Micron’s Weak Outlook Signals a Slowdown in Tech Spending
Micron Technology (MU), the largest U.S. maker of memory semiconductor chips, is down more than -5% today after giving a downbeat forecast late Thursday for the current quarter as demand for computers and phones sagged. Other global chipmakers also retreated on the news, with Nvidia (NVDA), Qualcomm (QCOM), Intel (INTC), and Advanced Micro Devices (AMD) moving lower. In addition, the Bloomberg Asia Pacific Semiconductor Index on Friday fell to its lowest in 2 years.
Micron Technology forecast Q4 sales of about $7.2 billion, well below the consensus of $9.14 billion. Excluding certain items, Q4 profit will be about $1.63 a share, weaker than the consensus of $2.57. Piper Sandler says the grim outlook “was attributed to weakness in both mobile phones and personal computers as well as demand and supply issues in China.”
The dim outlook from Micron suggests that tech spending is on the wane. Consumers and businesses have been cutting their spending amid fears that the major world economies are headed for recession. Micron Technology CEO Mehrota said, “the world is in a rapidly changing and uncertain environment, and consumer spending is certainly being reallocated away from electronic devices.”
In a conference call, Micron executives said the company is cutting spending on new plants and equipment to slow increases in factory output. Similar actions in the past have typically taken two quarters to complete, and Micron is projecting a rebound in orders “sometime in the fiscal year 2023.” During the conference call, Micron executives emphasized that the company is rapidly taking action to ensure the demand slump doesn’t fuel an industry glut of chips.
Micron Technology competes with South Korea’s Samsung Electronics and SK Hynix as well as Japan’s Kioxia Holdings in a volatile and unpredictable market. Many of their products are sold as interchangeable commodities, which can suffer rapid price fluctuations. The two types of memory chips are the DRAM and Nand flash memory chips. DRAM chips hold information temporarily, helping processors crunch data, and Nand chips act as permanent storage in phones and computers.
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