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Micron cuts 09 capex budget by 50% as losses rise

24 December 2008 | By Mark Osborne | News > Fab Management

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Micron now expects capital spending to be in the range of US$650 million and US$750 million in FY2009Micron Technology is reducing its capital spending plans for 2009 by as much as 50%, only a quarter after giving 2009 CapEx guidance of between US$1 billion and US$1.3 billion. Micron now expects capital spending to be in the range of US$650 million and US$750 million in FY2009. Earlier, in mid-2008, Micron was projecting combined 2009 capital spending of US$2.85 billion.

Capital expenditures for Micron’s financial first quarter came in at US$334 million, down from US$759 million in the last quarter. This could mean that Micron has already spent just over 50% of its FY2009 CapEx in one quarter and also equates to a projected cut of over US$2.0 billion from six months ago, such is the challenging environment and need to preserve cash as losses rise in the memory sector.

During a conference call with financial analysts, Micron executives noted that its MeiYa DRAM joint venture operation with Nanya, is expected to be consolidated into Inotera Memories in the near future, suggesting that the operation which had already been put on hold would cease to exist. Inotera is a listed company in Taiwan, which Micron recently purchased Qimonda AG’s 50% share in its two 300mm fabs production. Nanya is the the other partner in Inotera.

The move to disband MeiYa, could be related to the efforts by Nanya, Powerchip and other struggling Taiwan memory manufacturers to secure Taiwan Government support for new financial loans along with possible industry consolidation requirements as part of any bail-out package.

The capital expenditure revisions came on the back of Micron reporting a quarterly loss of US750 million on sales of US$1.3 billion. A significant fall in both NAND (-24%) and DRAM (-34%) ASPs in the quarter and a US$369 million write-down in inventory, forced Micron to cut costs further.

New cost reductions include reductions in executive and employee salaries, and elimination of bonuses, a continued hiring freeze, and reduction of other discretionary costs such as outside services, travel, and overtime, the company said. The expected savings were said to be in the range of US$200 million on an annualized basis.

Micron said that it would also be reducing DRAM and NAND bit growth in coming quarters, sighting a slowdown in production rather than a shutdown in production. Samsung, Hynix and Powerchip had all recently announced cuts in capital spending for 2009. Hynix and Powerchip for example are also cutting production by 30% or more.

Earlier, in mid-2008, Micron was projecting combined 2009 capital spending of US$2.85 billion.

 

 

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