Goldman Sachs Global Semiconductor Conference

May 31, 2023

CFO Mark Murphy and GS analyst Toshiya Hari

  • · The overall memory market is proceeding in their current fiscal quarter as they forecasted it would in their analyst call at the end of March. Bit consumption bottomed in December and has been increasing since. Customer inventories are high but declining.
  • · The company initially estimated the revenue potentially affected from the China ban on memory products for some critical infrastructure to be low single digits to high single digits percent. In this interview, they revised this up to the high end of this range, high single digits percent of revenue affected. Networking and servers are the segments most affected by these restrictions.
  • · Overall inventories in the industry are at “unprecedented” levels. They see inventory levels at PC and smartphone users to be at healthier levels than the rest of the industry. However, end demand for PCs and smartphones continues to be weak. Micron recently revised down their end unit demand forecasts in those markets.
  • · In servers, demand is stronger but inventories there are higher.
  • · They believe customer inventories will be healthier by the end of the year and that Micron’s inventories will have begun to come down by then. This is really important. I hear this to be saying that Micron’s inventory levels will be flat to growing for most of the rest of calendar 2023. That is longer than I thought.
  • · Their 1-beta DRAM node is “terrific.”
  • · Artificial intelligence workloads are “memory intensive.” The number of parameters in an AI model is related to the amount of memory needed. Murphy gave an example that an AI training server has 8x the DRAM and 3x the NAND of a conventional server.
  • · Their long-term DRAM bit growth CAGR is mid-teens percent.
  • · From the analyst: NAND prices are down more than 50% from a year ago. From Murphy: the NAND market is worse than DRAM. NAND inventories are higher than DRAM. The analyst gave Murphy a chance to say something positive about the NAND market and he didn’t. The tone and substance of what he said communicated that the NAND market is terrible, with little to no signs of improving. He just said the pricing in NAND is ‘not sustainable.”
  • · Their long-term NAND bit growth CAGR is low-twenties percent.
  • · Micron’s inventories are now over 200 days. They will exit calendar 2023 with over 150 days of inventory.
  • · Murphy commented that the slowing rate of cost reductions in the industry (bending of Moore’s Law) is making inventory good for longer. He cited this as a positive factor in the structure of the memory industry in the future.
  • · In the near term, restrictions from China on Micron products will reduce their sales. Adjusting to this is made worse by how soft the market is right now.


Micron’s CFO gave no indication in this call that the memory market is showing any signs of improvement. This is in contrast to the run-up in Micron’s stock price over the last three weeks. That increase in price from around $60 to almost $75 seems to be the result of strength in the tech sector generally and the blowout forecast from Nvidia last week. The Nvidia forecast is for higher demand for servers for AI applications. Investors seem to have interpreted this as meaning more demand for server memory also. They believe customer inventories are coming down, with consumer-facing PC and mobile segments ahead of servers. However, Micron’s inventories are over 200 days now. The company believes this will still be more than 150 days exiting calendar 2023. That is still well above the healthy level of the low 100s. This is the most important piece of information out of this call. Said another way, Micron believes overall memory industry inventories will remain well above healthy levels for at least the next seven months. Prior to this call, I had high certainty that the upturn would be well underway by the end of calendar 2023. Now I see a significant chance that will not be the case. If that happens, Micron will continue to report quarterly revenues in the mid-$3B range, single digits to negative gross margins, and wide per-share losses in the fourth quarter of fiscal 2023 (to be reported in September) and in the first fiscal quarter of 2024 (to be reported in late December).

-Smooth Hughes (cyclical long MU)