Micron warns weakening consumer demand will hurt smartphone sales

Sanjay Mehrota, Micron Technology President & CEO at the WEF in Davos, Switzerland on May 24th, 2022.

Adam Galica | CNBC

Micron Technology, a major vendor of memory chips for PCs and smartphones, said on Thursday that it expects smartphone sales to be meaningfully lower than previously expected for the rest of 2022, citing a reduction in consumer demand.

Micron CEO Sanjay Mehrotra said on an earnings call with analysts that he expected smartphone unit volume to decline by around 5% versus last year. Analysts were expecting growth around 5%, Micron said. The company also warned that it believed that PC sales could decline 10% versus last year and that it was making changes to its production growth to match weaker demand.

He added that some PC and smartphone customers were “adjusting their inventories” in the second half of the year.

“If you were to translate it into units, it amounts to like 130 million units reduction versus expectation earlier in the year for smartphone,” Mehtotra said. “Similarly, for PC, let’s say 30 million kind of reduction in terms of total units versus the projections earlier in the year.”

Micron’s warning is the latest sign that the market for new computers and phones is starting to slump after two years where the pandemic supercharged growth as people worked and went to school from home.

Micron supplies memory to smartphone makers including Apple, Motorola, and Asus, so it has a view into broader sales trends.

“Near the end of [the quarter] we saw a significant reduction in industry bit demand, primarily attributable to end demand weakness in consumer markets, including PC and smartphone,” Mehrotra said. “These consumer markets have been impacted by the weakness in consumer spending in China, the Russia-Ukraine war, and rising inflation around the world.”

The forecast from the chipmaker is in line with some third-party industry estimates. Earlier this week, Gartner predicted that global mobile phone sales would fall 71% in 2022, revising its earlier estimate of 2.2% growth.

Micron shares fell more than 2% in extended trading on the company’s report for its fiscal third quarter 2022, which ended June 2. Sales rose 16% annually to $8.64 billion, and the company’s earnings per share of $2.59 beat analyst expectations.

However, the company reduced its revenue guidance for the current quarter to $7.2 billion versus consensus expectations of $9 billion.