Micron will drop wafer production by 20% for DRAM and NAND

Micron shares dropped 7% Wednesday on the company’s warning it will reduce wafer production for DRAM and NAND memory by about 20% compared to its fourth fiscal quarter of 2022.

The company said in a statement the market outlook for 2023 has weakened, with negative growth for DRAM and single digit growth for DRAM.

 Micron believes to balance inventory in the supply chain, year-on-year DRAM supplies will “need to shrink” while NAND supplies will “need to be significantly lower than previous estimates.”

“Micron is taking bold and aggressive steps to reduce bit supply growth to limit the size of our inventory,” Micron CEO Sanjay Mehrotra said in a statement. Even so, he said memory and storage revenue growth will outpace the rest of the chip industry over the long term.

In late September, Micron announced its fourth fiscal quarter 2022 results, which it described as “impacted by rapidly weakening consumer demand and significant customer investment adjustments across all end markets.”  Even at that point, Micron said it would respond decisively to the weak environment “by decreasing supply growth through significant cuts to fiscal 2023 capex and by reducing utilization in our fabs.”

The company’s announcement Wednesday of a 20% reduction in wafer production for DRAM and NAND compared to fourth fiscal quarter 2022 appears to be its first announcement of a specific value for its reductions.

The September statement also presaged Wednesday’s announcement by adding, “an unprecedented confluence of macro events and customer inventory adjustments are depressing demand for DRAM and NAND to well below end consumption.”

Analysts and economists have widely predicted a correction in the chip market through 2023. Their thinking is based on a reduction in chip demand for computers and servers because many customers, including consumers and data centers, bought up electronics at high levels during the pandemic and have filled that earlier demand. Meanwhile, some OEMs have greatly slowed purchases even as chipmakers had ramped production in 2021 and 2022.

The Philadelphia Semiconductor Index fell 4% in trading Wednesday, while Intel dropped 4%. Memory companies Western Digital and Texas Instruments were also down by 7.5% and 2%, respectively.

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