Micron Technology Inc. (MU) saw a drop in demand for memory used in personal computers starting last month, increasing the likelihood of consolidation in the chip industry, executives said.

“We started to see a significant shortfall of PC demand in July,” Mark Adams, head of sales at the Boise, Idaho-based chipmaker, said today at a company event. Micron shares declined 6.4 percent after the comments.

The sluggish economy and demand for smartphones and tablets are sapping purchases of computers. The decline in prices of dynamic random access memory chips -- the main memory in PCs -- also has made the industry “untenable” for some Asian manufacturers, Chief Executive Officer Steve Appleton said. They will have to exit the business or merge, he said.

“Many of these companies are in really bad shape,” Appleton said. “It will probably be a catalyst in order to consolidate this industry a little further than it is today.”

Micron fell 36 cents to $5.30 at 4 p.m. New York time in Nasdaq Stock Market trading. It was the biggest loser today in the Philadelphia Semiconductor Index, which tracks chip stocks.

In June, the company said the price of DRAM was dropping because of weak demand for consumer laptops and desktop PCs. The industry isn’t suffering from oversupply, Appleton said today. Unlike in the past, chipmakers haven’t hurt prices by flooding the market with new production, he said.

“I can’t tell you whether it will bottom out in the next couple of quarters, it’s impossible to predict,” Appleton said. “I think it will settle out quickly.”

Micron is the only remaining U.S.-based maker of DRAM. Competition from Asian manufacturers forced out the pioneers of the industry, including Intel Corp. (INTC) and Texas Instruments Inc. Prices of the chips, which are traded on commodity exchanges in Asia, often fall below the cost of production.

Micron has reported an annual profit in only four of the past 10 years. The company goes head-to-head with South Korea’s Samsung Electronics Co., the world’s largest chipmaker after Intel. Other makers of computer memory include South Korea-based Hynix Semiconductor Inc. and Japan’s Elpida Memory Inc.

Micron is aiming to lessen its dependence on DRAM by following Samsung and Toshiba Corp. (6502) into the market for Nand flash memory, chips that provide the storage in devices such as Apple Inc. (AAPL)’s iPhone and iPad. Nand is on course to exceed DRAM sales at Micron for the first time this quarter, the company said.

By: DocMemory
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