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The semiconductor industry is experiencing its worst phase in more than a decade, hurt by a poor price environment, despite stable demand. For memory chip maker Micron Technology Inc. (NASDAQ: MU ), the first half of 2023 was a very difficult period as profits fell across the board and eventually fell into negative territory. Worryingly, the decline is expected to persist in the second half.
Micron’s stock has been in free fall for more than a year, causing a significant reduction in the company’s market value. In the past twelve months, it has seen some ups and downs, reflecting mixed investor sentiment. On the positive side, the stock has become more affordable, and many potential investors will find it attractive. In addition, Micron’s dominance in the memory chip market and its successful business model will enable it to create long-term shareholder value.
Expansion
Tech companies are now building what they call Megafab in New York, spending about $100 billion. Billed as the largest semiconductor fabrication facility in the US, the plant is expected to give the company a significant edge over its competitors. It is expected that the total addressable market for memory and storage chips will reach a record high in the next two years, surpassing the larger semiconductor industry.
“Our expectation for calendar 2023 industry bit demand growth has moderated to about 5% in DRAM and some teenage presentations in NAND, which is lower than the long-term CAGAR expected from the mid-teens percentage range in DRAM and the low 20s percentage range. in NAND . The reduction in calendar 2023 demand from previous forecasts was driven by customer inventory evaluations as well as some degradation in end-market demand. We expect that increasing customer inventory will support sequential bit demand growth for DRAM and NAND during the calendar year,” said Micron’s CEO Sanjay Mehrotra in a recent statement.
Q2 is weak
In a dismal showing, all four operating segments contracted twice in the second quarter of 2023 while total revenue fell 53% year-on-year to $3.69 billion. That is in line with management guidance. As a result, the company lost, marking the second consecutive negative profit. The point also missed estimates, as it did in the previous quarter, reversing the long-term trend of regular beats. On an adjusted basis, the net loss was $1.91 per share, compared with earnings of $2.14 per share in the year-ago quarter.
Meanwhile, Micron executives believe that customer inventory and the industry’s supply-demand balance will improve in the coming months. On Tuesday, Micron shares declined in early trading and hovered slightly below their long-term average. They are up 16% since the beginning of the year.
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