Micron stumbles, announces cost cuts as sales sag. The profit outlook? ‘Just awful’
Micron Technology Inc. began September with a lion-like roar: We’re going to build a $15 billion plant in Southeast Boise, the company said, bringing 2,000 more jobs to our headquarters campus.
But Idaho’s largest for-profit employer of Idahoans is leaving September like a lamb, reporting sales in its latest quarter of $6.64 billion, a 20% decline from the same quarter of 2021.
A decline was expected. That’s because the growth in sales of semiconductor chips worldwide has been slumping this year.
Micron on Thursday cited “rapidly weakening consumer demand and significant customer inventory adjustments” that brought steep revenue declines in its phone, data center, personal computer, auto and other markets. CEO Sanjay Mehrotra also cited an “extremely aggressive pricing environment.”
Chief Business Officer Sumit Sadana told Barron’s that a hiring freeze is in place. And Mehrotra said the company will scale back its capital investment in chip wafer-manufacturing equipment by nearly 50% to reduce costs.
What about new Boise plant?
Mehrotra didn’t say whether the investment slowdown would affect the pace of the new Boise plant’s development or a “mega fab” elsewhere in the U.S. that Mehrotra previously told the Idaho Statesman would be announced “at the right time.”
But he did say Micron’s spending on new construction would more than double in its new fiscal year, in part for the Boise fab.
“These new fabs will fulfill our requirements for additional wafer capacity starting in the second half of the decade and beyond,” Mehrotra said Thursday in a call with investment analysts. “We plan to build these sites in stages. Tool installation and production output will be ramped in line with industry demand growth, which is consistent with our goal to maintain stable bit-supply share as well as supply discipline.”
Micron said this month that it employs about 6,000 people in the Treasure Valley. But it hasn’t made chips for sale in Boise since 2009. Most of its Boise-area workers are involved in research, development or corporate business roles.
The planned plant, or fab, is being built in Boise to take advantage of new federal subsidies aimed at returning semiconductor manufacturing to the United States. Most manufacturing has moved abroad, where costs are lower.
Micron remains profitable. For the quarter, Micron reported earnings of $1.35 per share. For the year, they were $7.75 per share.
For the new quarter, Micron projected that earnings would land between a 9-cent loss and a 10-cent profit.
That’s “just awful,” said a headline on Seeking Alpha, an investment-bloggers’ site.
Micron CEO touts returns to shareholders
Mehrotra put a positive spin on Thursday’s earnings report, noting that sales for the full fiscal year that ended Sept. 1 were still higher than ever.
“In fiscal 2022, Micron generated record revenue of $30.8 billion and delivered our sixth consecutive year of positive free cash flow, allowing us to return a record $2.9 billion to our shareholders,” Mehrotra said in a news release.
Then he said Micron is succeeding in the two types of memory chips it makes: dynamic random-access memory, or DRAM; and NAND, a contraction of not-and, a logic term used in digital circuit manufacturing memory.
“Our technology and manufacturing leadership in both DRAM and NAND, deep customer relationships, diverse product portfolio, and strong balance sheet put Micron on solid footing to navigate the weakened near-term supply-demand environment,” Mehrotra said.
“We ... expect to emerge from this down-cycle well positioned to capitalize on the long-term demand for memory and storage,” he said.
Shares closed Thursday at $50.01, down from a 52-week high of $98.45. Micron released its earnings just after the market closed. Shares then climbed 6 cents in after-hours trading through 8 p.m. Eastern.
This story was originally published September 30, 2022 at 4:00 AM.
