Chip giant Micron to axe 10% of workforce, suspends 2023 bonuses

Chip giant Micron to axe 10% of workforce, suspends 2023 bonuses
A sign marks the entrance of the Micron Technology automotive chip manufacturing plant on Feb 11, 2022, in Manassas, Virginia. (Photo: AP/Steve Helber)

NEW YORK/SINGAPORE: Chipmaker Micron on Wednesday (Dec 21) forecast a much steeper-than-expected second-quarter loss and said it will lay off 10 per cent of its workforce next year, citing a nagging glut in the semiconductor market.

“Due to the significant supply-demand mismatch entering 2023, we expect that profitability will remain challenged throughout 2023,” Micron chief executive Sanjay Mehrotra said.

Micron had about 48,000 employees worldwide as of Sep 1.

Replying to CNA queries, a spokesperson from Micron said that the workforce reduction will vary by country, without specifying any figures. Micron hires more than 10,000 workers in Singapore, and it has three fabrication facilities here, as well as a test and assembly facility, according to its website.

The spokesperson said that about half of the anticipated workforce reduction will come from not backfilling for “normal voluntary attrition” over 2023.

“The remainder will come from targeted business decisions, including, but not limited to, the elimination and/or scope reduction of certain projects and associated roles, and individual performance,” the spokesperson said.

“We currently anticipate the completion of most of these targeted actions by the end of FQ2 (end of February), subject to local legal requirements and processes.”

The company is also suspending FY2023 bonuses companywide and cutting executive salaries for the remainder of the year.

Micron, reporting earnings on Wednesday, forecast second-quarter revenue of US$3.8 billion, plus or minus US$200 million, above Wall Street estimates. But it forecast a loss of 62 cents per share plus or minus 10 cents, much steeper than analysts’ estimates for a 30 cents loss.

Micron’s shares fell over 1 per cent in extended trading. They have fallen about 45 per cent so far this year.

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 and in turn the business of chip makers.

The situation was a quick U-turn from chip shortages last year that hit everything from laptops to car makers.

Micron said on Wednesday that its investments in fiscal 2023 would now be adjusted down to US$7 billion to US$7.5 billion and that it would be “significantly reducing capex” plans in fiscal 2024. It invested US$12 billion in fiscal 2022.

Micron, the first major chip maker to alert the market of the downturn over the summer, previously said it would be cutting investments in 2023. It was not clear what its previous 2024 investment plans were.

“The message overall is very much status quo,” said Matthew Bryson, analyst at Wedbush Securities. “There’s no sign that memory is yet recovering from declining fundamentals, but Micron is also continuing to work to create a better future supply demand dynamic.”

Revenue for the first quarter ended Nov 30 fell about 47 per cent year on year to US$4.09 billion. It had a net loss of US$195 million, or 18 cents per share, compared with a profit of US$2.31 billion, or US$2.04 per share, a year earlier.

Source: Reuters/CNA/sn/hm