Why Micron Plans to Cut Memory Chip Supply in 2023

Micron said on Wednesday it will reduce memory chip supply and make a major cut in its capital spending plan, as the semiconductor company struggles to clear excess inventory due to falling demand.

Shares of the company fell 5.8 percent to $59.44 (roughly Rs. 4,900) in afternoon trade.

Micron was the first major chip maker to sound the alarm about declining demand for personal computers and smartphones earlier this year due to the highest inflation in decades.

Chipmakers and electronics companies, which have been bracing for a surge in demand led by the pandemic and have long battled supply problems, quickly found themselves overstocked.

Many weaknesses are evident across the industry, and now affect all end-of-the-year markets from personal electronics to data centers to industrials. The Philadelphia Semiconductor index is down 31 percent so far this year.

“In order to significantly improve the value of innovation … DRAM bit supply will need to decrease and NAND bit supply growth will need to be significantly lower than previous estimates,” the company said.

Widespread deployments and capex cuts generally indicate lows in the memory industry and are a good sign, Wedbush Securities analyst Matt Bryson wrote in a note Wednesday.

But he said there is potential for long-term demand that could weigh on the broader technology space.

Micron said it reduced DRAM and NAND wafer starts – or the first semiconductor manufacturing process – by about 20 percent compared to the fourth quarter that ended Sept. 1.

By 2023, the company expects its year-over-year supply growth to be negative for DRAM and in the single-digit percentage range for NAND.

Micron’s view may be “balanced on the view that parts suppliers/small vendors are already baking bad conditions into their views, mocking the stock,” Bryson said.

© Thomson Reuters 2022

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