Micron Technology Inc gave a surprisingly downbeat forecast for the current quarter after demand for phones and computers weakened, but vowed to move aggressively to stave off a chip glut.
The company — the largest US maker of memory semiconductors — warned that sales would be about US$7.2 billion in fiscal fourth quarter, far below analysts’ estimate of US$9.14 billion.
Excluding certain items, profit would be about US$1.63 a share, the company said, compared with the US$2.57 predicted by analysts.
The outlook overshadowed generally positive results from last quarter and renewed concerns about a slowdown in two key markets for Micron’s memory chips: computers and smartphones.
Consumers and businesses have been reining in spending amid fears that the major world economies are headed for recession.
“The world is in a rapidly changing and uncertain environment, and consumer spending is certainly being reallocated away from electronic devices,” CEO Sanjay Mehrotra said in an interview. “Look at us: We just delivered a record quarter, and we’re so quick to take action to adjust our total supply to meet demand. This has never happened in this industry this fast.”
Micron’s shares fell more than 8 percent in extended trading on Thursday following the report, before recovering somewhat to a decline of about 3 percent. They had already lost 41 percent this year through the close, part of a rout of semiconductor stocks that had rallied over the last five years.
Mehrotra and his executives told analysts on a conference call that they are cutting spending on new plants and equipment to slow increases in factory output. For their part, the company’s customers — electronic device makers — are scaling back orders to reduce their inventory.
Similar actions in the past have typically taken two quarters to be completed and Micron is projecting a rebound in orders “sometime in fiscal year 2023,” Mehrotra said.
That period begins in September for the chipmaker.
During the call, Micron executives said the company is rapidly taking action to make sure the slump in demand does not fuel an industry glut.
By burning through existing stockpiles, slowing production increases and walking away from orders when customers demand steep price cuts, Micron can moderate the impact on its earnings, Mehrotra said in the interview.
In the three months ended June 2, Micron’s sales grew 16 percent to US$8.64 billion, its smallest increase in more than a year. Net profit was US$2.63 billion, or US$2.34 a share. Profit and sales were roughly in line with analysts’ predictions.
“The long-term trends absolutely bode well for memory and storage,” Mehrotra said. “The industry will have cycles, but across the cycles the fundamentals of the industry will keep strengthening.”
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