Due To A Drop In Demand For Computer Chips, Micron Will Reduce Employment By 10%




The most prominent memory chip manufacturer in the US, Micron Technology Inc., forecasted depressing sales for the current quarter, predicted that the decline in demand for computer components would continue, and said that it would decrease its staff by around 10% in 2019.

According to a statement by Micron on Wednesday, revenue will total around $3.8 billion in the second quarter of the current fiscal year. Comparatively, as published by Bloomberg, the median estimate of analysts was $3.88 billion. 

For the quarter ending in February, the business anticipated a loss of around 62 cents per share, excluding certain factors, as opposed to the loss of 29 cents that analysts had expected.

Less than a year after they could not meet demand, semiconductor makers are experiencing declining demand for their goods. With growing inflation and an unsteady economy, consumers are delaying the purchase of PCs and cell phones. 

These gadgets’ producers, the primary consumers of memory chips, are now dealing with idle component inventories and delaying ordering fresh stock.

Micron’s products are interchangeable with those of the competitors because, in contrast to other segments of the chip business, they are produced in accordance with industry standards. Because memory may be sold like a commodity, its producers are more vulnerable to price swings.

To reduce the supply of chips and stop the tide, Micron has promised to scale back output at its plants and delay growth plans. Competitors like Samsung Electronics Co. and SK Hynix Inc. will need to do the same for it to be successful. 

Running expensive facilities at less than full capacity might negatively impact profits, this decision can support pricing.

Revenue decreased 47% to $4.09 billion for the three months that ended on December 1. The company’s share price fell by 4 cents with some elements excluded. Comparatively, the average forecast was for a loss of one penny per share on $4.13 billion in revenues.

Micron’s shares hardly moved in extended trading after reaching a New York closing price of $51.19 earlier. The stock has fallen 45% this year, which is a greater decline than other stocks tied to chips. 2022 sees a 33% decline in the Philadelphia Stock Exchange semiconductor index.

The business announced a production decrease of roughly 20% last month “in reaction to market circumstances.” According to records, Micron, a company with headquarters in Boise, Idaho, employed 48,000 people as of September 1.

The oversupply of chips won’t be relieved by Micron’s promise to cut production from its plants and postpone development plans unless rivals like Samsung Electronics Co. and SK Hynix Inc. follow. 

Although running expensive operations at less than full capacity, which can harm profitability, is the cost of taking such action, it can help sustain prices.

In a conference call following the presentation of the company’s results, executives stated that in addition to the anticipated personnel cutbacks, the company has halted share repurchases, is reducing executive wages, and will forgo company-wide bonus payouts.

About the author, Awais Rasheed

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