last quarter of 2008, thanks in part due to its close control over expenses.

Now it is executing a cost reduction plan that will delay the upgrade from 4-inch systems at its Woburn, Massachusetts operation originally slated for completion this year.

“We have definitely slowed down that investment," Skyworks' chief financial officer Don Palette told financial analysts. “Right now our expectation is that we re going to go live with 6-inch early in 2010," he said in the conference call announcing the company's financial results.

The plan also saw Skyworks lose 150 employees "“ 4  percent of its overall headcount "“ primarily from its transceiver development group in January. The company expects that the resulting savings should amount to $20 million annually.

Palette said that in the first three months of each calendar year he would normally expect Skyworks revenues to fall 15 percent from the previous quarter. This year he expects that figure will be nearer to 20 percent, hence the need for further cost cuts.

That comes after the company s revenues at the end of 2008 "“ traditionally the strongest period of the year "“ fell nearly 10 percent from the previous quarter.

Regardless of this Skyworks still delivered $22 million profit, down from $35.3 million sequentially but ahead of the $19 million it delivered in the same period in 2007.

It was able to offset the drop seen by other wireless semiconductor companies, thanks to demand from the latest smartphones and energy management systems.

Sales of wireless metering products to vendors like Itron, Sensus and Landis and Gyr increased by 30 percent in the quarter.

Production also ramped up for devices targeting smartphones, offsetting what management said was otherwise a consistent fall in revenues across the rest of its business.

As well as its own cost-reduction efforts, Skyworks credited its ongoing profitability on its arrangements with external compound semiconductor wafer manufacturing partners. By outsourcing to companies like its Massachusetts neighbor Kopin and Taiwan s WIN Semiconductor it can rapidly cut its output with a minimal impact on its own finances.

• Investors reacted positively to Skyworks latest financial results, sending the stock soaring almost 30 per cent to $6.43 in early trading on February 6.

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