Memory chip crisis threatens to wipe out earnings, destabilise suppliers

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.

And yet, less than a year after memory companies made such pronouncements, the $160 billion industry is suffering one of its worst routs ever. There’s a glut of the chips sitting in warehouses, customers are cutting orders, and product prices have plunged.

“The chip industry thought that suppliers were going to have better control,” said Avril Wu, senior research vice president at TrendForce. “This downturn has proved everybody was wrong.”