By Chavi Mehta and Jane Lanhee Lee

(Reuters) -Micron Technology, the first major chipmaker to sound an alarm about falling demand for PCs and smartphones earlier this year, on Thursday warned of even tougher times ahead and said it was cutting its investments.

"We made significant reductions to capex and now expect fiscal 2023 capex to be around $8 billion, down more than 30% year over year," Chief Executive Sanjay Mehrotra said on an earnings call.

Still, Micron forecast strong revenue growth in the second half of fiscal 2023 as demand starts to recover early next year.

Shares of the Boise, Idaho-based company, which have slumped about 45% so far this year, fell 1.5% in extended trading.

Red-hot inflation, rising interest rates, geopolitical tensions and COVID-19 lockdowns in China have led businesses and consumers to rein in expenses, hitting the PC and smartphone market.

Micron said it would reduce wafer fabrication equipment investments by 50% in the new fiscal year. Chip equipment maker Applied Materials Inc's shares dropped 2% on the news in after-hours trading.

"Net times are really bad now, but traditionally production cuts and capex reductions are a sign that memory markets are approaching trough fundamentals," said Matt Bryson, analyst at Wedbush Securities.

Citing a possible turnaround in a few quarters, Kinngai Chan, Summit Insights Group analyst upgraded Micron's stock to a "buy" recommendation.

Micron forecast first-quarter revenue of $4.25 billion, plus or minus $250 million, below Wall Street estimates of $5.62 billion, according Refinitiv data. Adjusted revenue for the quarter ended Sept. 1 was $6.64 billion versus analysts' expectations of $6.68 billion.

Profit outlooks were also grim at 4 cents per share, plus or minus 10 cents, falling below the consensus estimate of 64 cents per share. Fourth-quarter earnings of $1.45 per share beat estimates of $1.30.

Micron called the current market challenges "unprecedented" but was confident its scale back would help it navigate the market.

Phone brands including Apple Inc have driven down their production volume targets, which "compounded" the challenges for Micron, said Richard Barnett, chief marketing officer of Supplyframe, a supply chain solutions provider.

"What has been surprising is the extent of the sharp decline," said Sumit Sadana, Micron's chief business officer, in an interview.

Micron has further adjusted down its sales outlook for PCs and smartphones by several percentage points in the last few months, Sadana said. PC sales in calendar 2022 will drop by a high teen percentage range from last year and smartphone sales will be down by a high single-digit percentage range, he said.

(Reporting by Chavi Mehta in Bengaluru and Jane Lanhee Lee; Editing by Krishna Chandra Eluri, Marguerita Choy and Richard Chang)