Chipmaker Micron slides after predicting steeper loss than expected

SAN FRANCISCO – Micron Technology fell in late trading on Wednesday after predicting a steeper loss than anticipated in the current quarter, indicating that an industry slump is still weighing on the largest US maker of memory chips.

The company projected a fiscal first-quarter loss of as much as US$1.14 a share, excluding some items. Analysts had estimated a loss of 96 US cents. On the bright side, revenue is expected to start recovering in the period.

Micron predicted sales of US$4.2 billion (S$5.8 billion) to US$4.6 billion, compared with an estimate of US$4.21 billion.

For Micron and its competitors, Samsung Electronics and SK Hynix, 2023 has been a brutal year.

Customers in their main sectors – personal computers and smartphones – have slashed orders as they cope with lacklustre demand and stockpiles of excess parts. Wednesday’s report suggests that investor optimism about a rebound in profitability may be premature.

The shares dropped more than 5 per cent in extended trading. They had closed at US$68.21 in New York, leaving them up 36 per cent in 2023.

Micron chief executive Sanjay Mehrotra said Micron has taken “decisive actions on supply and cost”, which will help the company as the market for memory chips recovers in 2024 and then reaches record levels again in 2025.

Sales have fallen for five straight quarters. In the three months ended in August, Micron’s revenue declined 40 per cent to US$4.01 billion. The company had a loss of US$1.07 a share, excluding certain items, compared with an estimated loss of US$1.18 a share and sales of US$3.93 billion.

The forecast suggests that sales will begin to grow again in the fiscal first quarter, which runs till end-November.

But one additional obstacle that Micron faces is Beijing’s designation of its products as a security risk. This has already cut into the US company’s revenue in China – the largest market for semiconductors – in what its management has previously called a “significant headwind”.

Micron expects the industry outlook to brighten considerably by 2025, especially as artificial intelligence systems demand new types of more expensive memory chips.

In the interim, the outlook remains mixed. In traditional servers – the computers that are still the mainstay of most data centres – demand remains lacklustre, Mr Mehrotra said.

Both personal computers and smartphones will return to growth in 2024, with units increasing by a percentage in the low- to mid-single digits, Micron said.

To cope with the slowdown, Micron and its peers reined in production, severely reducing supply and helping prices bottom out.

It expects to be “significantly” below peak 2022 output for the foreseeable future. The company plans to continue to run factories at less than full capacity well into the 2024 calendar year. Micron will also further reduce spending on new equipment in 2024.

Micron’s chips, which help store information in computing devices, are particularly vulnerable to swings in demand as memory products are directly interchangeable and traded like commodities.

Rapid fluctuations in the balance between supply and demand can leave producers selling the components for less than they cost to make. BLOOMBERG