Tower Semiconductor (TSEM) to Cut 400 Jobs from Workforce

December 1, 2008 11:09 AM EST

Tower Semiconductor Ltd. (NASDAQ: TSEM) continues to execute its previously announced cost reduction plan, expected to result in approximately $60 million of annual run-rate savings commencing in 2009. This plan focuses on synergies inherent in the merger and integration with Jazz Technologies, Inc., such as operational and organizational efficiencies, and also includes stand alone Tower and Jazz cost reductions.

A number of cost savings initiatives are being implemented, including reduction in manufacturing and materials' cost through multiple sourcing of materials and spare parts, substitution of expensive materials and parts by less expensive alternatives and price negotiations with suppliers, and a reduction in sustained capital expenditures. With respect to its workforce, Tower announced today a reduction of approximately 200 employees resulting in a total reduction of approximately 400 positions in its workforce since the announcement of the signing of the merger agreement with Jazz on May 19 of this year. In addition, Jazz Semiconductor's work force is reduced by approximately 80 employees.

In addition to the elimination of overlapping positions following the completion of Tower's merger with Jazz, the workforce reductions announced today take into consideration the current global economic downturn and its impact on the semiconductor industry as well as the fact that Tower has not yet received from the Israeli government grants related to its capital investments from 2006 to 2008, performed in accordance with its investment plan filed on 2005, which were promised, committed and are over two years past due. In response, Tower has filed a petition with the Israeli High Court of Justice targeting an approval certificate from the State of Israel for up to $80 million of grants.

Together with the recent 15-20% increase in the United States Dollar to New Israeli Shekel exchange rate and the reduction in the interest rate on Tower's outstanding bank debt as part of its restructuring agreement announced in September of this year, the cost reduction plan is designed to improve future gross, operating and net margins in fiscal year 2009 and beyond.

Tower Semiconductor, Ltd., an independent wafer foundry, provides customized solutions in various complementary metal oxide semiconductor (CMOS) technologies that include digital CMOS, mixed-signal and radio frequency CMOS, and CMOS image sensors and power management devices.

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