Micron’s decision to cut 15 per cent of its workforce and slash production of Nand Flash is symptomatic of the dire predicament of memory-chip manufacturers.
The iSuppli research firm today lowered its forecast for revenue growth for semiconductors in general to 3.5 per cent in 2008, down from its 4 per cent prediction in August. Industry revenues grew just 3.3 per cent in 2007 as memory chip prices collapsed in the fourth quarter with demand weakening. This caused Intel to miss its forecasts in January.
The credit crisis is also beginning to have an impact, according to Mark Durcan, Micron president, in a Reuters interview:
“We have customers calling us up right now saying they can’t pay for product we’ve already shipped them because they can’t get access to cash under their lines of credit,” he said.
ISuppli analyst Dale Ford says the credit crisis will hit the chip industry on several levels:
“The first level is demand for electronic equipment from the Wall Street firms themselves, which is expected to drop and thus decrease demand for semiconductors. The second level, and a much more significant factor, is the impact on corporations in general. With companies unable to get credit, the crisis could spread to the wider economy, impacting demand for electronic equipment and semiconductors. The final level, and the most significant area of impact, is the broader effect on consumer confidence and spending if the overall economy collapses.”
For Nand flash, commonly used in digital cameras, times are already at their hardest. In April, iSuppli cuts its forecasts for Nand revenues in 2008 by two-thirds or $4bn on weakening consumer spending.
One result has been Samsung’s move to try to consolidate the industry by bidding for SanDisk.
The memory market in general has been suffering from oversupply for several years. ISuppli downgraded its revenue forecasts for Dram memory, used in PCs, by 5.4 percentage points today. PC demand has held up well this year although signs of weakening appeared in September.
The memory slump is also spreading down the food chain. A Gartner report on Wednesday said a collapse in memory spending, combined with a weak economy, was driving a 25 per cent contraction in semiconductor capital equipment spending this year.
