Join our brand new verified AMN Telegram channel and get important news uncensored!

How Micron says China’s restrictions on its memory-chip products will hurt the company

President Xi Jinping delivers remarks at U.S. Department of State. (U.S. State Department/Released)

China’s partial ban on Micron products could cut a sizable chunk of the Boise company’s revenue and slow its recovery from three consecutive quarters of net losses.

Micron reported better-than-expected sales for the third quarter in its latest earnings report, but said a recent decision from China’s cyberspace regulator marks a “significant headwind” as the chip industry appears to reach the end of a global slump in demand.

The Cyberspace Administration said in May that Micron’s products failed to pass a cybersecurity review and that it would bar operators of key Chinese companies from buying the company’s goods.

“Many analysts viewed the move as retaliation for Washington’s efforts to cut off China’s access to high-end chips,” The New York Times reported.

The Idaho memory-chip manufacturer estimated Wednesday that China’s ban could slash its revenue by one-eighth — half of its total sales to companies headquartered in mainland China and Hong Kong, which account for one-fourth of all Micron revenue.

Micron’s chips are used in phones, server farms, computers, cars and other products.

“This significant headwind is impacting our outlook and slowing our recovery,” President and CEO Sanjay Mehrotra said during an earnings call with investors. “Micron is working to mitigate this impact over time and expects increased quarter-to-quarter revenue variability.”

Still, the chip maker continues to invest in its manufacturing capabilities inside China.

Micron said it plans to invest about $600 million in its assembly, packaging and test operations in Xi’an over the next several years. It also intends to construct a new building at its Xi’an site.

“This will allow us, over time, to serve more of the demand from our customers in China … ,” Mehrotra said.

The company said it would expand further into India as well. Micron said it has the support of the Indian government to build a new assembly and test plant in Gujarat to address chip demand in the latter half of the decade.

It’s also increasing its investments in high-bandwidth memory products in Taiwan. It expects demand for those goods to pick up thanks to the rapid growth in the artificial intelligence industry, spurred by the popularity of OpenAI’s chatbot, ChatGPT.

Micron reported a revenue of $3.75 billion for the quarter ended June 1, compared with $8.64 billion for the same quarter a year ago. It reported a net loss of $1.9 billion — its third consecutive quarterly loss — versus a profit of $2.63 billion a year ago.

The company said it had a loss of $1.73 per share for the third quarter. Its share price has been trending up for months, despite weakened demand for memory products. It ended the day Thursday at $64.33, down $2.74, or 4.1%, over its closing price Wednesday of $67.07.

On Sept. 1, 2022, after Micron announced its plans to expand in Boise with a new multibillion-dollar fab for memory manufacturing, its stock was trading at $57.31. The stock reached its highest closing price ever on Jan. 14, 2022, at $97.36.

Micron is Idaho’s largest for-profit employer.

As of December, the company had about 6,000 workers in the Treasure Valley and 49,000 employees worldwide, but Micron began laying off workers in February, with plans to reduce its global headcount by about 10% over the next year, according to previous Idaho Statesman reporting. It’s unclear how many workers in Boise and Meridian, where Micron also has a facility, have been affected.


© 2023 The Idaho Statesman

Distributed by Tribune Content Agency, LLC