Micron Technology Inc, the largest US maker of memory chips, said the worst industry glut in more than a decade would make it difficult to return to profitability next year.
The company on Wednesday announced a host of cost-cutting measures, including a 10 percent workforce reduction, aimed at helping it weather a rapid drop in revenue.
Micron also projected a steep sales decline and a wider loss than analysts had estimated for the current quarter.
Photo: Reuters
The industry is experiencing its worst imbalance between supply and demand in 13 years, Micron chief executive officer Sanjay Mehrotra said.
Inventory should peak in the current period, then decline, he said.
Customers would move to more healthy inventory levels by about the middle of next year, and the chipmaker’s revenue would improve in the second half of the year, Mehrotra said.
“Profitability will be challenged throughout 2023 because of the oversupply that exists in the industry,” he said in an interview. “The rate and pace of the recovery in terms of profitability depends on how fast supply is brought into line.”
Mehrotra said a unique convergence of circumstances — the war in Ukraine, a surge in inflation, COVID-19 and supply disruptions — has thrust the memorychip industry into a repeat of past cycles when prices plummeted and wiped out profits. Micron has responded aggressively to try to quickly get through the difficult period.
Once the downturn is over, the industry would resume profitable growth helped by demand for artificial intelligence computing and automation of various industries, he said.
Micron, which last month said that it was cutting production by about 20 percent, is cutting its budget for new plants and equipment, and now expects to spend from US$7 billion to US$7.5 billion for the fiscal year, a decline from an earlier target of as much as US$12 billion.
The company is slowing the introduction of more advanced manufacturing techniques and predicts that spending on new production will fall throughout the industry.
Micron’s pledge to reduce output from its factories and slow expansion projects would not ease the glut of chips available unless rivals, including Samsung Electronics Co and SK Hynix Inc, follow suit. That step can help support prices, but comes with the penalty of running expensive plants at less than full capacity, something that can weigh heavily on profitability.
In addition to its planned workforce reductions, the company has suspended share repurchases, is cutting executive salaries and would skip company-wide bonus payments, executives said on a conference call after its results were released.
Micron said sales would be about US$3.8 billion in the fiscal second quarter. That compares with analysts’ average estimate of US$3.88 billion, according to data compiled by Bloomberg.
The company projected a loss of about US$0.62 a share, excluding certain items, in the period ending in February, compared with a loss of US$0.29 expected by analysts.
In the three months ended Dec. 1, Micron’s revenue declined 47 percent to US$4.09 billion. The company had a loss of US$0.04 a share, excluding certain items. That compares with an average estimate of a loss of US$0.01 a share on sales of US$4.13 billion.
Micron’s shares declined about 2 percent in extended trading after closing at US$51.19 in New York.
The stock has dropped 45 percent this year, a worst decline than most chip-related equities. The Philadelphia Stock Exchange Semiconductor Index is down 33 percent this year.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
FUTURE PLANS: Although the electric vehicle market is getting more competitive, Hon Hai would stick to its goal of seizing a 5 percent share globally, Young Liu said Hon Hai Precision Industry Co (鴻海精密), a major iPhone assembler and supplier of artificial intelligence (AI) servers powered by Nvidia Corp’s chips, yesterday said it has introduced a rotating chief executive structure as part of the company’s efforts to cultivate future leaders and to enhance corporate governance. The 50-year-old contract electronics maker reported sizable revenue of NT$6.16 trillion (US$189.67 billion) last year. Hon Hai, also known as Foxconn Technology Group (富士康科技集團), has been under the control of one man almost since its inception. A rotating CEO system is a rarity among Taiwanese businesses. Hon Hai has given leaders of the company’s six