Micron plans staff decimation as demand dips to Great Recession levels
Lower demand? Bid adieu to 10% of workers and cut production
American chipmaker Micron Technology plans to cut 10 percent of its workforce and significantly reduce capital spending next year as demand for its memory and storage silicon have reached lows not seen since the Great Recession in 2009.
"The industry is experiencing the most severe imbalance between supply and demand in both DRAM and NAND in the last 13 years," Micron CEO Sanjay Mehrotra said at the top of the company's Wednesday earnings call for the first quarter of its 2023 fiscal year, which ended on December 1.
Micron's first-quarter revenue was $4.09 billion, a 62 percent decline from the previous quarter's $6.64 billion in sales and an 88 percent dip from the $7.69 billion it made in the same period last year. The company's profitability took a big hit, dropping to a net loss of $195 million in the third quarter from a net gain of nearly $1.5 billion the previous quarter when using standard accounting practices.
This was driven by DRAM revenue dropping 41 percent from the previous quarter to $2.8 billion and NAND revenue declining 35 percent sequentially to $1.1 billion. The market segments that also suffered from lower demand were PCs, datacenters, graphics, networking, and mobile devices. One bright spot for was the automotive market, which Micron said was "stronger than consumer and industrial markets."
While Mehrotra said Micron's earnings results were within the range of previously issued guidance, it nevertheless marked yet another sign of the tough times ahead.
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As the semiconductor industry experiences a significant reversal in demand that made chip shortages the norm in the past two years, the DRAM and NAND markets have been particularly hard hit. Taiwanese research firm TrendForce said global revenue fell as much as 24.3 percent for NAND flash products and almost 30 percent for DRAM in the third quarter from the previous one.
A slump in demand for Micron's products became evident in September, when the company reported that its fourth quarter revenue for its 2022 fiscal year dropped 30 percent from the previous quarter and 24 percent from the same period last year.
This downturn prompted Micron at the time to announce that it would reduce spending for chip production in 2023 by 30 percent. Then in mid-November, the company said it needed to cut production expenditures further and announced a 20 percent reduction in DRAM and NAND wafer production in the first quarter of its 2023 fiscal year from the previous three-month period.
Now Micron plans to lower spending even more in part by cutting roughly 10 percent of its workforce next calendar year through layoffs and employees voluntarily quitting their jobs, Mehrotra said Wednesday. The job cuts may amount to roughly 4,800 positions if Micron's stated global headcount of 48,000 employees is still accurate.
The company has also suspended bonuses and cut executive salaries for the remainder of the 2023 fiscal year, among other cost-cutting measures.
The hard times aren't expected to end soon. Micron projected that its revenue for the second quarter of its 2023 fiscal year will be $3.8 billion, plus or minus $200 million, a further decline in historical sales.
"For both years, demand in DRAM and NAND is well below historical trends and future expectations of growth largely due to reductions in end demand in most markets, high inventories at customers, the impact of the macroeconomic environment and the regional factors in Europe and China," the CEO said.
Mehrotra said Micron will continue to struggle with profitability in 2023, and he expects conditions will only improve if the company can manage to reduce production enough to balance its supply with lower demand.
"Although we have taken these aggressive steps, we are prepared to make further changes and remain flexible to exercise all levers to control our supply and manage our cost structure," he said. ®