Wednesday, June 7, 2023
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Bloomberg: What Micron’s Earnings Signal About the Chip Industry

Pierre Ferragu, New Street Research global team head of tech infrastructure, discusses the key takeaways from Micron’s second-quarter earnings report and forecast with Scarlet Fu and Katie Greifeld on “Bloomberg Markets: The Close.”

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One of the big concerns and the overhangs for micron was the glut of memory chips that it was kind of working through there’s a lot of excess inventory what do these results and the Outlook suggest to you about how Micron is managing through that inventory yeah I think

What Micron is uh telling us today is on one hand the outlook for 2023 is not that bad you know like Spotswood Market slicing down PC Mac and down single digits but the inventory collection is maybe bottoming out in the data center but still fairly fierce in a in the PC

Market and in the smartphone market so like this period of very intense pain is going to to continue to last a few more quarters but they are expecting you know sequential Revenue growth to uh to come back it’s a very negative numbers you’ve mentioned you know like it’s like good

To be in love versus 670 million million expected mostly reflects exclusively actually reflects a significant inventory write Downs the inventory write-ons is the very very painful on your pnl the quarter you do it but it’s also a sign you’re getting into a into something more um uh uh you know into uh

Better times so in a nutshell you know when you when you memory when you have an inventory correction there is no there is no limits there is no safety net you can go down very very badly but if it’s suddenly an inventory correction at some point excess inventories are

Good and things get back to normal and and that’s really I think the message of Micron today we see things progressively coming back to normal between this year and next year and that’s really what we wanted to hear so we’re very happy to see uh to see that today in fact Micron

Says days of inventory peaked in the second quarter you had mentioned that the data center Revenue might have bottomed in the second quarter this is what Micron has said in its presentation as well but the outlook for PC units and smartphone units are likely to be down

What is more important to a company like Micron and indeed for micro uh for memory chip makers overall well I don’t know which one is the most important but the one that is the most exciting is very definite is a data center when you see you know these AI servers

At Microsoft and Google and uh and uh others are lining up uh to run this giant language models and all this acceleration like really inflection points in a very large scale AI um that technology is extremely more intensive like the amount of memory you need on an AI server is easily close to

10 times more than in a normal server so the data center now is a very large chunk of the market and it’s clearly where the market is going the fastest so all hopes and excitement is about data center that’s where growth is going forward and then in the smartphone in

The PC market you know we know these markets are not like significant Growers but when you are at a low point because you have very significant inventory Corrections at some point when you inventories get back to normal your volume of business gets back to normal

And so you know in the next 18 months if we have very significant growth in the data center and smartphone and PCs getting back to normal because inventories are being digested and absolved we’ll have a very nice outlook for memory and the one last thing that micro mentioned in the presentation very

Very clearly is that they are not trying to go after market share games right that’s actually probably the most important thing you have to make sure that Samsung Micron and high Nicks are all very clear that we don’t go for market share again we have capacity very

Carefully so that these guys can gain the exercising power and expand back to those margins here let’s talk about the the share price a little bit because you can see shares moving higher after hours if we look across the past year though I see Mike run down about 26 as of today’s

Close I see the Philadelphia semiconductor index down about 13 do these results from Micron today put them on the path to narrow that Gap yes exactly I think it’s a very very good way to put it um we’ve seen like the the semiconductor cycle playing very fast since you know

Like uh November when we could feel like the traffic we had visibility on the traffic we saw named like tsmc like Nvidia uh all like the logic names coming back like the semi-cat equipment manufacturers performing extremely well but things were still like crumbling in memory it was like terrible to see that

Not only they had like they were reaching the the trough yes but like the amount on the inventor is to process were so much that investors understood the economics like the numbers it’s a financial performance of memory manufacturers we continue to deteriorate and so memory has been a

Laggard in the semicycle and now I I would say it’s the right time actually to look at memory on a relative basis because they are going to catch up with everybody you don’t sell you don’t buy a GPU without dying uh the dram that has to go with it




  1. Recession is either here and will be here, less people especially layoff people is not buying chips, except potato chips, they mentioned AI , stock went crazy, companies is cutting cost, no potential AI. Banking problems, housing, inflation problems, stock will crash down a lot, tech stocks up a lot this year, they will fall hard. Way too early, buy now, Lose your shirt later.

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