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Micron warning: chip demand is deteriorating, lowered financial report forecast

Time:2020-08-17 Views:476
Micron said on Thursday that due to the economic shock caused by the "epidemic", the demand outlook is deteriorating, and customers are also adjusting their plans at any time according to changes. Micron is unlikely to reach its revenue target in the next quarter (September to November) and revenue will be low. According to the forecast of US$5.4 billion-US$5.6 billion. Affected by this news, Micron’s stock price plummeted 4.83% on August 13, and then fell 0.48% after the market to $45.92.
In the third fiscal quarter (March to May) of 2020, Micron is optimistic that the fourth fiscal quarter (June-August) revenue will reach 5.75 billion to 6.25 billion U.S. dollars, with a median value of 6 billion U.S. dollars, and revenue growth from the previous quarter 10%. So why did Micron change its view on the financial report for the first quarter of 2021 (September to November)?

Reason 1: Overseas "epidemics" repeated and the global economy fell, affecting the overall consumer market demand to decline

In the second half of 2020, the "second outbreak" of the overseas "new crown" epidemic and the sharp global economic recession, especially the number of new cases in a single day in many countries and regions such as the United States, Spain, Germany, France, etc., have increased sharply. About 70% of the U.S. economy Personal consumption expenditure plummeted by more than 30%, which had a greater impact on the sales of consumer electronic products. Industry insiders predict that global smartphone shipments will decline by 12% to about 1.2 billion units in 2020, and the PC market will also be dragged down by the decline in desktop PC shipments and overall shipments will also show a downward trend.
Micron also believes that the risks of the second wave of COVID-19 will have a greater short-term impact on changes in customer inventories, global economic recovery, and international trade disputes, resulting in lower sales of cars, smartphones, and personal computers than before COVID-19. According to the forecast level, Micron’s business will face greater challenges and uncertainties.
In the fields of data centers, enterprises, etc., due to the “epidemic” that poses challenges to corporate operations, the growth of global cloud vendors’ capital expenditures has slowed, and the short-term recovery of demand for online advertising is also a potential risk. In addition, there is widespread global expansion of corporate personnel. The phenomenon of slowing down, the subsequent server market demand is likely to decline compared with the peak of the second quarter, and the storage market demand lacks the driving force for continuous growth.

Reason two: Micron has high inventory, and prices of consumer NAND Flash and DRAM have dropped, and subsequent sales pressure is great

Affected by the weak demand in the overall consumer market, especially the poor sales of mainstream mobile phones, starting from Q2, the price decline of NAND Flash and DRAM related products in the market continued until mid-August.

According to the ChinaFlashMarket quotation of China‘s flash memory market, in terms of NAND Flash prices, SSD prices in the industry market have gradually approached the low prices in 2019, while the cumulative average drop in SSD prices in the channel market has exceeded 30%. In terms of DRAM prices, in less than three months, the price of DDR particles has fallen by more than 10%, and the price of some memory modules in the channel market has fallen by more than 20%.
Micron‘s 2020 third fiscal quarter (March-May) inventory value is US$5.4 billion, a year-on-year increase of 10.1% and a month-on-month increase of 3.8%. The inventory days are 131 days, while the normal inventory days of Micron are 110 days, and the inventory turnover days have been continuous. The 6th season was higher than normal. Under the influence of the sluggish consumer market demand and the declining prices of consumer NAND Flash and DRAM, Micron‘s subsequent sales may face greater pressure.
Micron estimates that the "epidemic" has caused great changes in market terminal demand, and even affected the cyclical recovery of DRAM and NAND. Therefore, industry supply growth in the second half of 2020 may slow down. Micron will closely monitor changes in supply and demand. , Actively adjust the balance between supply and demand.

Reason 3: Huawei’s mobile phone shipments this year are lower than last year, affecting Micron’s performance

Micron’s two largest divisions, Computers and Networks, are responsible for the sales of storage products to satisfy the client, cloud server, enterprise and network markets. The mobile business division is responsible for the sales of storage products in the smartphone and other mobile device markets. In the third fiscal quarter of 2020 (3 From May to May) these two sectors accounted for 41% and 28% respectively.

The US "ban" was further escalated in May 2020 because TSMC could not supply Huawei after September 15, which affected the design and production of Huawei‘s mobile phones. A few days ago, Huawei’s consumer business CEO Yu Chengdong said that after September 15th, Kirin series chips cannot be manufactured and are currently out of stock. Huawei’s mobile phones have no chips and no supply, which will cause shipments in 2020 to be lower than last year. Industry insiders predict that Huawei‘s global smartphone sales in 2020 will probably be less than 200 million units, and the annual decline will exceed 15%.

Because TSMC cannot supply Huawei after the US "ban" takes effect, suppliers such as Qualcomm and Micron also need to obtain licenses before they can supply them normally. According to previous news, because new mobile phones are restricted by the supply chain, coupled with the slow recovery of demand due to repeated epidemics in overseas markets, Huawei has cut orders for subsequent orders in the supply chain, including memory chips. Micron has also said that it has been aware of the impact of the US restrictions on Huawei, and it has also affected more market opportunities for Micron. Huawei is an important customer of Micron. Therefore, speculation has a certain impact on Micron‘s first quarter 2021 (September to November) financial report.

Looking forward to the future:

Although affected by the "epidemic", the short-term global economy has suffered setbacks and the end market demand is turbulent, Micron also estimates that the next quarter (September-November) revenue may be lower than expected. However, the demand in the data center market is steady, and the demand for DRAM and NVMe SSDs for business computers, Chrombooks and gaming notebooks, which are the main education market, is stronger, which will accelerate the inventory consumption of the storage industry chain.

In addition, 5G mobile phones are accelerating market penetration, driven by the continuous increase of thousands of yuan models, increasing demand for Mobile DRAM and eMMC/UFS capacity, plus data center construction, artificial intelligence, smart cars, new infrastructure, and information technology. With the vigorous development of innovative industries, the future storage industry market prospects will still be very impressive.
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