WEBVTT - Ian King on Micron (Audio)

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<v Speaker 1>All right, let's have a look at the micron. We've

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<v Speaker 1>got micro Technology, the largest maker of memory chips in

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<v Speaker 1>the US. It came up with a week forecast for

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<v Speaker 1>the current quarter. Let's get to Ian King Bloomberg News

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<v Speaker 1>u S Semiconductor Reporter and in a what's behind it

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<v Speaker 1>and you know, to have sales, they're saying about four

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<v Speaker 1>and one quarter of one billion dollars in the period

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<v Speaker 1>compared with the analysis of it's of six billion. That's

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<v Speaker 1>a huge, huge miss. How come you know what they're

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<v Speaker 1>saying wish is that you know, look, this is a

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<v Speaker 1>lot worse than we thought, and we're taking drastic action.

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<v Speaker 1>So we're just not going to put chips out there

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<v Speaker 1>into the market. We're going to cut our production, and

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<v Speaker 1>you know, our sales and our shipments are going to

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<v Speaker 1>be sort of even worse than en demand and consumption

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<v Speaker 1>for a short period. And we're doing that because we

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<v Speaker 1>want to get rid of infantry in the market and

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<v Speaker 1>get things back to a more reasonable balance between supply

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<v Speaker 1>and demands. So, yes, very bad, a lot worse in

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<v Speaker 1>the short term, but they're arguing that this is the

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<v Speaker 1>way to clean things open and get the market back

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<v Speaker 1>towards a balance quicker, and as you've seen, the stock

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<v Speaker 1>initially on those numbers went down very badly, reacted really

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<v Speaker 1>aggressively badly, down as much as like four or and

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<v Speaker 1>has come back on their explanation of how this is

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<v Speaker 1>going to play out going forward. Ian For for for

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<v Speaker 1>those people that weren't paying too much attention to this space,

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<v Speaker 1>it must seem incredible because you know, it wasn't too

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<v Speaker 1>long ago we were talking about all these shortages in

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<v Speaker 1>semiconductors and and some of the supply chain restrictions and issues,

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<v Speaker 1>and now all of a sudden, we've got what massive

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<v Speaker 1>inventory over supply. Yeah, I know, that's absolutely right. I mean,

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<v Speaker 1>and you know the business that micron in is in

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<v Speaker 1>um and some sort of electronics and and he Nicks

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<v Speaker 1>and Kioxy in Japan is typically the most you sort

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<v Speaker 1>of volatile market. You are literally a couple of quarters

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<v Speaker 1>from you know, fast to famine. And that's that's what's

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<v Speaker 1>happened again this time. I mean, and it's a classic

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<v Speaker 1>case of you know, demand can shift in a matter

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<v Speaker 1>of weeks, but production takes months. And that's the you know,

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<v Speaker 1>an inventory, because production takes months to go through a cycle.

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<v Speaker 1>What you ordered, you don't get for three four months,

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<v Speaker 1>this is what you end up with. And and here

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<v Speaker 1>we are again, but we're joking memory chips. I must say,

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<v Speaker 1>I'm a little bit ignorant of what all these various

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<v Speaker 1>ships do. Do. Give you tell me how they stack

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<v Speaker 1>up next to some of the other ones out there,

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<v Speaker 1>which you know, of course flash and things like also

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<v Speaker 1>d RAM. Yeah, And I mean you're asking a good

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<v Speaker 1>question here. Flash and de ram are two type the

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<v Speaker 1>two main types of memory chips. One access storage. That's

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<v Speaker 1>flash memory, so that's storage in your iPhone, storage in

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<v Speaker 1>your computer. De Ram access the short term kind of

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<v Speaker 1>holder for memory which helps process data predominantly in computers

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<v Speaker 1>but also in phones. The particular sort of characteristic of

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<v Speaker 1>this market what makes it so volatiles that they get

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<v Speaker 1>traded like a commodity, because you could, in theory, pull

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<v Speaker 1>a deer own chip made by Samsung out of your

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<v Speaker 1>PC and take something that you brought from Micron and

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<v Speaker 1>plug it into the same thing and they would work

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<v Speaker 1>in exactly the same way. Ian we used to look

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<v Speaker 1>at the at the transports as a very good indicator

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<v Speaker 1>of the sexicality in economies, and people now say that

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<v Speaker 1>chips do this for us? Does does this sort of

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<v Speaker 1>bode well for for growth in the global economy, say

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<v Speaker 1>over the next year. Well, uh, you know, if you're

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<v Speaker 1>a chip investor, as you're seeing in the Microns stock

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<v Speaker 1>reaction after hours, you're looking for the bottom. Right, the

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<v Speaker 1>bottom in chips kind of anticipates the record worry by

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<v Speaker 1>sort of two quarters. So what people are looking at

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<v Speaker 1>today is saying, look, we've seen this rapid fall off

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<v Speaker 1>and will get worse, but that you know, if Micron

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<v Speaker 1>is right, and if this isn't an extended recession, then

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<v Speaker 1>usually within two quarters or so we'll start to see

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<v Speaker 1>things growing again. And that's what Micron is indicating. So

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<v Speaker 1>maybe this is the worst. Maybe this is a turning point.

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<v Speaker 1>And as we've seen, chip stocks have absolutely been open

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<v Speaker 1>the last twelve months, and maybe this is industry w

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<v Speaker 1>memory tends to anticipate the rest of the industry. Yes,

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<v Speaker 1>I wanted to ask you about the plans that some

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<v Speaker 1>of these big companies have for expanding production in the

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<v Speaker 1>United States. I guess because what we're talking about here

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<v Speaker 1>is real cyclicality, So maybe it doesn't affect these plans

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<v Speaker 1>for these new plants, which are a couple of years

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<v Speaker 1>down the road, but um is there much of an

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<v Speaker 1>impact on that. Micron said that they're going to cut

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<v Speaker 1>their spending on equipment by which is a lot. That

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<v Speaker 1>means that the factories will still get built, but they

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<v Speaker 1>won't be equipped. So in theory, you've got this shell

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<v Speaker 1>ready so that when things appeared to pick up, you

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<v Speaker 1>need that kind of six months lead time. You stick

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<v Speaker 1>in the machinery in time for that and get that

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<v Speaker 1>going then. So what they're saying is, you know, kind

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<v Speaker 1>of a double sided thing. Yes, we're going to build

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<v Speaker 1>these plants. Thank you very much you as government for

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<v Speaker 1>the money, but maybe they won't come on this line

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<v Speaker 1>as quickly as we perhaps thought I might. Alright, Ian,

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<v Speaker 1>thanks very much. A lot of this was pre announced,

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<v Speaker 1>I suppose, so that's why the market reaction after hours

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<v Speaker 1>wasn't too dramatic losses but only a little under one percent.

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<v Speaker 1>I guess. We've been chatting with Ian King, and he

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<v Speaker 1>is our top reporter on semiconductors Bloomberg News u S

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<v Speaker 1>Semiconductor reporter with US Live