The latest illustration of how a slowdown in the technology sector is affecting employment is the announcement made on Wednesday by semiconductor manufacturer Micron that it will cut its headcount by roughly 10% in 2023.
In late trading, shares of Micron decreased by more than 1%.
Approximately 48,000 people work for Idaho-based Micron, according to a recent SEC filing. The business claimed that in addition to layoffs, voluntary departures would help it reach its reduction goal.
Additionally, Micron announced that it is halting 2023 bonuses.
“On December 21, 2022, we announced a restructure plan in response to challenging industry conditions,” the company said in an SEC filing. “Under the restructure plan, we expect to reduce our headcount by approximately 10% over calendar year 2023, through a combination of voluntary attrition and personnel reductions.”
A $30 million charge for the restructuring, which will also involve less investment in manufacturing capacity and cost-cutting initiatives, was anticipated by Micron for the current quarter.
The decision was made shortly after Micron announced its fiscal first-quarter 2023 results, missing analyst expectations for earnings and revenue while also predicting a larger loss per share than anticipated for the current quarter.
Here is how Micron performed for the quarter ending in December as compared to Refinitiv consensus estimates:
On $3.8 billion in revenue for the current quarter, Micron projected a loss of 62 cents per share. Analysts had anticipated a loss of 30 cents per share on sales of $3.75 billion.
Micron is best known for providing memory to the computer industry, but it is currently operating in a market where server sales are anticipated to remain flat in 2023 while PC sales have already started to slow or decline.
Sanjay Mehrotra, CEO of Micron, stated in prepared remarks that the company has kept more inventory and lost pricing power because there is an excess of memory supply and a dearth of demand.
“In the last several months, we have seen a dramatic drop in demand,” Mehrotra said, according to the prepared remarks.
He stated that while the firm anticipates revenue and free cash flow to rebound later in 2023, he expects the company’s profitability to “remain challenged” through the end of 2023. Micron announced that it has halted share repurchases.
Following announcements of hiring freezes or layoffs by other semiconductor companies, Micron announced its restructuring. Intel announced in October that it would eliminate jobs as part of a plan to reduce spending by $10 billion. While Qualcomm announced its hiring freeze in November, Nvidia announced a hiring slowdown over the summer.
But after two years of growth and supply problems brought on by pandemics, it’s not just semiconductor companies that are adapting. As businesses prepare for a potential recession and rising interest rates, tech companies like Meta, Twitter, Snap, Stripe, and Tesla have also made staff reductions.
(Adapted from Bloomberg.com)