Opinion: The chip boom may be over, Micron says it’s in the doldrums

The semiconductor boom of the past two years appears to be coming to an end.

Micron Technology Inc. MU, the manufacturer of memory chips
He gave a downbeat outlook for the next fiscal quarter on Thursday, predicting a massive revenue shortfall of $1.5 billion to $2.3 billion, as COVID-19 restrictions in China and slowing consumer demand hit the sale of memory chips.

“There are headwinds related to consumer demand and inventory affecting the industry and thus our financial outlook for the fourth quarter,” Micron CEO Sanjay Mehrotra told analysts on Thursday.

earlier in the day, The manufacturer of dynamic random access memory (DRAM) and NAND chips reported third-quarter revenue of $8.64 billionaccording to analyst expectations, but expectations and comments about the rest of the technology industry that uses the company’s chips were the core of most questions in the company’s post-earnings conference call.

Computer unit sales [are] It is now expected to fall about 10% year-over-year from very strong calendar 2021 unit sales,” Mehrotra told analysts. “This compares to industry and customer expectations for calendar PC unit sales for roughly flat 2022 at the start of this calendar year. Computers are huge consumers of DRAM, and they use more memory per system, especially Macs with AAPL from Apple Inc.
The new M1 processor.

But markets are affected by weaker consumer spending in China due to the COVID lockdowns, the Russo-Ukrainian war and rising inflation.

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Additionally, Mehrotra said demand for smartphones is also declining, and Micron predicted that smartphone unit volume would decline at an average single-digit rate per year in calendar 2022, which is much lower than the industry forecast earlier in the year. which saw average single-digit growth. .

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Micron said that, in response, it will cut some of its capital spending on wafer equipment, the equipment semiconductor companies use to make chips in manufacturing facilities, for the 2023 fiscal year. .

Micron executives said that cloud and enterprise demand remains strong, but added that they see some enterprise customers wanting to reduce some memory and storage inventory, due to a lack of other components and the macroeconomic environment.

Mehrortra even mentioned the word “deflation,” saying Micron will emerge from the slowdown better: “We’re well prepared to come out stronger on the other side of this downturn, so we’re doing really well, working closely with our customers to understand the latest demand trends and various end market segments, adjusting our plans as necessary and as quickly as possible.”

The company said it believes supply and demand will return to balance — or growth will resume — sometime in 2023, but executives weren’t more specific.

“We suspect the bottom is likely to occur in the February or May 2023 quarter,” Piper/Sandler analyst Harsh Kumar said in a brief note after the call.

“Another issue that Micron mentioned is rising inventory levels with cloud clients, but management continues to see strong trends in this end market. We feel this is something investors should watch for in the near future.”

Micron’s shares fell sharply after the earnings announcement, but its shares returned to close the after-hours session down just 1.4%, to $54.50. Some analysts expected this The potential end to the pandemic chip boom, and that Micron’s guidance could disappoint investors.

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In fact, the downturn may have already begun. The question now is, will it really turn out next year, and will it be short-lived?

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