Micron revenue halved in FY23 as China ban bites

Reason for the block still a mystery – but most have their guesses

Memory maker Micron Technology's revenue fell by almost half year-on-year, partly thanks to the effect of China's unexplained bans on some of its products.

In May, the Cyberspace Administration of China (CAC) announced that the chipmaker had failed a security review and subsequently banned its products from being used by some government and security-sensitive organizations.

The regulator offered no reason for its assessment, and in June 2023 Micron remarked that the impact of the CAC decision remained "uncertain and fluid." However, Micron did predict that the China ban would cost it $4 billion in annual revenue.

The memory maker has tried to learn the reason for the ban, but on its Q4 earnings call Wednesday execs offered no update on the matter.

Although no official reason has come to light to explain the ban, it is widely interpreted as Beijing responding to US bans on Chinese products.

Whatever the reason for the ban, Micron execs revealed that the impact on its balance sheet has become clearer.

CEO Sanjay Mehrotra reported that the CAC decision had hurt sales to the domestic datacenter and networking markets in China.

CFO Mark Murphy further detailed that the impact was seen in revenues and reflected in the forward guidance.

Q4 revenue came in at $4.01 billion, versus $3.75 billion for the prior quarter and $6.64 billion for the same period in 2022. The quarter brought a net loss of $1.43 bilion.

Revenue for FY 2023 was $15.54 billion – well down on FY 2022's $30.76 billion – and saw Micron swing from net income of $8.68 billion to a net loss of $5.83 billion.

First quarter 2024 non-GAAP guidance for revenue was $4.4 billion, plus or minus $200 million. Gross margin was placed in the range of negative 4 percent, plus or minus 200 basis points, and operating expenses were pegged at $900 million, plus or minus $15 million.

"Fiscal Q1 gross margin is projected to improve sequentially on a greater mix of DRAM and more sell-through of written-down inventories," explained Murphy. "We expect approximately 60 percent of the remaining benefit from lower cost inventories to clear in fiscal Q1."

"Q4 results and Q1 guidance reflect the net effect of the loss of revenue in China as well as the success with some of the mitigation, and of course we are working on mitigating the China revenue loss," Mehrotra said.

According to the CEO, the business remains "focused on maintaining Micron's global market share" and committed to serving Chinese customers not impacted by the CAC decision. He also seemed unruffled by Micron's nasty numbers, stating the company "took several prudent and timely actions to reduce our capex and supply in order to address the market imbalances through the course of fiscal 2023."

Mehrotra also stated that "our industry-leading technology roadmap continues to progress well," with most production now on leading-edge process nodes, and work to move other products to more efficient manufacturing processes that create higher-value products proceeding well. ®

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