Micron: The GM of technology
The latest word from Micron’s beleaguered employees is that more than 300 of the company’s IT workers will be in the unemployment line by next August.
The company is apparently in the process of outsourcing the majority of the IT department. The plan, according to the employees still on the inside, is that the layoffs will occur in stages between January and August of next year.
Micron officials haven’t confirmed any of this of course, which isn’t surprising. But what is surprising is that some people still seem shocked that Micron is cutting jobs.
Let us take a closer look at Micron. We have essentially put much of the Treasure Valley’s economic success on the backs of a high tech car company.
Micron is no different than any of our American auto companies. Just like the automakers, Micron is primarily a manufacturing company.
Sure Micron makes a few cool things. The company developed the technology for the camera pill that CEO Steve Appleton like to trot out at public events.
But the American automakers also have developed few cool things. No one has been able to duplicate Chevrolet’s Corvette for example. But as Chevrolet has learned — and Micron is now finding out — you can’t have a successful company on just few cool things.
Micron’s memory is a commodity just like automobiles. And Micron's foreign competitors can produce the same memory at a much lower price.
The harsh reality is that Micron will have to cut costs and shift more jobs overseas to be competitive.
It’s easy to feel betrayed and blame Micron’s executives for the job losses — especially after Appleton made such a big show a few years back and got everyone’s hopes up that the company might build a new Boise plant.
Appleton’s optimism and confidence got ahead of him — as it often does — but it doesn’t change the fact that we still need Micron. If there’s a way our state leaders can help Micron battle the foreign competition and keep more jobs in Idaho we should lend a hand.
But at the same time, lets start looking for the next Micron and giving that company or companies a hand up. We won’t have to look far. The next Micron is already here if we only open our eyes.
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Outsource Appleton and crew?
No doubt there are some sharp East Indians who could replace Micron's executives at about a 75 percent savings for the shareholders. They might even do a better job - especially if their IT staff is East Indian too.
To the legislature
Quick, give them another tax cut before they turn out the lights!
You still might be able to squeeze one last campaign contribution out of them. And hey, don't worry about us. Just tag it onto our property taxes in a midnight tax hike session.
re: The GM of Technology
We are giving away the ability of manufacturing in this country. Down the road the Wall Street experts realize that you have to have a manufacturing base in the US. Too late. Why give the Asians the head start for a few years? - for a better ROI? Nope, Wall Street greed! And what about a true market? The Dow would drop tomorrow 700 points, guess what? They would halt trading...so that the Dow doesn't drop past a 1,000 points...
Not true market forces after all...sad.
Tom McCall's answering machine in heaven
"Hello, this is the spirit of Former Oregon governor Tom McCall..."
"I'm away from my mansion having land use planning meetings with St. Thomas trying to convince him of things again...haha. Seriously though, of late I've been hearing the notion that Idaho will dry up and die without Micron Technology".
"I want you to know that the Lord himself told me that while Idaho is welcome to visit heaven it too shouldn't move here"!
BEEP
Betrayed
"It’s easy to feel betrayed and blame Micron’s executives for the job losses — especially after Appleton made such a big show a few years back and got everyone’s hopes up that the company might build a new Boise plant."
- It's also easy to feel betrayed when the company just lost over 300 million dollars in one year and stock was given to the executives totaling well over 10 million for their performance.
1. If you're losing the company millions why are you being rewarded? (Maybe I should file bankruptcy and maybe someone will give me a million too!)
2. The funds given to the execs, are more than the amount of money it would cost to pay over 400 operator-level wages (including benifits) for a year....so essientially what happened is - cut the little guy to feed the big guy.
3. The loss in money is yes in part because of the downturn in prices. But there is also a huge chunk of loss contributed by the lack of sight and leadership. Micron used to be one of the top memory producers. Now they're maybe #5? Continually getting beat to new contracts by Samsung and Hynix. It doesn't take cheap labor to get chips out on a deadline. It takes leadership.
Betrayed... Yeah, that seems about right to us.
Micron: The GM of technology
First of all, I want to raise my colors.
#1 I am not a Micron employee
#2 I am not a fan of Steve Appleton
But really, there is no comparison between a semiconductor manufacturer and a car company. General Motors' financial problems stem from a bloated cost structure; primarily the health care liability that is, or should I say was, built into the union contract. Because of this alone, GM's cost structure was thousands of dollars higher per vehicle than their foreign competitors. Additionally, because GM's largely manual assembly process is so labor intensive, labor constitutes a large part of the cost, so movement to low wage countries has a major impact on the total cost.
Semiconductor manufacturing is primarily capital intensive, with costs for a brand new fab running into the billions of dollars. That's not to say labor doesn't play a part, but it's small compared to the automotive industry.
Sure, it is cheaper to build fabs in the far east, but that is primarily because of lax environmental standards. Additionally, the major growth in semiconductor markets is in the far east, so shipping costs can be minimized by off-shore manufacturing. But these factors will not last forever.
That said, it is still tough for a CEO to make the case to the board for the capital investment necessary to maintain the cost structure. Particularly in today's fast-buck, short sighted business climate. Appleton, as both CEO and Chairman of the board, should have been able to make that case. Evidently he did not, and THAT is his primary failure. Investors want large profits NOW, not stability over the long term. Then they look for a scape goat when the roof caves in. Look at the home mortgage industry as an example.
I believe Micron succumb to the allure of sky rocketing stock prices, not some malicious desire to screw the business and get out. The problem can be fixed, by attention to the fundamentals, and a willingness to sacrifice stock performance for the greater long term health of the company. Perhaps a dividend would have been in order when they were making money, but alas, I suspect the engineers would have revolted at the thought of a smaller profit sharing bonus. Micron can retrench, and retool, and survive. But it will take time, talent and money, and an effective sales pitch to investors. Who would want that job?!
Micron is an international company, and it's interests lie far and wide from the Boise. It would be expedient, as Idahoans, to spread our risk by helping Micron where we can, but also continue to seek out new industry to grow in the Treasure Valley. With a little luck we can have the best of both worlds.
You allude to the shipping
You allude to the shipping costs to send memory chips to oversees buyers, and I have listened to Micron spew this nonsense themselves as well. However, how do they explain that with some wafers they start them here in Boise, ship them to oversees for certain masking levels, then ship them back here to finish them? The shipping costs for their products pale in comparison to the manufacturing costs. I think the executives toot that horn as a justification for sending US jobs oversees when the real reasons are, as you mention above, lax environmental standards but also lower labor costs and lax safety standards for employees. I personally believe that the large stock grants to the executives are a way for the board to help Steve-O and the boys get over their love of Boise and help convince them that there are more important things then US jobs and the pride of an Idaho company. Those more important things are dollars and more dollars for Stevie Wonder and the gang. I do wonder these days though if Scrooge McSteve swims laps in a pile of gold coins in his ivory tower. I also fear that he may crash one of his planes due to extra weight after he has it gold plated. Also, he may paper cut his rear when he wipes his butt with hundred dollar bills.
Market growth is the driving factor
I can't say I entirely disagree. You're right, shipping costs are just a part of the equation. But the fact remains that the primary growth in the semiconductor markets is in South East Asia. I wonder if the executives at Toyota underwent the same scrutiny when they decided to build their plants in the US to serve American markets... But I guess that turned out O.K. for them.
Regarding Appleton, it is my personal belief that he will be gone by the end of FY08. Micron stock is a bargain, and there have been takeover rumors all year long. (See http://www.google.com/url?sa=t&ct=res&cd=1&url=http%3A%2F%2Fseekingalpha.com%2Farticle%2F38085-micron-lbo-seems-imminent&ei=Vw4sR-aCEZCOgAPakpx-&usg=AFQjCNFIcioKke5l5d5FLxrLqP4fJYYBPw&sig2=zJS1FCEGXrY4rgG8gtwAFw,
and http://www.google.com/url?sa=t&ct=res&cd=2&url=http%3A%2F%2Fseekingalpha.com%2Farticle%2F24337-micron-technology-takeover-target-for-private-equity&ei=Vw4sR-aCEZCOgAPakpx-&usg=AFQjCNFbiyw1xwdSokb1sff79bpOb-ijFQ&sig2=Vh-czxcsKn19letoGEbymg)
Since Micron is mostly held by institutional investors, I doubt that they will tolerate much more of the mismanagement.
In any case, it is extremely unlikely that even with new management, Micron will be heavily investing in the treasure valley in years to come. I'm afraid that is just the way the semiconductor industry works. It was great while it lasted, but now I think we need to look to the future. There are currently a lot of resources in the treasure valley capable of supporting high tech industry, human and otherwise. Prudence should dictate that we, meaning the state and local governments, seek out and invest in those startups before before they all slip away.