Shares of chip gear makers fell after a tepid forecast by U.S.-based Micron Technology Inc exacerbated fears that a two-year chip boom was fizzling due to sluggish demand from makers of smartphones, PCs and servers.

The industry is suffering from a supply glut as output, including from South Korean rivals Samsung Electronics Co Ltd and SK Hynix, is outstripping chip demand and pressuring prices.

Wall Street analysts have said chipmakers will have to cut capacity for the industry to recover and prices to stabilize.

Micron Chief Executive Officer Sanjay Mehrotra said weaker demand in DRAM will likely persist through the first half of calendar 2019 with a recovery expected in the second half.

"Our bigger picture concern is that with the price declines through calendar (first quarter), we seem to be nowhere near a market clearing price in either DRAM or NAND," Morgan Stanley analyst Joseph Moore wrote in a client note.

Micron hinted it would look at reducing its production output to better align with falling demand. Rival Samsung has also indicated it would evaluate its production, according to media reports.

Shares of VAT Group, seen as a bellwether for the industry, fell nearly 6 percent after the Swiss vacuum valve maker said weak chip demand forced it to keep production employees on shorter working hours.

The industry concerns weighed on U.S. chip equipment makers. Lam Research Corp fell 3 percent, while Applied Materials slipped 1.6 percent. U.S.-listed shares of ASML Holding NV fell 1.8 percent.

Micron's shares were down 7 percent at $31.21, while those of peer Hynix were down 1.3 percent.

At least eight brokerages lowered their price targets on Micron, with J.P. Morgan and Evercore ISI lowering their targets by $20, respectively. Needham and RBC downgraded the stock to "hold." The median price target on the stock was $48.

Micron's shares have fallen nearly 17 percent this year, compared with the broader Philadelphia SE Semiconductor Index's 6 percent drop.