Historic crash for memory chips threatens to wipe out earnings |

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This time was supposed to be different. The memory-chip sector, famous for its boom-and-bust cycles, had changed its ways. Know more:

This time was supposed to be different. The memory-chip sector, famous for its boom-and-bust cycles, had changed its ways. A combination of more disciplined management and new markets for its products—including 5G technology and cloud services—would ensure that companies delivered more predictable earnings.

It’s been a swift descent from the industry’s pandemic sales surge, which was fueled by shoppers outfitting home offices and snapping up computers, tablets and smartphones. Now consumers and businesses are holding off on big purchases as they cope with inflation and rising interest rates. Makers of those devices, the main buyers of memory chips, are suddenly stuck with stockpiles of components and have no need for more.

The industry is suffering from a unique combination of circumstances—a pandemic hangover, the war in Ukraine, historic inflation and supply-chain disruptions—that have made the slump much worse than a regular cyclical downturn. All eyes are now on memory-chip king Samsung, which has thus far said little about the industry’s near-term prospects. The world’s largest maker of chips, smartphones and display panels is set to report fourth-quarter earnings on Tuesday, followed by a call during which analysts are likely to question its capacity management plans.

It’s always been difficult for memory makers to handle spikes and troughs in demand. Bringing new factories online takes years and billions of dollars, so it’s hard to get the timing right.

 

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