U.S. trade ban on Huawei cuts off Micron’s biggest customer. Boise company suffers
Micron Technology saw revenues drop sharply during its fiscal third quarter while at the same time beating analysts’ expectations.
The Boise company reported $4.79 billion in revenue for the quarter, which ended May 30, down nearly 39 percent from the same quarter a year ago. Last year, Micron reported revenue of $7.8 billion during the same quarter.
The drop in revenue was still $100 million more than analysts predicted ahead of Tuesday afternoon’s announcement.
Shares of Micron stock rose 10% in after-hours trading. That came after falling 1.5%, to 32.68, during regular trading.
Micron CEO Sanjay Mehrotra said the company made strong progress despite U.S. trade restrictions placed on one of its largest customers, the Chinese telecom company Huawei.
Last month, the Trump administration placed Huawei on a blacklist amid a worsening trade war with China. It prevents Huawei from buying American-made chips.
“To ensure compliance, Micron immediately suspended shipments to Huawei and began a review of Micron products sold to Huawei to determine whether they are subject to the imposed restrictions,” Mehrotra said during a conference call Tuesday with analysts.
A New York Times story published Tuesday reported that a number of the United States’ biggest chip makers, including Micron and Intel, had found ways to sell millions of dollars of products to Huawei despite the ban. The story cited four people with supposed knowledge of the sales.
Intel and Micron declined to comment, The Times reported.
Mehrotra said during the call that Micron’s review determined it could resume shipping certain products that were not subject to the export restrictions. He said Micron began shipping some of those products during the past two weeks.
Sales to Huawei during the first two quarters of Micron’s fiscal year accounted for 13% of Micron’s revenue, the company reported earlier.
Mehrotra would not say how much the loss of business to Huawei hurt Micron. But David Zinsner, Micron’s chief financial officer, said the company’s losses would have been less.
Micron reported earnings of $1.05 per share. Analysts had expected earnings of 79 cents per share.
Mehrotra said he expects strong growth in the fourth quarter as inventory levels lower because of stronger sales.
“This reinforces our confidence that good demand for DRAM will return to healthy year-over-year growth in the second half of calendar 2019,” he said. “NAND bit demand is also increasing as elasticity kicks in in response to price declines over the last year.”
Dynamic random access memory, DRAM, is used in computers and servers, while NAND flash memory chips are used in USB drives and small devices such as digital cameras.
There’s a glut of DRAM and NAND chips, Zinsner said. He said he expects sales to improve and inventory levels to shrink.
This story was originally published June 25, 2019 at 4:49 PM.
