Micron Technology cuts expenditure by 30%, warns of tougher times
- Micron Technology, following concerns on faltering demands earlier this year, warned of even tougher times ahead.
- The company is even cutting its investments to US$8 billion, down more than 30% YoY.
- Micron suggested that the current chip glut could get a lot worse.
- But the company remains upbeat on revenue growth in the second half of the fiscal year 2023, as it expects demand to recover early next year.
Just a few months ago, Micron Technology, a leading US maker of memory semiconductors, declared that demand was falling off rapidly and warned investors that revenue would not meet projections. The company even forecast its fourth-quarter sales to be at the low end of, or below, its previous guidance as customers reduced their stockpiles of unused chips.
This week, Micron reported a worse-than-expected fiscal fourth quarter, with revenue plunging 23% from last year. The company noted that a “sharp and sudden” drop in demand exceeded even its own expectations. To top it off, Micron also suggested that the current chip glut could get a lot worse.
Micron Chief Financial Officer Mark Murphy told analysts on a conference call, “As we look ahead, macroeconomic uncertainty is high and visibility is low.” He even forecast the company’s inventories would continue to rise from their high levels in the first half of fiscal 2023. Micron Technology was the first major chipmaker to sound an alarm about falling demand for personal computers and smartphones earlier this year.
This week, it warned of even tougher times ahead and said it was cutting its investments. “We made significant reductions to capex and now expect fiscal 2023 capex to be around US$8 billion (RM37 billion), down more than 30% year over year,” Micron’s Chief Executive Sanjay Mehrotra said on the earnings call on Thursday.
During the pandemic, global chipmakers rode high as the work-from-home trend fueled demand for computers and other consumer technology. This year, inflation and recession fears — plus a partial return to the office — have put a dampener on purchases.
According to data compiled by Bloomberg, Micron is in for a difficult year. It expects sales of around US$4.25 billion in its fiscal first quarter, which ends in November. That compares with an average analyst estimate of US$6 billion. “Yes, we have a challenging market environment, but we’re responding rapidly with actions,” Mehrotra said in an interview. “Fiscal 2023 is, of course, an unprecedented environment, but the long-term drivers are intact,” Bloomberg’s report noted.
Concurrently, even Japan’s Kioxia, which supplies much of the world’s NAND storage for smartphones and servers, announced today that it is reducing new production and will lower its overall output by 30% by December. Another stark proof that indicates chipmakers are bracing for a slowdown in global demand is the fact that South Korea’s semiconductor output fell for the first time in more than four years.
Semiconductor production slid 1.7% in August from a year earlier, a sharp reversal from the 17.3% gain reported in July, Statistics Korea data showed Friday. The first fall in output since January 2018 also coincides with chip inventories soaring by 67.3%. Even South Korea’s Samsung Electronics Co. warned of a gloomy outlook for the second half of the year.