Gloomy prognosis: Micron cuts and postpones DRAM and NAND production


In the summer Micron shocked the stock market, they did it again at night. Because the first shock is now followed directly by the next, because the prospects for the current and last quarter are again more than 25 percent below what the stock market had hoped for. So it's only going to get worse.

It's always going to get worse before it gets better

Micron had recently warned several times, in August, six weeks after the first bad forecast, that the market would continue to cool down and its business would suffer as a result. And that is exactly what is happening now, as not only the figures for the last quarter make clear, but also the forecast for the current three months and into 2023.

However, Micron still tried to sell it all as a success, mainly because the previous period had a positive influence on the year as a whole. Because Micron is doing very well there compared to the previous year, an increase in sales accompanied by a massive increase in profits can be reported here. But the stock market and the analysts don't look back, they look ahead. And there's excitement.

Micron had nearly $8.5 billion in revenue a year ago, even in the third quarter of its fiscal 2022. Now it was just $6.6 billion in the fourth quarter of fiscal 2022, which ended September 1 . And in the current first quarter of the fiscal year 2023 it should only be 4 to 4.5 billion US dollars. The almost halving of sales is accompanied by dwindling profits: instead of earning almost 3 billion in the operating business, the value has already halved to 1.5 billion US dollars.

Reduce spending, lower production, shift new products

In order not to slip into the red, Micron cuts spending drastically. Instead of a CAPEX of 12 billion US dollars as in fiscal year 2022, 8 billion US dollars are still being targeted. In some areas, expenses are to be reduced directly by at least 50 percent, such as wafer fab equipment (WFE). However, some things cannot be canceled at short notice, including factory expansions and purchases of EUV lithography systems, which are also badly needed for the second half of the decade to remain competitive. However, manufacturing steps such as new 1-beta DRAM and advanced 232-layer NAND are being pushed into the market more slowly than previously envisaged. Effectively, they will only be available in less than a year, explained the CEO.

I think it's important to understand that we are delaying the ramp off 232-layer and 1-beta technologies versus our prior plans. And most of the CapEx — the $8 billion CapEx that we have talked about or the WFE CapEx that we are talking about is actually going toward preparing those technologies for engineering learning and producing the products for new — in production for customer qualifications.< /p>

In turn, these technologies will really not be contributing to the revenue shipments through our fiscal year '23 until late in fiscal year '23, they will be the primary drivers of bit growth and revenue growth and of course, cost reductions in fiscal year '24.


In the short term, Micron will even take the step of screwing up DRAM and NAND production. Diplomatically, Micron calls this “we are reducing utilization in select areas in both DRAM and NAND”, and it is intended to reduce inventory levels. This has recently grown to 139 days and includes products worth 6.7 billion US dollars. And in the short term, this is expected to rise even further and only start to decline in the second quarter of the fiscal year, i.e. from spring/summer 2023. Therefore, the value should first increase to over 150 days, with around 100 days being ideal, Micron explained in the conference call on the quarterly figures.