ST Microelectronics moving some production lines to Morocco, but no layoffs planned

By Natalino Fenech, The Times of Malta, 7 September 2003

ST Microelectronics will be shifting some of its production lines from Malta to Morocco some time next year because production costs are lower there, sources said yesterday.

The company is not planning layoffs but may take measures to reduce overtime, the sources said.

The company has written to the General Workers Union and to Social Policy Minister Lawrence Gonzi explaining that its hourly costs in Malta have risen to $12 per employee when in Singapore this had gone down from $9 to $8.

Contacted yesterday, Andrew Mizzi, the GWU's technology workers' section secretary, said the contents of the letter were “preoccupying” and meetings would be held both with the employees and management.

The collective agreement of ST Microelectronics expires in April, but Mr Mizzi said he did not think that the letter was a stratagem so that the union would not make wage rise claims.

“All industries involved in electronics are facing similar situations,” Mr Mizzi said.

ST Microelectronics embarked on a cost-cutting exercise long ago, but it was felt that this was not enough, sources said.

They said no layoffs were foreseen but people who left the company may not be replaced and overtime would be curtailed. Such measures were also taken in 2001.

The company has already issued a circular to supervisors to be careful in the authorisation of overtime.

The sources said that in terms of production, the volume being produced by the company in Malta was very good, but costs were high.

“Essentially, the company is exporting more for less revenue. The prices of electronic goods has gone down, so has the price of their components and ST's profit margins.”

“But ST in Malta is here to stay. It is only some lower technology production lines that will go. The more complex products will still be made in Malta, but the company is hesitant to put in new lines as sub-contractors in Asia can handle them for much less.

“The company is still investing in test equipment. Some $40 million worth of test equipment is being bought this year alone,” the sources said.

Labour costs are part of the problem, and as margins are getting lower, the automatic increases in pay envisaged in collective agreements do not make much sense,” the sources said.

“The company wants to hold talks with the unions as everyone has to understand that labour in Malta is not cheap. Apart from the wages they receive, employees take an average of 15 days' sick leave, and 25 days' leave in addition to public holidays.

“While labour costs in Malta are estimated at $12 an hour, in Morocco and China labour costs $1.50 an hour. Some production lines from Malaysia will also be transferred to Morocco. There are lots of incentives by governments in Tunisia and Morocco for industry to go there.

“ST already employs 5,000 in the three plants it operates in Morocco,” the sources said.