The business of the fourth largest chip manufacturer in the world collapses.
(Photo: AP)
Munich Cars, cell phones, coffee machines and robots: Hardly any electrical device can do without memory chips. Micron’s latest results are correspondingly worrying for the global economy.
The business of the American memory chip specialist is going much worse than the analysts had expected. The world’s fourth-largest semiconductor maker is counting on sales of $4.25 billion for the current quarter, which began September 1. That’s two billion fewer than Wall Street bankers had forecast, and down 45 percent from a year earlier. “What surprised us is how strong the decline is,” said Sumit Sadana, the board member responsible for operations.
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The boom of the last two and a half years in the chip industry is over. The memory chips are stacked up in the warehouses of the electronics manufacturers. According to market researchers at Trendforce, high inflation worldwide is dampening demand for PCs and laptops. They expect prices for the widespread, so-called DRAM memory chips to drop by 13 to 18 percent in the fourth quarter.
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“As we look ahead, macroeconomic uncertainty is high and it’s hard to predict what’s to come,” said CFO Mark Murphy. Important customers in the chip industry such as Apple are not increasing their orders as planned, but at best are buying just as many chips as in the previous year.
According to the Bloomberg news agency, the US group recently canceled its plans to increase production of the new iPhone 14 smartphone by up to six million units in the second half of the year. The expected surge in demand failed to materialize.
Micron will shrink by a third
Apple is still doing well compared to other customers of memory chip manufacturers. Notebook manufacturers shipped a quarter fewer devices worldwide in the second quarter than in the previous year. Smartphone production has fallen by six percent.
Improvement is not in sight. Morningstar analysts assume that Micron’s sales will fall by almost a third in the fiscal year that has just begun. The most important competitors, Samsung and SKHynix from South Korea, have already warned of tough business at the end of the year.
Micron boss Sanjay Mehrotra announced that he would cut investments by 30 percent: “Yes, we have a challenging market environment, but we are reacting quickly.” However, the cuts will only stop the price decline if the competitors follow suit. Memory chips are standard products that are interchangeable.
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Apparently, the two major competitors from South Korea have already reacted. Semiconductor production in the country fell by 1.7 percent in August. This is the first decline in more than four years. In July, the statistics office recorded an increase of 17.3 percent.
Japanese rival Kioxia announced on Friday that it would cut output by 30 percent by December. Manufacturers are left with the hope that prices will stabilize when output falls and inventories are emptied.
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