(Bloomberg) — Micron Technology Inc., the largest US maker of memory chips, gave a weak forecast for the current quarter, renewing concern that demand for personal computers and smartphones is falling off.
Sales will be about $4.25 billion in the period, Micron said in a statement Thursday. That compares with an average analyst estimate of $6 billion, according to data compiled by Bloomberg. Excluding certain items, profit will be about 4 cents a share, compared with a 87-cent prediction by analysts.
The company said it’s acting swiftly to cope with the decline in demand. That includes slowing down production at existing plants and slashing its budget for machinery. Capital spending will shrink 30% in its fiscal year 2023, Chief Executive Officer Sanjay Mehrotra said on a conference call with analysts.
“Yes we have a challenging market environment, but we’re responding rapidly with actions,” he said in an interview. “Fiscal 2023 is, of course, an unprecedented environment, but the long-term drivers are intact.”
Customers across various industries are cutting orders to pare their stockpiles of unused chips, he said, and the industry is experiencing a tough pricing environment. Micron expects conditions to improve in the second half of the fiscal year, which begins next May.
“As we look ahead, macroeconomic uncertainty is high and visibility is low,” Chief Financial Officer Mark Murphy said.
Micron’s memory chips store data and help process information in phones, PCs and servers, making its outlook a key indicator of demand for a large swath of the electronics industry. While it has benefited from the spread of computing into everything from household devices to automobiles, it’s still heavily reliant on computers to drive revenue.
Micron shares dropped more than 4% in extended trading following the report, but then rebounded when executives outlined the rapid response that the company is making. The stock had fallen 46% this year through the close, part of a rout for the semiconductor industry.
In the three months ended Sept 1, Micron’s revenue shrank about 20% to $6.64 billion, its first decline in more than two years. Net income was $1.49 billion, or $1.35 a share.
In August, the company said it would likely miss its own projections and there would be significant declines in profitability. That added to a chorus of similar warnings from chip companies.
Demand for home computers and consumer technology surged during the lockdowns of the pandemic but have since subsided — hurt by inflation and recession fears, as well as a return to the office.
The US company competes with South Korea’s Samsung Electronics Co. and SK Hynix Inc., as well as Japan’s Kioxia Holdings Corp., in a market that has historically been perilous and unpredictable. Many of their products are sold as interchangeable commodities, which can suffer rapid price fluctuations — sometimes trading for less than they cost to produce.
DRAM chips hold information temporarily, helping processors crunch data. Nand flash memory, meanwhile, acts as permanent storage in phones and computers. Micron, based in Boise, Idaho, is a smaller contender to Samsung in both types of chips, with the South Korean company dominating the industry.
(Updates CEO’s comment in fourth paragraph. An earlier version of this story corrected the earnings forecast in the second paragraph.)
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