MU - Memory Chip Prices Are Still Tumbling: Is Micron Stock in Trouble?
2023-05-17 07:20:00 ET
Following a pandemic-era boom, the memory chip industry is going through an extreme bust. Micron (NASDAQ: MU) CEO Sanjay Mehrotra recently called the current environment the "worst downturn in the last 13 years with an exceptionally weak pricing environment that is significantly impacting our financial performance."
Supply chain inventories are bloated, and despite production cuts from Micron and its peers, supply is still outstripping demand. Micron grew bit shipments of both DRAM and NAND sequentially in its most recent quarter, but per-bit pricing was down at least 20% for both types of memory chips. The result was a 10% sequential revenue decline, and a 53% year-over-year revenue decline.
When per-bit prices drop faster than Micron can bring down per-bit production costs, the bottom line takes a big hit. Micron posted a net loss of $2.1 billion in its most recent quarter, and gross margin was negative thanks to inventory write downs.
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Memory Chip Prices Are Still Tumbling: Is Micron Stock in Trouble?