With chip supplies constrained, Analog Devices delays California factory closure

Feb 17 (Reuters) - Analog Devices Inc is delaying the closure of a California chip factory as sales boom and supplies remain tight, the company’s chief executive told Reuters after the company reported better-than-expected quarterly results.

ADI previously said it would close its semiconductor factory in Milpitas, California, which makes chips for the automotive industry, sometime before the company’s fiscal year ends in October. In December, ADI told California regulators the plant’s 255 employees would be laid off by Feb. 19.

But ADI Chief Executive Officer Vincent Roche on Wednesday said the plant will stay open longer due to tight supplies that could persist through October.

“We’ll likely keep that facility open a bit longer to be able to fill any gaps in supply,” Roche said. “We’re pretty much on track to go ahead with the closure by the end of the (fiscal) year.”

Automakers from General Motors Co to Honda Motor Co Ltd are battling chip shortages, which led to suspensions of factories, as consumer demand has snapped back unexpectedly quickly from the coronavirus crisis.

Roche said the company still believes it will be more cost-effective to consolidate the California factory with its Washington facility by October, but that it could revisit that decision in the future.

“If demand goes up another notch, then that’s a different story,” Roche said. He added, “We’ll be smart and adaptable as needed.”

Analog Devices, or ADI, on Wednesday reported that revenue in the fiscal first quarter ended on Jan. 30 increased 20% to $1.56 billion and adjusted earnings per share rose to $1.44. These compared with Wall Street expectations of $1.51 billion and $1.32 per share, according to IBES data from Refinitiv.

The company forecast fiscal second-quarter revenue and profit with midpoints of $1.6 billion and $1.44 per share, beating estimates, according to Refinitiv data. (Reporting by Stephen Nellis and Hyunjoo Jin in San Francisco Editing by Cynthia Osterman and Matthew Lewis)