European chipmakers fall after Micron flags capex reduction, job cuts

By Scott Kanowsky 

Investing.com -- Shares in European chipmaking companies fell on Thursday after U.S. peer Micron Technology, Inc. (NASDAQ:MU) announced a raft of job cuts next year and unveiled a reduction to its capital spending plans.

Dutch semiconductor firms ASML Holding NV (AS:ASML) and ASM International NV (AS:ASMI) were both in the red in early trading, along with chip-tool manufacturers like BE Semiconductor Industries NV (AS:BESI), Aixtron SE (ETR:AIXGn) and VAT Group AG (SIX:VACN). Germany's Infineon Technologies AG NA O.N. (ETR:IFXGn) and STMicroelectronics NV (EPA:STM) in France were also lower.

In a statement included in its fiscal first quarter results, Micron said it would slash about 10% of its headcount, which amounted to 48,000 at the beginning of September.

Meanwhile, the forecast for capital expenditure in the 2023 financial year was lowered to between $7-$7.5 billion. Utah-based Micron had previously outlined a spending plan worth $8B, itself down from the $12B level expected for 2022.

The firm is also "significantly" drawing down its fiscal 2024 capex plans, saying that it expects spending on wafer fabrication equipment - a key signpost of chip demand - to fall year-on-year.

Chief executive officer and president Sanjay Mehrotra said the belt-tightening was necessary in response to "the most severe imbalance between supply and demand" for its DRAM and NAND memory chips in the last 13 years. Returns from these semiconductors have been hit recently by weaker end-market demand, high inventory levels, and a steep decline in pricing.

Mehrotra added that Micron expects chip industry profitability to "remain challenged" throughout next year.

"The timing of the recovery in profitability will be driven by the rate and pace at which supply and demand are brought into balance and inventories are normalized across the supply chain," he said.

In the three-month period ended on December 1, Micron's adjusted revenue dropped by 47% annually to $4.09B, missing Bloomberg consensus estimates of $4.13B.

The outlook for top-line growth in the second quarter was also weaker than expected at the midpoint.