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What's going on?
Memory chip maker Micron is still in a slump, but its upbeat forecast hinted at a potential turnaround on the horizon.
What does this mean?
Micron’s memory chips are the unsung heroes of our devices, keeping the data flowing seamlessly in phones and computers. But because the firm’s chips are virtually indistinguishable from competitors’ offerings, their prices are particularly vulnerable to swings in demand. And that’s exactly what’s happened lately: orders have fallen off a cliff and supply’s still riding relatively high, so memory chip prices have plunged. And that meant even Micron’s increased shipments couldn’t save it from shrinking revenue last quarter, as prices plunged by around 20%.
Micron’s holding out hope and betting that demand will outpace supply this year – but the company’s still on track for its largest loss since going public in 1984. How swiftly it recovers depends on whether the industry as a whole follows Micron’s example, slashing production in a bid to shore up prices.
Why should I care?
Zooming in: Surfing the artificial wave.
Micron’s long-term hopefulness isn’t totally dependent on what its competitors do: AI’s also a player. The firm’s predicting a memory-chip-market bonanza in 2025, powered by the emerging smart tech. And that’s not a wild prediction: memory chip demand is set to surge as more contenders enter the fray, and AI servers need over three times the capacity of old-school ones. You can almost imagine the dollar signs in Micron’s eyes.
The bigger picture: Problematic policy.
The US remains a global powerhouse in advanced chip design, but its market share has nosedived from 37% in 1990 to a meager 12% today. And while the government’s injecting $52 billion into the sector, throwing money at the problem probably isn’t enough: policy changes are also needed. Skilled worker shortages and burdensome red tape – like environmental regulations and planning permission processes – are driving up production time and costs, making Asia a more attractive production hub.
Originally posted as part of the Finimize daily email.
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