Release Date: June 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Micron Technology Inc (MU, Financial) delivered fiscal Q3 revenue, gross margin, and EPS all above the high end of guidance ranges.
- AI-driven demand enabled over 50% sequential revenue growth in the data center segment.
- Micron is ramping the industry's most advanced technology nodes in both DRAM and NAND, with significant progress in 1-gamma DRAM and next-generation NAND nodes.
- Micron signed a non-binding preliminary memorandum of terms with the US government for $6.1 billion in grants under the CHIPS and Science Act.
- Micron achieved record automotive revenues, driven by robust demand for memory and storage in the automotive sector.
Negative Points
- Operational disruptions occurred due to a recent earthquake in Taiwan, although recovery was swift.
- Near-term demand uncertainty exists in industrial and retail consumer segments.
- Fiscal Q4 operating expenses are expected to increase sequentially due to higher R&D program expenses and a non-recurring Q3 asset sale gain.
- Micron's fiscal 2024 CapEx plan is approximately $8.0 billion, indicating significant capital expenditure requirements.
- The construction of new fabs in Idaho and New York will not contribute to meaningful bit supply until fiscal 2027 and 2028, respectively.
Q & A Highlights
Q: Sanjay, can you provide an update on the progress and customer qualifications for HBM3E?
A: We delivered over $100 million in revenue in fiscal Q3 with HBM3E, which was margin accretive to our overall and DRAM margins. We remain focused on ramping production and improving yields. We are confident in achieving our goal of $700 million in fiscal 2024 HBM revenue and multiple billions in fiscal 2025. We are also in qualifications with other customers and expect to broaden our customer base in 2025.
Q: Why has the NAND bit demand growth outlook changed from low 20s to high teens?
A: The change is due to revising the base year for the CAGR calculation to 2023, which had higher bit demand growth. Data center, automotive, and industrial segments are growing faster than the overall CAGR, while client, mobile, and consumer segments are slower. We remain conservative in our planning but will continue to assess average capacity growth in smartphones and PCs.
Q: What happens to the HBM trade ratio as you move to higher stacks and improve yields?
A: For HBM3E, the trade ratio remains around 3x over mature yields of D5 in the same technology node. As we move to HBM4, the trade ratio will increase. The 12-die stack in HBM3E will have somewhat lower mature yields, but the operative guidance remains 3x for HBM3E and higher for HBM4.
Q: Why can't fiscal 2025 be a record year for gross margins as well as sales?
A: We expect sequential gross margin expansion driven by price and mix improvements, particularly from HBM, high-capacity DIMMs, and data center SSDs. Tight supply conditions and increasing demand for AI applications will support continued gross margin expansion through fiscal 2025.
Q: Are there any yield issues with HBM, and what are your thoughts on its profitability going forward?
A: We are pleased with our HBM3E production, having delivered over $100 million in revenue in fiscal Q3. We remain focused on ramping capacity and improving yields. HBM margins are accretive to both corporate and DRAM margins, and we expect this to drive continued gross margin expansion through fiscal 2025.
Q: How should we think about your bit supply growth in fiscal 2025 given the increased CapEx?
A: We are very constrained on bit production and expect inventory levels to come down, approaching target levels by the end of 2025. Our CapEx will support HBM assembly, test equipment, and greenfield fab construction, with a focus on aligning supply growth with demand growth.
Q: What is your view on the HBM market and its suppliers?
A: We see the HBM bit growth CAGR well above 50% over the next few years. We are sold out for 2025 with most of our output already committed. We are working with a broad range of customers and expect to ship to a broader set of customers in 2025. HBM is complex and resource-intensive for both us and our customers, but our strong product position and high quality give us confidence in our market share goals.
Q: Why sign customers to long-term contracts if you expect pricing to increase?
A: Long-term contracts help build closer relationships with customers, aligning supply, pricing, and product roadmaps. These contracts support our substantial revenue record and improved profitability projections for 2025.
Q: Was the impact of the Taiwan earthquake limited to the May quarter?
A: The Taiwan earthquake did not have a material impact on our financial results.
Q: Are enterprise SSD gross margins accretive to overall NAND margins, and what is the outlook for next-gen Gen 5 SSDs?
A: Yes, enterprise SSDs are accretive to our overall NAND margins. We have strong momentum in data center SSDs and are working on qualifying next-gen Gen 5 SSDs for AI applications. Our strong product portfolio supports our growth and share gains in this segment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
