In Micron’s earnings report, although third-quarter revenue still met expectations, the company projected revenue of $7.2 billion for the fourth quarter ended in August, 21% below Wall Street’s expectations. That would bring the company’s first year-over-year revenue decline in more than two years.
Micron points out that computers and smartcell phoneWeakness in the market was the main reason for the subdued outlook, with the company telling analysts in a post-earnings conference that it had seen a “significant reduction in demand.”
Intel’s new CFO also hinted at this, saying at an investor conference in early June:
“The current situation is much worse than we expected as we entered the quarter.”
Although the demand for data center chips remains high due to the support of cloud services, computers and mobile phones are still the two largest end markets in the chip industry.
Recently, chip orders have spread to MCUs (microcontrollers), and the price of consumer applications has dropped the most, once again confirming the shrinking demand in the consumer sector.
As of Friday’s close, Intel andAMDShares of chipmakers Broadcom, Qualcomm, Qorvo and Skyworks, most of which are set to report for June later this month, also fell an average of 2%. performance.
The Philadelphia Stock Exchange Semiconductor Index fell 3.8% on the back of those companies, which has fallen 38% this year.
“Semiconductor is a banner”
A more serious problem is that the pain that the chip industry is currently suffering is likely to spread to more industries.
Chips are widely used in industries that play an important role in economic growth: automobiles, consumer electronics, appliances, data centers, etc., so if the chip is not in good condition, it will cause demand problems in other areas of the economy.
Historically, chip stocks have been a key barometer for the stock market and the economy. Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder, said:
“This weakness suggests the economy is slowing and a recession is likely.”
“Chips are a flag because they’re literally in everything. They’re integral to everything that’s sold today. They’re the most basic devices, so that’s a big negative for the economy.”
Shortages of chips have brought dynamism to the industry after a surge in demand for everything from cars to phones to cloud services. The recovery in demand should bring more rebound to the chip industry as the pandemic fades, but that doesn’t appear to be the case at the moment.
Miller Tabak + Co. Matt Maley, a senior strategist at the U.S., said it was a troubling omen that if chips didn’t fare well, it would trigger demand problems elsewhere in the economy:
“Our chips are far from enough, but now demand is falling.”
“What signal does this send? It highlights a growing concern that the slowdown we’re experiencing will turn into a recession.”