Micron Technology (MU) said Wednesday that it is slashing production of memory chips, citing weak demand. The news pulled down semiconductor stocks broadly.
The Boise, Idaho-based company said it is reducing its wafer starts for DRAM and Nand memory chips by about 20% in the current quarter vs. the same period last year. Micron also is planning additional cuts to its capital expenditures, according to a news release.
In calendar 2023, Micron now expects its year-on-year bit supply growth to be negative for DRAM, and in the single-digit percentage range for Nand. DRAM chips act as the main memory in PCs, servers and other devices, working closely with central processing units. Nand flash provides longer-term data storage.
Bit growth, which refers to the amount of memory produced, is a key barometer for gauging market demand.
Semiconductor Stocks Tumble
“Micron is taking bold and aggressive steps to reduce bit supply growth to limit the size of our inventory,” Chief Executive Sanjay Mehrotra said in a written statement.
He added, “Despite the near-term cyclical challenges, we remain confident in the secular demand drivers for our markets, and in the long term, expect memory and storage revenue growth to outpace that of the rest of the semiconductor industry.”
On the stock market today, Micron stock fell 6.7% to close at 58.87.
Meanwhile, the Philadelphia semiconductor index, known as SOX, dropped 4.3% on Wednesday. The SOX includes the 30 largest semiconductor stocks traded in the U.S.
Negative News For Chip-Gear Makers
Rosenblatt Securities analyst Hans Mosesmann called Micron’s production cuts “aggressive.”
The moves are “evidence that both end demand and inventory reductions at customers/channel are much more problematic than expected,” he said in a note to clients.
Still, Mosesmann called the production cuts healthy for the industry. He rates Micron stock as buy with a price target of 100.
Micron’s announcements are negative for semiconductor stocks tied to chip gear, Wells Fargo analyst Joe Quatrochi said in a note.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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