US: Oregon workers face major job losses as high-tech firms make cuts

By Hector Cordon
6 August 2008

Memory chip heavyweight Hynix Semiconductor Inc. announced plans to close down its only North American plant, located in Eugene, Oregon, in the next two months. The closure will result in the elimination of over 1,400 jobs. As of August 1, the first pink slips had already been handed out.

The closure of Hynix’s Eugene plant is the largest loss of jobs in Oregon this decade. Kim Jong-kap, chairman of the South Korean company, flew to Oregon to personally convey the news to the governor and the mayor of Eugene. The July 23 announcement apparently caught state and local officials by surprise.

Hynix, the second largest producer of memory chips in the world after Samsung Electronics, has been battered by the unusually steep decline in global prices for memory chips. The average price fell a dramatic 39 percent in 2007. A March 19, 2008 analysis by the Taipei Times said, “But, for computer memory chipmakers, the hard times are not over yet. ‘The [overcapacity-driven] downturn is longer than expected.’ said Simon Woo, another semiconductor analyst with Merrill Lynch, which is negative on the sector.”

Estimated at $28.3 billion, world DRAM (dynamic random access memory) revenues for 2008 will show a 13 percent decline from last year’s revenues, according to market researcher IC Insights. Hynix cited the collapse in prices as well as the industry’s migration to the larger 12-inch wafers, on which greater numbers of chips can be manufactured, for its decision to close the plant.

Reports are that in Taiwan all production of memory chips on 8-inch wafers, excluding one manufacturer, will cease. According to a July 24 Associated Press report, “Hynix is also reviewing options for four other 200 mm [8-inch] wafer production facilities in South Korea and China.” Hynix has already placed one 8-inch facility in Korea on the chopping block.

The Register-Guard quoted one Oregon official who stated, “Hynix Semiconductor chairman told state officials that Hynix plans to close three of its five plants worldwide that are tooled for the smaller and outdated silicon wafers.”

The doomed 10-year-old plant, located in Eugene, Oregon’s third largest city with a population of 153,690, has 1,113 employees and 300 contractors. Hynix has been the largest employer in Eugene with an annual payroll of $62 million. Other large employers are the University of Oregon, local government and Sacred Heart Medical Center.

Laid off high-tech workers will find themselves job-hunting in an economy that is reeling from the collapse of the housing market and rising fuel prices. Over the last few years, two major high tech companies, Intel Corporation and Hewlett Packard, have downsized operations in Oregon.

The city of Eugene will also have to cope with the loss of over 2 percent of its general fund budget. Hynix paid over $2.5 million in city taxes over the last five years. Eugene is already attempting to squeak by with a $2 million deficit for the fiscal year beginning next July. Close to an additional $2 million more in taxes from Hynix went to two school districts, the county, and the community college.

In 2005 Palo Alto, California-based Hewlett Packard wiped out 700 jobs in Corvallis, Oregon through buyouts and early retirement offers. At that time, HP eliminated 14,500 jobs worldwide, 10 percent of its global workforce. Since a peak in 1996 of 6,000 employees in Corvallis—the birthplace of HP’s inkjet printer technology—the workforce has shrunk to less than 3,000 today.

Santa Clara, California-based Intel Corporation, the largest private employer in Oregon, has, after a substantial cutback in 2006, through attrition, buyouts and retirements has whittled down its 17,253 Oregon employees to approximately 15,500 today, a cut of close to 11 percent of its workforce,

Oregon employment department figures show that the wood products industry, which has constituted a major industry in that area, has been hit recently with job cuts due to the decline in housing construction, For June, “Lane County [where Eugene is located] wood manufacturing dropped 10 percent over the same period [referring to the last two years], for a loss of 500 jobs.” The state has lost 2,700 wood products jobs since June 2007. “Computer and electronic product manufacturing shed 500 jobs and is down 1,900 over the past 12 months,” the state agency reports.

Monaco Coach Corporation, headquartered in adjacent Coburg, Oregon, and a major builder of recreational vehicles, has temporarily laid off 225 production workers in Oregon while closing three of its Indiana facilities with 1,400 jobs lost. Another 20 administrative positions were permanently cut. Monaco’s retrenchment is in response to a loss of $9.7 million in the second quarter of 2008. Last April Monaco pink-slipped 600 of its employees, 300 of them in Oregon.

Unemployment in Oregon currently stands at 5.5 percent, identical to the national level. However, losses in well-paid construction jobs, down 7,500 jobs since June 2007, have been balanced by gains in notoriously lower paying jobs in retail and the leisure and hospitality industry. June was the first month since May of 1996 that Oregon’s unemployment rate was equal to the national rate. In 2003, Oregon led the nation, and exceeded the national rate by 2 percent, with an 8.5 percent unemployment rate.