The semiconductor boom of the previous two years seems to be ending.
Memory-chip maker Micron Technology Inc.
MU,
-1.32%
gave a downbeat forecast for its subsequent fiscal quarter Thursday, predicting a large income shortfall starting from $1.5 billion to $2.3 billion, as COVID-19 restrictions in China and slower demand for shopper merchandise harm the sale of reminiscence chips.
“There are consumer-demand and inventory-related headwinds impacting the industry and consequently our fiscal-Q4 outlook,” Micron Chief Executive Sanjay Mehrotra advised analysts Thursday.
Earlier in the day, the maker of dynamic random entry reminiscence (DRAM) and NAND chips reported third-quarter income of $8.64 billion, on track with analysts’ projections, however the outlook and feedback about the remainder of the tech trade that makes use of the corporate’s chips had been the crux of most questions on the corporate’s post-earnings convention name.
“PC unit sales [are] now expected to decline by nearly 10% year over year from the very strong unit sales in calendar 2021,” Mehrotra advised analysts. “This compares to an industry and customer forecast of roughly flat calendar-2022 PC unit sales at the start of this calendar year.” PCs are massive shoppers of DRAMs, and they’re utilizing extra reminiscence per system, particularly Macs with Apple Inc.’s
AAPL,
-1.80%
new M1 processor.
But markets are being impacted by weak point in shopper spending in China attributable to COVID lockdowns, the Russian-Ukraine struggle and rising inflation.
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In addition, Mehrotra mentioned demand for smartphones can also be falling, and Micron projected smartphone-unit quantity to say no by mid-single-digits yr over yr in calendar 2022, nicely under trade expectations earlier in the yr of mid-single-digit share progress.
Micron mentioned that, in response, it will likely be slicing a few of its capital spending on wafer fab tools, the tools that semiconductor corporations use to make wafers in fabrication amenities, for fiscal 2023. “We now expect our fiscal 2023 wafer fab equipment capex to decline year-over-year,” Mehrotra mentioned.
Enterprise and cloud-computing demand stays sturdy, Micron executives mentioned, however they added that they’re seeing some enterprise clients desirous to pare again a few of their reminiscence and storage stock, attributable to shortages of different elements and the macroeconomic setting.
Mehrortra even talked about the phrase “downturn,” saying Micron would come out of the slowdown in a higher place: “We are well-poised to emerge stronger on the other side of this downturn, so we are really executing well, working closely with our customers to understand the latest demand trends and various end-market segments, and adjusting our plans as necessary and as fast as we can.”
The firm mentioned it believes provide and demand shall be again in steadiness — or that progress will resume — someday in 2023, however executives weren’t extra particular.
Piper/Sandler analyst Harsh Kumar mentioned in a temporary word after the decision that “We suspect the bottom likely occurs in the February or May 2023 quarter.
“Another issue Micron cited was the elevated inventory levels at cloud customers, but management continues to see strong trends in this end-market. We feel this is something investors should watch in the near future,” he added.
Shares of Micron fell sharply after the earnings launch hit the wires, however its shares got here again, closing the after-hours session off simply 1.4%, to $54.50. Some analysts had been predicting the potential finish of the pandemic chip boom, and that Micron’s steering may disappoint traders.
Indeed, the downturn might have already begun. The query now could be, will it actually flip round subsequent yr, and be a short-lived one?
