Micron reports net loss for FY1Q23, expects bleak outlook next year

Micron Technology has released its earnings report for fiscal first-quarter 2023, which ended on December 1, 2022, showing revenue of US$4.09 billion compared to US$6.64 billion for the prior quarter and US$7.69 billion for the same period last year. That translates into a 38.4% quarter-on-quarter decline and a 46.8% year-on-year decrease. Micron reported a GAAP net loss of US$195 million, or US$0.18 per diluted share.

Given the significant supply-demand mismatch entering calendar 2023, Micron expects industry profitability will remain challenged throughout next year, said Micron executives in a conference call on December 22.

Micron president and CEO Sanjay Mehrotra said Micron is taking decisive actions to cut supply and expenses.

"The industry is experiencing the most severe imbalance between supply and demand in both DRAM and NAND in the last 13 years. Micron is exercising supply discipline by making significant cuts to our capital expenditures (capex) and wafer starts while maintaining our competitive position. Micron is also taking measures to cut costs and operating expenditures (opex) across the company," said Mehrotra.

The gross margin of fiscal first-quarter 2023 was 21.9%, down from 39.5% of the previous quarter and 46.4% a year ago. Operating loss for the quarter was US$209 million, compared to operating income of US$1.5 billion and US$2.6 billion for fiscal fourth-quarter 2022 and first-quarter 2022, respectively. Capex investments (net) were US$2.47 billion for fiscal first-quarter 2023, which resulted in adjusted free cash flows of negative US$1.53 billion, according to Micron's press release.

Customer inventory, which is impacting near-term demand, is expected to continue improving, and Micron expects most customers to have reduced inventory to relatively healthy levels by mid-calendar 2023. "Consequently, Micron expects the fiscal second-half revenue to improve versus the first half of our fiscal year," said Mehrotra. "Micron expects days of inventory (DOI) to peak in current fiscal Q2 and gradually improve over the next few quarters, as our bit shipments improve and our supply growth is significantly reduced. Despite this improving bit shipment and revenue trajectory, Micron expects industry profitability to remain challenged through calendar 2023."

Besides filing to the authority a plan of a 10% job cut in 2023 to reduce costs, Mehrotra said Micron is taking the following actions:

1) Capex reductions: Fiscal 2023 capex is lowered to a range between US$7.0 billion to US$7.5 billion from the earlier US$8 billion target and from the US$12 billion level in fiscal 2022. It expect fiscal 2023 wafer fab equipment (WFE) to be down more than 50% year-on-year. It is significantly reducing fiscal 2024 capex from earlier plans to align with the supply-demand environment. It expects fiscal 2024 WFE to fall from fiscal 2023 levels, even as construction spending increases year-on-year.

2) Sharp reduction in wafer starts: As previously announced, Micron reduced wafer starts for DRAM and NAND by about 20%.

3) Slowing process tech node transitions: Given the decision to slow 1-beta production ramp, it now expects 1-gamma introduction to come in 2025. Next NAND node beyond 232-layer will be delayed to align to the new demand-supply outlook.

4) Reducing costs: Project spending will decrease through the year. It expects to exit fiscal 2023 with a quarterly operational expenditure of around US$850 million.

Mehrotra painted a bleak outlook for the memory industry in 2023:

1) Micron expects calendar year 2022 industry bit demand growth in the low to mid-single-digit percentage range for both DRAM and NAND. For 2023, it expect industry demand growth of about 10% in DRAM and about 20% in NAND.

2) For the near term, Micron expects that over the next few months there will be gradual improvements in demand trends for memory as customer inventory levels improve further, new CPU platforms are launched, and China's demand starts to grow as its economy reopens.

3) For the longer term, it expects DRAM bit demand CAGR in the mid-teens percentage range and NAND bit demand CAGR in the low-to-mid 20% range. The have been revised down from earlier this year primarily due to lowered growth expectations from PC and smartphone markets and some moderation in the strong long-term growth in the cloud.

4) It expects 2022 industry bit supply growth for both DRAM and NAND to be close to their respective long-term demand CAGRs and well above 2022 industry demand growth. For 2023, it expects that DRAM and NAND industry supply growth will be well below their long-term CAGRs and also well below expected demand growth in 2023.

Micron chief financial officer Mark Murphy shared the following fiscal second-quarter 2023 guidance: Revenue of US$3.8 billion ± US$200 million; gross margin of 8.5% ± 2.5%; operating expenses of US$945 million ± US$15 million; diluted earnings (loss) per share (US$0.62) ± US$0.10.

Source: Micron, compiled by DIGITIMES Asia, December 2022