Micron shares dropped 4% following its latest quarterly earnings report showing revenues of $3.7 billion, less than half ofrevenues a year ago. By comparison, shares have improved more than 27% in all of 2023, although the company raised worries about the impact of Chinese government sanctions on its products, the result of ongoing trade tensions between China and the US.
The company also reported a net loss of $1.9 billion. On an optimistic note, however, CEO Sanjay Mehrotra told analysts in a call on Thursday that the company believes the memory industry “has passed the bottom for both quarterly revenue and year-on-year revenue growth.” In a separate statement, he said revenue and margins are expected to improve as the industry supply-demand balance is gradually restore.”
He also warned of a “significant headwind” slowing the company’s recovery from a recent Cyberspace Administration of China decision. Revenues are forecast for the company’s fourth fiscal quarter to reach more than $3.9 billion, reflecting a negative 12.5% gross margin.
The impact of the May 21 decision by CAC on Micron’s business remains “uncertain and fluid,” he said on the call, according to a transcript from Seeking Alpha. About half of the China-based customer revenue is at risk of being impacted, with such revenue making up a low double-digit percentage of Micron’s global revenues.
In the May CAC decision, China’s government told its tech manufacturers to stop using Micron chips in an ongoing feud with US, which has joined with Europe and Japan to reduce Chinese access to advanced chipmaking gear that the US worried will be used in weapons.
Micron also reported 71% of its revenues came from DRAM products, down 2% over the prior quarter. NAND made up 27% of total revenue, up 14% over the prior quarter. Average sales prices declined up to the mid-teens percentage range.
For all of 2023, Micron said industry demand for NAND and DRAM have declined. For DRAM, demand growth is down to low-to-mid single digits and for NAND have dropped to high single digits “well below the expected long-term CAGR of mid-teens percentage range for DRAM and low 20s percentage range in NAND.”
Micron sees year-on-year bit supply growth to be “meaningfully negative for DRAM and to produce few NAND bits in calendar 2023” compared to 2022.
Across business units. Micron saw $1.4 billion in revenues for Compute and Networking (down 64% from a year earlier), $912 million for Embedded (down 36%) , $819 million for Mobile (down 58%) and $627 million for Storage (down 53%).
Over the long term, Micron and other memory makers expect generative AI to be a boost to revenues. AI servers have six to eight times the DRAM content of a regular server and three times the NAND content. Nvidia’s DGX GH200 Supercluster provides a massive shared memory space of 144TB.
Despite some concerns over the earnings report, many analysts were positive on Micron’s report immediately afterward, noting company shares have gained more than 27% for 2023. Revenues for its latest third fiscal quarter actually beat analyst estimates, contributing to their optimism.
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