Micron forecasts Q1 revenue below estimates as demand worsens

MEMORY chipmaker Micron Technology forecast first-quarter revenue below Wall Street estimates on Thursday (Sep 29) as demand from its key end markets including PCs and smartphones worsen amid rising worries about an economic downturn.

To cope with the tougher market conditions, Micron also said it would cut its investments.

“We are taking decisive steps to reduce our supply growth including a nearly 50 per cent wafer fab equipment capex cut versus last year,” said chief executive Sanjay Mehrotra in its earnings statement.

Shares of the Boise, Idaho-based company, which have roughly declined 45 per cent so far this year on fears of a further slowdown in demand for semiconductors, fell 2.4 per cent in extended trading. Chip equipment maker Applied Materials also dropped 2 per cent in after hours on the news.

Micron was the first to sound a severe warning bell for the entire semiconductor industry during its third quarter earnings report late June.

Since then, the situation has only worsened with the weakness seeping from consumer electronics to end markets such as data centres and cloud as a global economic slowdown caused by red-hot inflation, rising interest rates, geopolitical tensions and Covid-19 lockdowns in China has led businesses and consumers alike to rein in expenses.

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Spiralling demand had led to inventory build-ups, which in turn has forced companies to drive down the prices of chips. Research firm TrendForce forecast a 13 per cent to 18 per cent drop in Dram chips pricing, which makes over 70 per cent of Micron’s revenue, while also forecasting a 15 per cent to 20 per cent drop in Nand memory pricing for the last 3 months of 2022.

The company forecast adjusted current-quarter revenue to be US$4.25 billion, plus or minus US$250 million. Analysts on average expected revenue to be US$5.62 billion, according to Refinitiv data.

Adjusted revenue for the quarter ended Sep 1 was US$6.64 billion. Analysts on average expected revenue to be US$6.68 billion. REUTERS