Memory giant vows to slash capex, sees 180m fewer smartphones and PCs shipped
Semiconductor firm Micron has slashed its outlook for the rest of the year, saying it expects to see 130 million fewer smartphones and 30 million fewer PCs shipped than it predicted earlier in 2022.
The memory specialist vowed “immediate action” to trim supply amid an economic slowdown and pledged to use “inventory as a buffer to navigate through this period of demand weakness.”
Micron produces DRAM, NAND (including flash-based SSDs) and high performance computing (HPC) data centre accelerators for both consumer and enterprise clients as well as the cloud hyperscalers.
The grim Micron outlook comes as $18 trillion was wiped from valuations in H1 amid war and "quantitative tightening" -- although strong US job creation figures for July eased recession fears.
The US-based firm said it would “reduce wafer fab equipment capex for fiscal year 2023 versus our prior plans, and we now expect our fiscal 2023 wafer fab equipment capex to decline year-over-year” – warning of a rocky second half to the year even as it reported record SSD revenue, with both data center and client SSD revenues reaching all-time highs (Micron’s data center SSD revenue more than doubled year-over-year.)
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An “overall trend of digitization and use of data to help drive greater productivity and efficiency in businesses” continued to prove a firm foundation for the future, executives suggested, despite the slowdown.
The memory and storage TAM is expected to grow to $330 billion by 2030 and as Micron’s Chief Business Officer Sumit Sadana told analysts: “even companies that do focus on tightening their belt in this macroeconomic environment will continue to look for ways to become more efficient, become more profitable, improve their competitive positioning. And that means extracting more value from data, digitization trends…”
Micron's Q3 revenue from sales to data centre customers grew over 50% on-year: "Data center end demand is expected to remain strong in the second half of calendar 2022, driven by robust cloud CapEx growth. Despite the strong end demand, we are seeing some enterprise OEM customers wanting to pare back their memory and storage inventory due to non-memory component shortages."
The global downturn comes at an inopportune moment for Micron, which this month announced the commercial and industrial channel partner availability of its DDR5 server DRAM -- featuring an architecture that nearly doubles the bandwidth of DDR4 to increase efficiency as core-counts per CPU continue to expand and with hugely increased JEDEC (an industry standard for memory) speeds of 4800MT/s.
"DDR5-enabled servers are being evaluated and tested in data centre environments and are expected to be adopted at an increasing rate throughout the remainder of 2022" the company said in a press release on July 6, but admitted on its earnings call that "delays in the rollout of new server CPU platforms have slowed the industry DDR5 ramp versus prior expectations" as OEMs struggle with supply chains.
More broadly the company said it expects "robust auto content growth as OEMs adopt significant architectural changes to support ADAS, infotainment and electric vehicles" but "overall industry supply is also being impacted" [by Covid in China and other supply chain and macroeconomic issues], with CEO Sanjay Mehrotra adding on the earnings call: Manufacturing equipment shipment delays, challenges for some in the industry in ramping new nodes of technology and DRAM supply discipline evident in the industry are all expected to limit supply growth over the next few quarters. These supply reductions will help offset some impact of the weaker demand."
Micron is sitting on a $12 billion cash pile. Its share price is around half of what it was earlier this year and CBO Mark Murphy added: "Given our long-term financial outlook and the strength of our balance sheet, we see the current share price as very attractive and, at these levels, intend to repurchase shares more aggressively in fiscal Q4.
