In This Article:
* Micron sees output outstripping demand
* Samsung, Hynix have warned of slowdown
* Micron shares slide in extended trading, pare losses (Updates to indicate picture available)
By Sonam Rai and Stephen Nellis
Dec 18 (Reuters) - U.S. chipmaker Micron Technology Inc gave on Tuesday quarterly sales and profit forecasts well below Wall Street estimates, citing a market glut of memory chips as consumer and business demand for phones and computers is weakening.
Micron said it expected industry output, including from South Korean rivals Samsung Electronics Co Ltd and SK Hynix, to outstrip demand from the makers of phones, PCs and servers, pushing down Micron chip prices.
Samsung had already warned of a slowdown in demand and drop in chip prices, flagging an end to a two-year boom in memory chips as global demand for mobile and other electronics devices wanes and fresh supplies from Hynix and Toshiba Corp hit the market. Hynix has also offered a downbeat outlook.
Micron Chief Executive Sanjay Mehrotra told investors on a conference call on Tuesday that the company was taking "decisive actions in terms of reducing our production output" to hold the line on prices.
"We are always reviewing how to best align our output with market demand to focus on delivering healthy profitability," Mehrotra said in an interview.
But the glut will hammer Micron in the short term, with the company estimating revenue of $5.7 billion to $6.3 billion for its fiscal second quarter and gross margins of 50 to 53 percent, compared to analysts' estimates of $7.3 billion and 55 percent, according to I/B/E/S data from Refinitiv.
Shares of the Boise, Idaho-based company fell as much as 8.5 percent in extended trading after the forecast, before paring losses to 2.8 percent.
Asked about Micron's comments, Hynix told Reuters that in the short term, the memory chip sector would struggle through a period of relatively low growth due to weak demand in the smartphone and PC markets, but the outlook would brighten in the long term.
Hynix shares were down 1.6 percent in late morning trading in South Korea. Samsung shares were up slightly.
"The worse may not be over yet if the end-market demand weakens further," said analyst Kinngai Chan of Summit Insights Group.
Micron is responding to the oversupply of DRAM and NAND memory chips by investing more in its next generation of chips. Major suppliers to smartphone makers such as Apple Inc have lowered their sales forecasts, citing weak demand from device makers.
Data centers, which have been a boon for Micron as cloud computing providers like Amazon.com's Amazon Web Services have become massive businesses, were a weak spot in Micron's earnings. On the post-earnings call, Mehrotra cited "inventory adjustments" at data centers for the pressure on revenue.