Memory chip makers are struggling to cope with lower demand and falling prices

As the price of electronic components dropped for months, major memory chip makers, including Samsung Electronics and Micron Technology, issued gloomy forecasts and lowered already low estimates for upcoming profit margins.
Other companies announced plans to cut production to avoid further market saturation.
Top company executives and industry analysts don't expect the price decline to end, or even slow, until the middle of next year.Image source: skhynix.comMemory chips used in smartphones, PCs and servers serve as a key health indicator for the semiconductor industry, and there has been a shift from pandemic-driven growth to a sharp drop in demand.
Between July and September, average contract prices for the two major memory types, DRAM and NAND, fell 15 percent and 28 percent, respectively, TrendForce analysts calculated.
With the accumulation of excess inventory, this trend will remain relevant in the fourth quarter of the current and the entire next year, and only by the end of 2023 should we expect a slowdown or even complete cessation of negative dynamics.Samsung, the world's largest memory chip manufacturer, recently reported that its operating profit for the third quarter, according to preliminary data, fell by 32%.
Its U.S.
competitor Micron in late September has not presented a positive report, and the forecast for the current quarter was quite restrained.
SK Hynix, the world's second-largest memory chip market by revenue, is poised to report a 40 percent year-over-year drop in revenue, FactSet analysts believe.Memory chip prices began falling late last year.
Compared to other semiconductor components, they are less differentiated, so demand fluctuations are particularly acute here.
Memory accounts for 27% of the semiconductor industry's revenue, which will be $619 billion by 2022, Gartner analysts say -- the market also includes processors and image sensors, and the biggest players are Samsung, SK Hynix, Micron and Intel.
In general, the industry with the arrival of the pandemic showed sharp growth, but this year the situation has changed: powerful negative factors were inflation and geopolitics, which, in turn, collapsed demand for PCs, smartphones and gaming devices.Image source: kioxia.comAfter the memory chips segment, other areas of the electronic components market begin to show negative dynamics: AMD reported that revenues for the third quarter will be much lower than expected.
Stock market also demonstrates pessimism: the day before AMD shares lost 13% of their value, NVIDIA securities fell by 7%, and Micron - more than 3%.
Another negative factor was also another sanctions imposed by the U.S.
on China.
However, there is a way to stop the decline - to reduce production, and it has already resorted to the Japanese Kioxia, which promised in October to reduce the output of memory chips by 30%.Micron CEO Sanjay Mehrotra recently said that the company will reduce production costs and in the short term will reduce supplies, although in the next decade, the memory market will still be ready for significant growth.
The company's capital investment for the current fiscal year will be $8 billion, and this is 30% lower than the year before.
At the same time in the long term the industry still expects growth - the same Micron is preparing to spend up to $100 billion on a new DRAM plant in New York State.
Intel, Samsung, and TSMC are also considering large investments.
However, one of Samsung top managers recently noted that the company's policy does not include intentional production cuts, and there is no need to abandon this strategy so far.
SK Hynix does not give a direct answer to a similar question, but says it is ready to pursue a flexible policy depending on market trends.

Micron, Intel and NVIDIA are not going to reduce the number of personnel in the near future

Micron Technology had to deal with contradictory statements in the past days.
On the one hand, it expressed its willingness to invest $40 billion to expand its memory production in the U.S.
On the other hand, it had to admit that demand for memory failed to meet expectations last quarter, proportionally reducing revenues.
Hire new employees in such circumstances Micron will not be able to, but will not cut staff, and it will be joined by Intel and NVIDIA.Image source: Micron TechnologyAt least, that's what Bloomberg representatives report, citing the companies' proprietary information.
In fact, Micron Technology will not suspend hiring even in this difficult situation, but will significantly limit its scope.
Micron executives aren't thinking about cuts commensurate with the level of trouble in the economy, either, as Bloomberg explains, citing its own sources.At a general staff meeting at Intel last week, management assured the team that it won't be cutting staff, as Bloomberg adds.
NVIDIA made similar statements this week, already after admitting to a slump in revenue.
In fact, company founder Jensen Huang even promised to raise employee pay to counter inflation.
NVIDIA's management is confident in the market opportunities open to the company and the technology it is developing.Analysts at Citigroup, however, do not share the optimism of these market participants, who are convinced that the correction in demand is temporary in nature.
According to experts, the semiconductor components market is entering its worst crisis since 2001, and the downturn will be observed in all market segments.

In NVIDIA's footsteps: Micron warns shareholders about decline in revenues due to falling demand for memory

American company Micron Technology Inc.
said that the revenue for the current quarter may be lower than previously forecasted.
The announcement comes as demand for memory chips continues to fall.Image source: MicronIn an official statement, Micron said demand for dynamic random access memory (DRAM) and NAND flash memory has continued to steadily decline since the last forecast.
The company expects challenging conditions to continue over the next two quarters - at least until the end of this year.A month and a half ago, Micron expected revenue of $6.8 billion to $7.6 billion for the next three months versus $8.6 billion in the previous quarter.
Analysts had forecast revenue in the $7.28 billion range, but now the company has warned that revenue will be near the lower end of the estimate, closer to $6.8 billion.The company also intends to cut some costs in response to the situation, noting that the amount of capital spending in fiscal 2023 will fall significantly compared to the previous year.Micron announced a lower quarterly revenue forecast a day after NVIDIA reported that quarterly sales would be well below expectations.
In addition, last week AMD reported a decline in graphics gas pedal sales.
As for Micron, today it announced its intention to invest $40 billion in memory production in the U.S.
by the end of the decade.

Capital spending in the semiconductor industry could be cut by 16% next year

A report from Micron Technology has let industry analysts know that the company is ready to cut the amount of capital spending in the next fiscal year, which in the memory manufacturer's calendar will start in the first half of September.
The exact amount of the reduction has not yet been named, as there are about two months left until the end of the fiscal year, but experts believe that Micron's example is ready to be followed by other semiconductor manufacturers.Image source: TSMSCA Analysts Citi, for example, expect the main market players to reduce the amount of spending on building new plants and production lines next year.
If this year, according to their estimates, for the corresponding needs will be spent $95 billion, next year this amount can be reduced by 16% to $80 billion.
On such measures can go not only memory manufacturers, but also contract manufacturers of chips, including the largest.Recall that only TSMC is ready to spend this year from $40 to $44 billion for construction of new plants and development of advanced lithography.
Next year, according to preliminary estimates, the company's capital spending will exceed $40 billion, although so far its representatives are not ready to make clarifications on this parameter.
The value of TSMC's core costs is proportional to its share of revenues in the global market of contract services.
The rapid growth of costs, according to the Taiwanese media, will force the company to raise prices for its services by 6% by the beginning of next year.
This unpopular step is pushed not only by capital costs, but also by an increase in electricity tariffs, which took place at the beginning of this month.

Micron will pull Japan up to the level of Taiwan - production of DRAM on the most advanced technological process will start there too

According to Japanese sources, Micron intends to start production of RAM chips with 1β technological process in Japan by the end of this year.
This was announced two weeks ago in Taiwan during Computex 2022.
Traditionally, Micron's new processors get to Taiwan early, but this time the American memory manufacturer decided to pull Japan up to Taiwan's level without too much delay.Image source: MicronThe production of DRAM memory using the 1β process will increase the density of memory cells even slightly.
Right now, Micron's most advanced 10nm process is the 1α process.
Moving from 1z to 1α resulted in up to 40% increase in memory density and 15-20% improvement in energy savings.
The company did not disclose the exact details of how much better 1β would be than 1α.
It is important to note that the 1β memory process (which could conceivably be 12- or 11nm) would not require the latest EUV scanners.
Production will still rely on 193nm DUV scanners.
In that sense, upgrading the Japanese lines will be relatively inexpensive for Micron.
The upgrade work is taking place at the former Elpida Memory plant in Hiroshima, which Micron got after buying the Japanese manufacturer in 2013.Now analysts would like to hear more details from Micron about the next tech process, 1γ (gamma).
So far it is known that the production of memory using 1γ will start in 2024.
This will require the installation of new EUV scanners.
Earlier, the company promised that it would show the first 13.5 nm \"extreme\" wavelength scanners at its Taiwanese production facility later this year.
The Japanese also want these, but when they will be available is a mystery to Micron.

Elbrus processors now want to be produced in Zelenograd instead of Taiwan

According to Konstantin Trushkin, deputy general director of the Russian ICST, the company is considering the possibility of transferring processor production from Taiwan to Mikron in Zelenograd, Russia.
ICST is engaged in the development and supply of Elbrus processors.Image source: TSMC According to RBC, processors were previously produced on order of ICST by Taiwan's TSMC, but the latter ceased cooperation with the domestic developer in early March.
TSMC is one of the leading semiconductor manufacturers in the world.
The ICST portfolio includes chips for production of technology from 16 to 130 nm, whose customers are mostly law enforcement and government agencies.
\"The company plans to increase production of 180-90 nm chips from 3,000 to 6,000 wafers per month by 2025, which will require about 10 billion rubles by 2030.
The funds are likely to be raised as part of a special national project to develop electronics.
By the way, the transfer of Elbrus production to Mikron will also require time and money - at least a year and several billion rubles.The option of establishing a separate Elbrus company not subject to sanctions was considered, but apparently it was decided not to resort to that.
According to Trushkin, Russian factories can \"create decent processors with sovereign Russian technologies for critical information infrastructure, information security and other markets.\" Another interlocutor of RBC showed that \"in the near future we should not count on our own production of 28 nm technology, nor on reaching an agreement with other foreign factories.
According to this interlocutor, 90-nm Elbrus would be suitable \"except for thin clients, cash registers, or for some special applications.

Micron introduced the Crucial P3 and P3 Plus NVMe drives with read speeds up to 5000 Mbytes/s

Micron has introduced the Crucial P3 Plus and Crucial P3 consumer NVMe SSDs, which can be categorized as mid-priced solutions.
The former supports the PCIe 4.0 standard, the latter works with PCIe 3.0.
Both series offer drive models with capacities up to 4 TB.Image source: CrucialThe manufacturer did not go into technical details.
It only indicated that the Crucial P3 Plus series drives offer sequential read and write speeds of up to 5,000 and 4,200 MB/s, respectively.
The Crucial P3 series, in turn, offers speeds of up to 3,500 and 3,000 Mbytes/sec, respectively.
The company notes that the novelties presented are built using 176-layer 3D NAND flash memory chips by Micron.
According to the manufacturer, the solutions are ideal for professional and creative tasks, as well as for use in the gaming PC.Both series of solid-state drives Crucial P3 Plus and Crucial P3 will go on sale this summer.
The company didn't specify their cost, but it's unlikely to be too high.
For example, the more advanced Crucial P5 Plus and 1TB P5 are currently on sale in the US for $128 and $110 respectively.

Micron will increase share of long-term contracts with customers

Micron Technology's management spoke to investors this week, promising to increase dividends and share repurchase costs, outlining a trend of decreasing dependence on the PC market and talking about an experiment with a new type of long-term contract.
The picture of the future, in general, turned out to be optimistic, the company's share price rose by a small percent.Image source: Micron TechnologyIn the period up to 2025 the supply of memory type DRAM will grow by 17-19% annually, in the segment of NAND this figure will reach 28-29%.
By the end of the decade, Micron predicts that the total turnover of the memory chip industry will reach $330 billion versus $161 billion in 2021.
Already, memory chips account for 30% of the semiconductor industry's total turnover, though at the beginning of the century they settled for 10%.The data center segment provided $50 billion in memory revenue last year.
Until the middle of the decade, memory shipments in this segment will grow at an average annual rate of 28% for DRAM and 33% per year for NAND.Automotive market turnover last year did not exceed $4 billion, but demand for DRAM type memory in this segment until the middle of the decade should grow at 40% annually, and in the case of NAND this figure will reach 49%.
A fully autonomous driven car will require 30 times more DRAM type memory, and 100 times more NAND type memory, than a driver-only driven car.Micron is gradually reducing its reliance on the PC and smartphone markets.
While both segments accounted for about 55% of the company's revenue last year, their share will drop to 38% by mid-decade.
By then, the data center segment will increase its share from 30% to 42%, and the combined share of the automotive, industrial and telecom segments will increase from 15% to 20%.As an experiment, Micron has signed a long-term memory supply agreement with one of its ten largest customers, which provides an annual revenue supplement of more than $500 million for more than three years.
The customer in this case gets the priority right to receive products in short supply, and the pricing policy is adjusted as the manufacturer's costs decrease.
At the same time, the price of the contract is not subject to fluctuations which are typical for the short-term market.
At the same time, it was announced about Micron's intention to increase the amount of dividends by 15% and provide up to 100% of the available funds for the return of capital to investors.
Now this value does not exceed 50%.