Micron cuts capital spending to stem ‘unprecedented’ oversupply cycle

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This huge shortfall was likely expected given that the company last quarter was the first major chipmaker this year to admit that there may be pockets of excess supply in the chip market after two years of shortages caused by the COVID-19 pandemic.

“Historically, the DRAM industry in recent years has been disciplined in terms of managing investments and managing supply growth,” Sanjay Mehrotra, chief executive of Micron, said in a conference call after the publication of the results.

Micron specializes in DRAM, or dynamic random-access memory, the type of memory commonly used in PCs and servers, and NAND chips, which are flash memory chips used in small devices like smartphones and keys. USB.

“Of course, the current environment is unprecedented in terms of the confluence of the factors we are discussing that have impacted demand and the unprecedented level of inventory adjustments by our customers as well,” Mehrotra told the AFP. analysts.

“Inventory levels are high and they’re going to be higher,” Mark Murphy, Micron’s chief financial officer, said on the call. “They will last over 150 days, we believe. And again, it’s a function of this unprecedented time, and we’re doing what we can to affect future supply or future capacity, to be able to reduce those inventories. »

“These are high-quality stocks, so they will be serviceable,” Murphy told analysts. “And we’re managing working capital expenses, cash flow, all aggressively right now.”

This means reducing capital expenditures in fiscal year 2023 by approximately $8 billion, or more than 30%, with a 50% reduction in wafer fabrication equipment expenditures, Micron’s Mehrotra said. adding that the company would continue to work closely with all end-market customers, and that all segments reported high inventory, including cloud customers.

Companies that supply the type of equipment purchased by Micron, such as Lam Research Corp. LRCX,
-0.17%
and KLA Corp. KLAC,
-1.92%,
all reported in the prior quarter that demand was still high but supply chain issues were hampering production. That could change given the sudden shift to pockets of oversupply of chips. Lam is expected to release results on October 19 and KLA on November 2.

After falling 1.9% to close the regular session at $50.01, Micron MU,
+2.17%
Shares fluctuated between slight gains and slight losses after hours Thursday, and were last down 1% after the company’s conference call ended. Micron stock is down 46% for the year, compared to a 24% drop in the S&P 500 SPX index,
-0.73%
and a 31% drop in the Nasdaq Composite Index COMP,
-0.52%.

For the fourth fiscal quarter, Micron reported net income of $1.49 billion, or $1.35 per share, compared with $2.72 billion, or $2.39 per share, a year ago. Adjusted earnings, which exclude stock-based compensation expense and other items, were $1.45 per share, compared to $2.42 per share for the same period last year.

Revenue fell to $6.64 billion from $8.27 billion in the year-ago quarter.

Analysts polled by FactSet had forecast adjusted earnings of $1.37 per share on revenue of $6.73 billion, based on Micron’s forecast of $1.43 to $1.83 per share on revenue from 6.8 to 7.6 billion dollars.

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Over the past 12 months, Micron shares have fallen 30%, while the PHLX Semiconductor Index SOX,
-0.72%
fell 28%, the S&P 500 fell 16% and the tech-heavy Nasdaq fell 26%.