Investors on recession red alert after Micron Technology cuts targeting of microchips

– Memory chip giant cuts fourth-quarter earnings and sales

– Spending on consumer appliances is affected by inflationary pressures

– Stocks have lost 42% in 2022 and are likely to fall on Friday

The semiconductor industry has always been cyclical, so microchip makers tend to do well when the global economy is strong. But the reverse is also true, so deep cuts in the orientation of Micron Technology (MU:NASDAQ)an indicator of the sector, will be seen by investors as another dire warning that the recession is on the verge of the hill.

Micron reported mixed third-quarter results overnight that beat analysts’ estimates, but cut fourth-quarter guidance in an indicator of a grim outlook ahead for the chipmaker as excess inventories and spending slower growth in consumer electronics hurt demand.

Micron Technology reported third-quarter earnings per share of $2.59, 6% above the consensus forecast of $2.44, on revenue of $8.64 billion, which also beat released estimates of $8.63 billion.

In the fourth quarter, Micron now expects earnings per share and revenue of $2.46 and $8.68 billion, well below the previous analyst consensus of $2.62 and $9.05 billion.

GADGET SHIPMENTS ON THE DECLINE

The backdrop for chipmakers including Micron has deteriorated sharply this year as demand for consumer electronics has been rocked by supply chain disruptions, geopolitics and rising inflation. .

Global shipments of total devices, including PCs, tablets and mobile phones, are on track to decline 7.6% in 2022, according to data published June 30 by technology research firm Gartner. PC shipments are expected to fall 9.5% this year, while smartphone volumes are projected to fall 5.8%.

In response to the “weakened” demand environment, Micron said it was taking steps to moderate its supply growth in fiscal 2023.

REDUCING CONSUMER SPENDING

Micron is a large supplier of memory chips. Consumers tend to buy more smartphones, home computers, TVs, cars and all manner of things that rely on memory chips to run, and consumer spending growth in the United States and Europe cooled in May.

Micron shares, which are down 42% so far in 2022, will lose another nearly 4% when Wall Street reopens later today.

Tech companies linked to PCs, such as Intel (INTC: NASDAQ), Nvidia (NVDA: NASDAQ) Y Microsoft (MSFT: NASDAQ)they have adjusted their plans and are slowing down some hiring. HP (HPQ:NYSE) Y Dell Technologies (DELL:NYSE) they are dealing with slower sales of low-cost laptops that have spiked during the pandemic.


Issue Date: Jul 01, 2022

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