U.S. memory chip supplier Micron Technology said it would reduce its capital spending plans for fiscal 2019 and 2020 and further trim wafer starts amid an ongoing demand slowdown that has thrown the memory market into a tailspin.

Micron said it would slash capital spending for its fiscal 2019, which closes in August, to about $9 billion, down about 10% from the company's estimate of about $10.5 billion at the start of the fiscal year. Micron said it expects its fiscal 2020 capital expenditures to be "meaningfully lower" than fiscal 2019.

Micron President and CEO Sanjay Mehrotra announced that the company would also continue with a previously announced 5% cut in DRAM wafer starts, which company executives expect will bring the company's DRAM bit supply growth for 2019 close to market demand growth.

Micron said it would further cut its NAND wafer starts from 5% to 10%, will result in lower supply growth in the second half of the year. While the overall NAND market remains oversupplied from the accelerated supply growth driven by the industry transition to 3D NAND, Micron remains optimistic that the NAND market will start to stabilize in the second half of this year, Mehrotra said in a conference call with analysts.

"With the higher levels of macro uncertainty and the relatively high levels of inventory on our balance sheet, we are taking decisive action to manage our DRAM and NAND bit production," Mehrotra said.

Business with Hauwei resumes... a little

Micron surprised analysts by saying it has resumed in the past two weeks shipments of some products to China's Huawei Technologies, which was placed on an exports blacklist by the Trump Administration last month. Executives said the company resumed shipments of some products after determining that these products are not subject to the restrictions imposed by the Trump Administration.

"However, there is considerable ongoing uncertainty surrounding the Huawei situation, and we are unable to predict the volumes or time periods over which we’ll be able to ship products to Huawei," Mehrotra said.

The announcements on capital expenditures, on wafer starts, and on Huawei came in the wake of Micron's fiscal third quarter financial results, which beat Wall Street's expectations despite hefty declines in sales and profit.

After robust growth amid rising average selling prices in both 2017 and 2018, the memory chip market has entered a downturn and is projected to decline by about 30% this year, according to market research firm IC Insights.

"Although previously announced capex cuts will start to impact industry supply in the second half of the calendar year, our assessment is that further cuts in capex and bit supply will be required to return the industry to a healthy supply-demand balance," Mehrotra told analysts.

While the memory downturn remains in full force, Micron executives suggested that the company sees early signs of demand recovery.

Mehrotra said customer inventory improvements have progressed largely in line with Micron's expectations in most markets, reinforcing management's confidence that DRAM bit demand will return to healthy year-over-year growth in the second half of 2019. NAND bit demand is also increasing in most markets, Mehrotra said.

For the fiscal third quarter, which closed May 30, Micron reported sales of $4.79 billion, down 18% from the fiscal second quarter and down 39% compared to the third quarter of fiscal 2018.

Micron reported a fiscal third quarter net income of $840 million, down 48% from the previous quarter and down 78% compared with the year-ago quarter.

Micron's DRAM revenue for the quarter was roughly $3 billion, down 5% year-over-year and 19% sequentially from the fiscal second quarter. NAND revenue declined to about $1.5 billion, down 25% year-over-year and down 18% sequentially, Micron said. The company said DRAM and NAND sales were both hurt significantly by restrictions in sales to Huawei.

For the fiscal fourth quarter, which closes in August, Micron said it expects sales to be between $4.3 billion and $4.7 billion, below consensus analysts' expectations of about $4.9 billion, according to Yahoo Finance.