J.P. Morgan Tech/Auto Forum


Panel interview with Micron CFO Mark Murphy and CBO Sumit Sadana

  • Opening statements reviewed key points from their first quarter earnings call; the market is weak, they believe bit shipments bottomed in November, company is cutting costs and output, revenue in the second fiscal half will be better than the first but margins will be compressed by the under-utilization charges
  • PC units will decline mid-single-digits in 2023 compared to 2022 to reach the pre-COVID levels of 2019
  • Smartphone demand is modeled flat to slightly up in 2023, which models a recovery to happen in the second half of the calendar year
  • A “significant impact” to demand is happening to demand from data centers because of both weaker end demand and inventory overhang at customers
  • By the middle of calendar 2023 (June-ish) is expected to see customer inventory levels reach normal levels
  • Micron’s DRAM bit growth percent will be negative in calendar 2023 over 2022. The company believes industry-wide DRAM bit growth needs to be negative to restore supply-demand balance.
  • The NAND market is more oversupplied than the DRAM market
  • Less than half of the higher cost inventories from the underutilization of the second half of 2023 will pass through to the first half of fiscal 2024
  • Management believes that the slowing of technology cadence that Micron has announced will be seen across the industry. They believe this because node transitions will have to slow to match supply and demand. Sadana didn’t say it directly, but he indicated that higher difficulty in the technology will also push to slow this.
  • The host analyst asked if Micron is staying with the long-term financial model they laid out during their investor day in May of 2022. Murphy didn’t say they are but didn’t say they aren’t. His answer wasn’t a strong reaffirmation. He said their revenue outlook doesn’t change as pricing declines shallow to offset bit volume reductions and that when supply-demand balance returns they anticipate the company will reach the revenue and profitability levels they outlined in May. The reason this is a weak statement is he didn’t comment on the through-cycle profitability, only on what they would reach in the up-cycle.


Nothing much new here, to be expected with their earnings call only a couple weeks past. The most interesting comments to me are that the company believes DRAM bit growth will need to be negative in calendar 2023 in order for the market to return to balance. They are modeling inventory levels to return to normal at customers by June but, as is customary for Micron, they have not made or implied anything about pricing. That is to say, pricing could still be declining even as customers buy more bits. Samsung and Hynix both report in January and I will be looking closely at their commentary for reductions in output and/or capacity investment. The other useful information was the specificity on demand in the PC, mobile, and data center markets.

-S. Hughes (Cyclical long MU)