Ultratech reduces workforce by 10%

26 Oct 2015

Lithography and laser annealing system vendor blames economic uncertainty and 'capacity issues' affecting the semiconductor industry.

Ultratech, the San Jose-based provider of lithography and laser systems used in semiconductor chip manufacturing, is to lay off 10 per cent of its workforce in a bid to cut costs.

Reporting the Nasdaq-listed firm’s latest quarterly results, CEO Arthur Zafiropoulo blamed weak demand in the chip industry and wider global macroeconomic uncertainty - as well as the "uninspiring" launch of Windows 10 - as he revealed a $6.1 net loss on sales of $33.1 million for the three months ending October 3.

Sales fell 28 per cent sequentially, with demand for laser process systems shrinking after a large number of anticipated bookings were delayed by customers.

“We made the difficult decision to reduce our workforce as part of our efforts to meet this challenging environment,” Zafiropoulo said. “By aligning the company’s resources to match our market and business objectives, Ultratech will be better positioned to meet the existing and future needs of the various industries we serve.”

However, those recent losses largely relate to stock compensation and restructuring costs, and Ultratech maintains a healthy-looking balance sheet that lists nearly $260 million in cash and other liquid assets against minimal liabilities.

Zafiropoulo said that demand for the company’s laser spike annealing (LSA) systems, which are used in some important silicon and LED chip processing steps like creating highly activated contacts, was currently in a “pause” while customer fab utilization was down and the ramp of FinFET logic devices delayed.

Once chip makers do begin to ramp production of FinFETs and other advanced devices, Ultratech’s executive team believes that the company will start feeling the benefits of a sharp uptick in demand for LSA systems.

Lumpy pipeline
As the CEO noted in a conference call with investors, Ultratech’s business model is based on the shipment of a relatively small number of high-value systems – so any order push-outs or other delays tend to have a significant impact on the company’s sales and profit.

At the moment, said company CFO Bruce Wright, order patterns were “very lumpy”, making it difficult to predict exactly how many units Ultratech would be likely to ship in the coming months.

In the meantime Ultratech has been trimming costs, but the 10 per cent workforce reduction represents a significant acceleration and should save the firm between $5 million and $6 million in annual outgoings.

The headcount reduction affects manufacturing and service roles in San Jose primarily, with Ultratech stressing that it wanted to minimize any impact on its research and development efforts.

Asked about the potential impact of the planned Lam Research/KLA-Tencor merger on the semiconductor equipment industry, Ultratech’s representatives said that there had been pressure to consolidate for some time - although the combined market share of the two firms in front-end wafer manufacturing may raise concerns among regulators.

Whatever the outcome of that particular deal, they expect more consolidation in the industry among both large and small equipment providers. Zafiropoulo suggested that the company would be “aggressive” if it decided to take an active role in that consolidation - but only if there was clear shareholder value to be gained.