Micron Soon to Announce Second ‘High-Volume’ US DRAM Fab: CEO
Micron Technology’s fiscal Q4 results “were impacted by rapidly weakening consumer demand and significant customer inventory adjustments across all end markets,” said CEO Sanjay Mehrotra on an earnings call Thursday for the quarter ended Sept. 1. Fiscal Q4 revenue of $6.64 billion was down 23% sequentially from the previous quarter and was 20% lower year over year.
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Fiscal Q4 mobile revenue declined sequentially and year over year, said Mehrotra. “Despite the weakness in end unit sales, we achieved two consecutive years of record mobile revenue in fiscal 2021 and 2022,” he said. Micron now projects calendar 2022 industry smartphone unit volume to decline by a high-single-digit percentage year over year, he said. 5G “continues to drive greater content per device,” he said. Micron projects 5G penetration will exceed 50% of the total addressable market in smartphone unit volume in calendar 2022, he said.
The memory and storage industry environment “has deteriorated sharply” since Micron’s last earnings call June 30, said Mehrotra. “An unprecedented confluence of events has affected overall demand, including COVID-related lockdowns in China, the Ukraine war, the inflationary environment impacting consumer spending and the macroeconomic environment influencing customers' buying behavior in multiple segments,” he said.
Customers' inventory adjustments in all end markets “are also contributing to demand weakness,” said Mehrotra. “These factors are depressing demand for DRAM and NAND to well below end market consumption levels. We are also seeing an extremely aggressive pricing environment.” Micron expects supply growth “to be significantly above demand growth in calendar 2022, contributing to very high supply inventories for both DRAM and NAND,” he said.
Though macroeconomic uncertainty is high and visibility is low for calendar 2023, “we currently expect demand growth to be closer to the long-term growth rates of both DRAM and NAND, bouncing back from very weak levels in calendar 2022,” said Mehrotra. “We expect the inventory at our customers to improve in early calendar 2023, causing demand to rebound starting from the second quarter of calendar 2023.
Micron expects calendar 2023 industry DRAM supply to grow “well below demand growth,” said Mehrotra. The company is modeling a mid-single-digit percentage growth in DRAM industry supply in 2023, “which would represent the lowest ever industry supply growth,” he said. “NAND supply growth in calendar 2023 is also expected to fall below demand growth. Given the elevated supplier inventories entering calendar 2023, we expect industry profitability to remain challenging in 2023.”
The chipmaker is “responding decisively” to the weak environment “by decreasing supply growth through significant cuts to fiscal 2023” capital expenditures and “by reducing utilization in our fabs,” said Mehrotra. “We are confident that the memory industry supply-demand balance will be restored, as a result of reduced industry supply growth combined with the long-term demand growth drivers for memory.”
AI, cloud computing, electric vehicles and the “ubiquitous connectivity” offered by 5G “are strong long-term demand drivers for memory and storage,” said Mehrotra. “To support memory demand in the second half of the decade and beyond, we will need to add new DRAM wafer capacity,” he said. The recently enacted Chips and Science Act “will help to reduce the memory manufacturing cost disparities that exist between the U.S. and Asia,” he said.
After the Chips Act was enacted, Micron announced its intent to invest $40 billion through the end of the decade in “leading-edge memory manufacturing” in the U.S., “contingent” on getting Chips Act support, said Mehrotra. “These investments will ultimately create tens of thousands of American jobs, strengthen U.S. supply chain resiliency and further diversify our global fab footprint,” he said.
Earlier in September, Micron announced it picked Boise as one of two leading DRAM manufacturing fab sites that are planned in the U.S., said Mehrotra. “We expect to invest approximately $15 billion at the site, through the end of the decade,” he said. “The collocation of this new manufacturing facility with our existing R&D site at our headquarters in Boise, provides multiple strategic benefits, including improving efficiency across both R&D and manufacturing, simplifying technology transfer and reducing time to market for leading-edge products.”
Micron soon will announce a second “high-volume U.S. DRAM manufacturing site,” said Mehrotra. “These new fabs will fulfill our requirements for additional wafer capacity starting in the second half of the decade and beyond. We plan to build these sites in stages.” Tool installation and production output “will be ramped in line with industry demand growth,” consistent with Micron’s goal to maintain stable “supply discipline,” he said.