What's going on?

Micron revealed a disappointing outlook for this quarter late last week.

What does this mean?

Micron � the biggest maker of memory chips in the US � saw its revenue climb 16% last quarter from the same time last year to an all-time high. But that was its most modest uptick in over a year, and the company � which admitted that demand was tailing off fast � gave a far worse-than-expected revenue outlook too. Shoppers, after all, are cutting down on the big-ticket technology that houses Micron�s semiconductors, leading the makers of the devices to scale back on their own orders.

So Micron is doing what every self-sacrificing young professional is doing in these overpriced times: it�s planning to cut spending on new plants. That way, it can slow down manufacturing and burn through existing stockpiles. The company even said it would start walking away from orders where the customer exploits the oversupply to negotiate big price cuts, which it hopes will minimize any impact on its profit.

Why should I care?

The bigger picture: South Korea is a warning.
You can see this situation playing out more widely too: data out last week showed that stockpiles of chips in South Korea � the world’s biggest producer of memory chips � was 53% higher in May than the year before. The last time inventory grew this fast was in March 2018, and it preceded a drop-off in revenue growth across the entire industry.

Zooming in: Boom or bust?
These are all the hallmarks of an industry slipping into a boom-and-bust cycle, where producers overproduce in the good times only to be left with a glut when demand drops off. But at least memory chips are essential to just about everything these days, which means that a chipmaking boom-and-bust should be far less severe than it would�ve been in the past. Micron certainly thinks so: it said it�s expecting a rebound in orders in the next year or so.