Micron announces layoffs and cost cuts as demand for chips falls

Micron will reduce its workforce by 10% next year and take further cost-cutting measures as the computer memory chip maker struggles with oversupply amid a drop in demand.

Micron CEO Sanjay Mehrotra announced the restructuring during a quarterly conference call with investors on Wednesday, noting that prices for computer memory products have “deteriorated significantly” in recent months, Boise television network KTVB reported.

According to a filing with the Securities and Exchange Commission, the company will reduce its workforce by about 10% through 2023 through voluntary departures and layoffs. Employee bonuses will also be suspended next year and executive salaries will be cut for the remainder of fiscal 2023, which runs through August, the company said.

Based in Boise, Idaho, the company employs approximately 48,000 people at 38 locations in North America, Europe and Asia – including more than 5,000 employees in Boise. It has not been announced where the layoffs will take place.

In September, Micron announced it would invest $15 billion by the end of the decade in a new semiconductor plant in Boise that is expected to create 17,000 American jobs. The following month, the company announced it would build another semiconductor plant in upstate New York, promising a long-term investment of up to $100 billion and a plant that could bring 50,000 jobs to the state. The restructuring is not expected to have any impact on these plans.

At the time, Mehrotra said the investments were made possible by the federal CHIPS and Science ACT of 2022, a $280 billion law aimed at making the US more competitive with China. The law provides $52 billion to bolster the semiconductor industry, which has been struggling to make the memory chips for smartphones, cars and computers due to supply chain problems related to COVID.

But in recent months, the company has seen a dramatic drop in demand. Unit numbers for PCs and smartphones have declined in 2022, Mehrotra noted. The company mainly makes two types of chips: NAND, which stores data when power is lost, e.g. in a portable flash drive, and DRAM, which must be powered on to store data.

“The industry is witnessing the largest supply/demand imbalance in both DRAM and NAND in the past 13 years,” he said. “Micron is exercising supply discipline by significantly cutting our capital expenditures and wafer start-ups while maintaining our competitive position.”

The restructuring plan was part of Micron’s release of financial results for the company’s fiscal first quarter, which ended Jan. 12. Revenue for the quarter was just under $4.1 billion, compared to more than $6.6 billion -dollars in the previous quarter.

Still, Mehrotra said demand is expected to grow by about 10% for DRAM and about 20% for NAND over the next year.

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