Memory Semiconductor Weakness Continues... US Micron Forecasts Earnings Below Market Expectations

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Following Samsung Electronics and SK Hynix, Micron, the third-largest memory semiconductor company in the industry, announced on the 30th of last month (local time) earnings forecasts that fell significantly short of market expectations. This reflects the worsening memory semiconductor market conditions due to reduced sales of electronic devices such as computers and smartphones amid recession concerns.

Micron announced its fiscal third-quarter (March-May) results and fourth-quarter (June-August) earnings forecast on the same day. Micron's sales forecast for June to August this year was $7.2 billion (approximately 9.37 trillion KRW). Bloomberg reported that the market expectation was $9.14 billion, indicating a significant shortfall. The adjusted earnings per share were also $1.63, far below the market expectation of $2.57.

Micron's earnings forecast reflects the deterioration of the memory semiconductor market. Due to recession concerns caused by the Ukraine war and high inflation, sales of consumer electronics are expected to decline, leading to a contraction in memory semiconductor demand. Taiwanese market research firm TrendForce recently reported that prices for DRAM and NAND flash in the third quarter of this year are expected to fall by 3-8% and 0-5%, respectively, compared to the second quarter.

In fact, electronics and component companies are adjusting production volumes in anticipation of demand contraction as concerns over raw material supply chain instability and global economic slowdown continue this year. Market research firm Counterpoint Research recently forecasted that global smartphone shipments this year will decrease by 35 million units from last year to 1.357 billion units.

Sanjay Mehrotra, CEO of Micron, stated, "The recent industry demand environment has weakened, and we are taking actions aligned with a moderation in supply growth for fiscal year 2023." Bloomberg interpreted this as meaning that rather than increasing production amid declining demand, Micron plans to respond with inventory when orders come in and reduce capital expenditures on new factory construction and equipment introduction.

Micron announced that sales from March to May reached $8.64 billion, a 16% increase compared to the same period last year. Although it recorded a double-digit sales growth rate, Bloomberg reported that this was the smallest growth in sales scale for recent quarters. Net profit was $2.63 billion, up 51% year-on-year.

According to Bloomberg, Micron's stock price fell more than 8% in after-hours trading following the earnings announcement. Micron's stock price has already dropped 41% so far this year.

Micron holds a 23.8% market share in the DRAM market for the first quarter of this year, ranking third behind Samsung Electronics (43.5%) and SK Hynix (27.3%).

This content was produced with the assistance of AI translation services.