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Tower Semiconductor Ltd. has announced a further step in their previously announced cost reduction plan to save $60 million in the annual run-rate for 2009; 200 more job cuts, bringing the total number of redundancies to 400 since the merger of Tower and Jazz was announced in May of 2008. Their cost reduction plan is in hopes to improve future gross, operating and net margins in fiscal year 2009 and further.

Tower has executed numerous cost saving initiatives, which include the reduction in manufacturing and materials’ cost by multiple sourcing of materials and spare parts, replacement of expensive materials and parts by less expensive choices, price negotiations with suppliers and decreasing sustained capital expenditures.

Along with Tower letting 200 more jobs go, Jazz Semiconductor is reducing its work force by around 80 employees. The companies noted that the reduction in employees include the overlap in positions after they merged and also take into account the worldwide economic recession.

Complicating matters is the fact that Tower has yet to receive its grants from the Israeli government for its capital investments between 2006 and 2008. These were performed in agreement with an investment plan filed in 2005, which promised the grants that are now more than two years overdue. Tower has filed a petition with the Israeli High Court of Justice for an approval certificate from the State of Israel asking for up to $80 million in grants.

“As recently announced, we are optimistic that we will exceed our original annual savings estimate and are targeting approximately $60 million of annual run rate cost reductions,” said Russell Ellwanger, CEO of Tower Semiconductor. “Tower will continue to place a strong emphasis on cost efficiencies in consideration of the current global economic downturn, which necessitates careful but decisive planning to further drive down expenses resulting in a leaner, stronger company poised to emerge from this downturn as the number one world-wide specialty foundry. Moving forward, we will continue to evaluate opportunities to improve our cost structure across the organization, as well as accelerate our top line growth.”