Technology

Micron to Report Operational Loss for Q4 of 2007

This is the result of free-falling prices in the semiconductor industry

By Bogdan Botezatu, Hardware Editor

21st of December 2007, 15:47 GMT

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Micron, a US-based company that fights Taiwanese competition

Micron Technologies has reported a quarterly loss after a full year of profit. The largest manufacturer of memory chips in the United States has been terribly affected by the free-falling prices that

could not even cover the manufacturing costs.

Previously, Micron reported first fiscal quarter net loss of $262 million, which translated in shares dropping about 34 cents per unit. Last year reports posted a net profit of $115 million and 15 cents per share. The company officials said that net sales rose to $1.535 billion from $1.53 billion, but the prices for the Micron memory products fell 50 percent to $1 in November from August.

The DRAM industry has faced many price crashes over the year, and average selling prices dropped 20 percent for the DRAM products, while NAND memory chips dropped about 30 percent. DRAM chips are widely used in average and value PC products, while the NAND ones are targeting at cell phones and digital music players.

For the next year, Micron expects to spend between $2.5 billion and $3.0 billion in capital expenditures. The capital expenditures refer to costs involved by technological changes and replacements, such as purchasing new gear for switching to smaller production nodes. Analysts are however questioning the amount of money the company is willing to invest in a single fiscal year, given the fact that the DRAM market has reached full saturation.

"The focus will be more the ASP decline and their ability to reduce costs," said American Technology Research analyst Doug Freedman. "The question high in my mind is how important is their capital spending to lowering costs."

Given the fact that the Taiwanese and South Korean competitors on the DRAM market may experience lower production costs, they may cut their prices and still get profit, while Micron would not be able even to cover it.

"By no means would they call the market good," Freedman said, referring to Micron's principal competitors.

TAGS:

Micron | DRAM | memory | semiconductors | loss

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