American chipmaker Micron Technology plans to shed 10 percent of its workforce and significantly reduce capital spending over the next year as demand for its memory and storage silicon has hit lows not seen since the Great Recession of 2009.
“The industry is witnessing the most severe supply-demand imbalance in both DRAM and NAND in the last 13 years,” said Micron CEO Sanjay Mehrotra, who spearheaded the company’s earnings announcement for the first quarter of fiscal 2023 on Wednesday on December 1st.
Micron revenue was $4.09 billion for the first quarter, down 62 percent from $6.64 billion in the previous quarter and down 88 percent from $7.69 billion in the same period of the previous year. The company’s profitability took a big hit, falling to a net loss of $195 million in the third quarter from a net income of nearly $1.5 billion in the previous quarter when standard accounting practices were used.
This was due to DRAM sales falling 41 percent sequentially to $2.8 billion and NAND sales falling 35 percent to $1.1 billion. The market segments that also suffered from the lower demand were personal computers, data centers, graphics, networking and mobile devices. One bright spot was the automotive market, which Micron says is “outperforming consumer and industrial markets.”
While Mehrotra said Micron’s earnings results were in line with previously released guidance, it was yet another sign of difficult times ahead.
As the semiconductor industry experiences a sharp drop in demand that has made chip shortages the norm over the past two years, the DRAM and NAND markets have been hit particularly hard. Taiwanese research firm TrendForce said global sales of NAND flash products fell 24.3 percent in the third quarter and DRAM fell nearly 30 percent sequentially.
A slump in demand for Micron’s products was evident in September, when the company reported fourth-quarter sales for fiscal 2022 were down 30 percent sequentially and 24 percent from the prior-year period.
That downturn prompted Micron to announce that it would cut chip production spending by 30 percent in 2023. Then, in mid-November, the company said it needed to cut manufacturing spending further, announcing a 20 percent reduction in DRAM and NAND wafer production in the first quarter of its fiscal 2023 compared to the previous three-month period.
Now, Micron plans to cut spending even further, in part by shedding about 10 percent of its workforce through layoffs and employee voluntary redundancies over the next calendar year, Mehrotra said Wednesday. The job cuts could amount to around 4,800 jobs if Micron’s reported global headcount of 48,000 employees is still correct.
The company suspended bonuses and cut executive salaries for the remainder of fiscal 2023, among other cost-cutting measures.
The hard times are unlikely to end soon. Micron forecast its revenue for the second quarter of its fiscal 2023 to be $3.8 billion, plus or minus $200 million, another decline from historical revenue.
“In both years, demand for DRAM and NAND is well below historical trends and future growth expectations, mainly due to lower end demand in most markets, high customer inventories, the impact of the macroeconomic environment and regional factors in Europe and China is due,” the CEO said.
Mehrotra said Micron will continue to struggle with profitability in 2023, and he expects conditions to improve only if the company manages to reduce production enough to balance supply with lower demand bring.
“While we have taken these aggressive steps, we stand ready to make further changes and remain flexible to use every lever to control our offering and manage our cost structure,” he said. ®
https://www.theregister.com/2022/12/22/micron_job_cuts/ Micron plans job cuts as demand falls • The Register