Intel’s CPU supply shortage impacts Micron
The world’s largest chipmaker, Intel (INTC), is struggling with a supply shortage for its PC CPUs (central processing unit) due to a decline in volume production of its ten-nm (nanometer) PC CPUs as well as higher CPU demand.
Intel’s PC CPU supply shortage has led to lowered guidance for Micron Technology’s (MU) first quarter of fiscal 2019, which ends in November. In its fourth-quarter earnings call held last month, Micron CEO Sanjay Mehrotra stated that some of its PC customers had cut their shipment forecasts due to supply shortages. He expects the CPU shortage to go beyond the first quarter of fiscal 2019, although he doesn’t expect it to extend for a longer term.
Micron lowers guidance
In the fourth quarter, Micron reported revenue of $8.44 billion and adjusted earnings of $3.53 per share, exceeding the consensus estimate of $8.25 billion and $3.33 per share, respectively. Micron’s management has, however, announced soft revenue and earnings guidance for the first quarter of fiscal 2019. The company anticipates revenue to lie in the range of $7.9 billion to $8.3 billion with EPS of $2.88 to $3.02, far below the consensus estimate of $8.45 billion and $3.08, respectively.
Micron believes Intel’s PC CPU shortages might impact the company’s first-quarter PC DRAM (dynamic random-access memory) sales and could result in piling of inventory. DRAM accounted for 70% of Micron’s revenue in the fourth quarter and over 75% of its gross profit. The US-China tariff war might further hurt the company’s gross margin in the first quarter.