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Micron Surrounded by Industry and Customer Headwinds in 2019

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Micron’s fiscal 2019 headwinds 

After two years of impressive growth, Micron Technology’s (MU) earnings have started to fall as demand softens.

Fiscal 2019 started with customers stocking large DRAM (dynamic random-access memory) inventories, which reduced Micron’s DRAM sales. These excess inventories will likely take a few quarters to clear.

Other headwinds are coming from specific customers. On Micron’s fiscal 2019 first-quarter earnings call, CEO Sanjay Mehrotra stated that its graphics customer NVIDIA (NVDA) had been hit by excess channel inventories of gaming graphics cards because of a fall in cryptocurrency demand. This development negatively affected Micron’s graphics DRAM sales. Another client, Intel (INTC), is also facing a PC central processing unit supply shortage, which has reduced its PC DRAM sales. These customer headwinds will likely reduce DRAM demand in the first half of 2019.

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On the NAND (negative-AND) side of the equation, sales could be low in fiscal 2019 as Micron transitions from Serial Advanced Technology Attachment interface SSDs (solid-state drive) to nonvolatile memory-interface SSDs. This transition could boost its SSD sales in fiscal 2020. Amid these headwinds, Micron has lowered its DRAM and NAND industry outlook.

Micron reduces capex for fiscal 2019

Micron has been quick to adjust its manufacturing practices to suit the changing demand environment. The company has cut its fiscal 2019 capex by $1.5 billion as it looks to reduce its NAND and DRAM output in the year. Mehrotra didn’t provide any details about how the company plans to reduce the output, but he stated that Micron would continue to invest in technology and cost competitiveness.

In this series, we’ll look at the key takeaways from Micron’s first quarter of fiscal 2019, which ended on November 30.

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