Due to rapidly deteriorating demand for commodity memory and dropping prices, Micron is cutting down wafer starts for 3D NAND and DRAM immediately by 20% compared to the previous quarter. The company now expects its 3D NAND bit output to grow insignificantly in the next calendar year, while its DRAM bit output will be reduced in 2023.
In a bid to address slowing demand for 3D NAND and DRAM memory, Micron is reducing wafer starts by approximately 20% compared to the fourth quarter of fiscal 2022, which ended on Sept. 1, 2022. The reductions will be made across all technology nodes that Micron uses for high-volume production, so essentially the company is cutting down output of virtually all types of its products.
Micron's ongoing first quarter of fiscal 2023 ends in early Dec., so cutting down wafer starts today will hardly have a meaningful impact on the company's results for the quarter or the market. Since production and testing/packaging cycles of both 3D NAND and DRAM are pretty lengthy, the market will feel the effect of Micron's cuts in a few weeks. Meanwhile, spot prices might react to Micron's announcement sooner.
But the current wafer starts cut will have an effect on the company's output for the whole fiscal 2023 as Micron expects its DRAM bit output to drop and its 3D NAND bit output to grow in the 'single-digit percentage range.'
Micron initiated production of 232-layer 3D NAND memory this summer and started making LPDDR5X memory on its 1β (1-beta) fabrication process earlier today. Both new production nodes will enable Micron to cut down its costs and increase bit output, but the company warned in late Sept. that it would slow ramp up of 232L 3D NAND and 1β DRAM production in a bid to limit bit output. Micron's 232-layer 3D NAND devices with a 2,400 MT/s interface are set to enable the fastest SSDs with a PCIe 5.0 x4 interface that will outshine currently available best SSDs with a 12.4 GB/s sequential read speed.
Micron also disclosed in Sept. that its capital expenditures in fiscal 2023 would total approximately $8 billion, down 30% from fiscal 2022. The cuts will primarily concern procurement of new wafer fab equipment, which will slowdown adoption of the company's latest fabrication technologies. The company's construction CapEx was projected to more than double as the company is building up its new fab in Idaho. Today, the company said it was "working toward additional CapEx cuts" without elaborating.
"Micron is taking bold and aggressive steps to reduce bit supply growth to limit the size of our inventory," said Sanjay Mehrotra, chief executive of Micron. "We will continue to monitor industry conditions and make further adjustments as needed. Despite the near-term cyclical challenges, we remain confident in the secular demand drivers for our markets, and in the long term, expect memory and storage revenue growth to outpace that of the rest of the semiconductor industry."
