PC and phone demand is weakening. Analysts see problems for parts suppliers.

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Concerns that a slowdown in demand for smartphones and PCs will hurt the prospects for memory chips and other components has prompted a flurry of cautious commentary from Wall Street.

The problems affect the memory chip manufacturers Micron Technologies (Ticker: MU) and

Western digital

(WDC); Hard drive manufacturers Western and

Seagate

(STX); and suppliers of cellular chips

Qualcomm

(QCOM),

Korvo

(QRVO) and

heavenwork

(SWKS).

On Tuesday,

MorganStanley

Chip analyst Joseph Moore was cautious about the prospects for both Western Digital, which sells NAND memory products alongside hard drives, and Micron, a supplier of NAND and DRAM memory chips. He said in a research note that memory markets are weak in terms of volume, with DRAM prices “down slightly” and NAND prices “weaker” in the current quarter.

Moore maintained an overweight stance in Western Digital, a call based on summary analysis, but trimmed its earnings forecasts, noting that NAND prices are falling faster than expected due to weakness in both PCs and the Chinese smartphone market . The weakness in PCs and smartphones is spreading geographically and is starting to impact demand for servers and other products, he said.

He lowered his calendar 2022 call for adjusted earnings per share at Western Digitial from $8.41 to $6.99 and now expects 2023 earnings per share to be $6.35, compared to $9.66.

As a reminder, Western Digital is in the midst of a strategic review that could lead to the separation of the company’s hard drive and flash memory businesses.

For Micron, Moore kept an Equal Weight rating while lowering his price target to $56 from $83. Moore thinks Street’s estimates for Micron are way overestimated, noting that his own forecast is 25% below consensus calls for calendar 2022 and 46% lower for 2023. Moore is increasingly cautious about the end-market outlook and increased inventories in particular and associated price pressures, which are trending down,” he wrote.

Mizuho analyst Vijay Rakesh touched on the same issues. In a research note focusing on the outlook for the memory chip sector, he said that “sentiment and price trends have softened significantly over the past month,” with weakness in PCs and smartphones. He described the server sector as “the only bright spot,” but said price action for both NAND and DRAM chips would remain negative in the second half of the year.

Rakesh remains a long-term bull for both memory chip companies, leading long-term strength in both 5G phones and servers. He maintained buy recommendations on Western Digital and Micron, but lowered his share price targets and lowered his call option on Western to $68 from $72. He reduced his target for Micron from $113 to $95.

In a separate note, Rakesh said smartphone supply chain reviews for both the June quarter and the rest of the year pointed to risks to results, suggesting a slow reopening of operations in China, weak global consumer demand and growing inventories . The analyst lowered its forecast for 5G phone sales in 2022 to 630 million units from 700 million and said overall cell phone sales will stagnate and 5G phone sales in China will stagnate.

Rakesh maintained its buy rating on Qualcomm but lowered its price target to $168 from $185. He also maintained a buy on Skyworks but lowered his target to $150 from $170. He stayed at Neutral for Qorvo, with a new target of $110 versus $128.

Barclays analyst Tom O’Malley wrote a cautious note on disk drive demand on Tuesday. For the June quarter, he now sees units falling 6% from a previous forecast of flat demand. For the full year, he lowered his unit forecast to a 15% decline from -12% and said revenue will fall 5% from 3% previously. Higher average selling prices will partially offset the lower volumes.

O’Malley noted that both Seagate and Western Digital have seen weakness in the PC and smartphone markets at recent conferences, but said there has also been an unexpected slowdown in demand for nearline drives, driven by Data center customers are used.

O’Malley has cut its estimates for the 2022 and 2023 calendars for both companies. He maintained his $65 price target on Western Digital while reducing his call on Seagate to $70 from $85.

Write to Eric J. Savitz at eric.savitz@barrons.com