5.21.24
This was a fireside chat hosted by Harlan Sur. Micron’s CFO and VP of Operations represented the company. This is all Q&A.
- · Tight supply-demand is still the situation on the leading edge. The company expects ASPs to continue to rise throughout calendar 2024.
- · They raised their FY-24 capex forecast from $7.5B to $8.0B, because of investment in HBM capacity.
- · Free cash flow will be positive in Q3 and Q4. Gross margin in the fourth fiscal quarter will be in the low-30s percent.
- · They reiterated that the company expects record revenue in FY-25.
- · The Taiwan earthquake reduced their output by mid-single-digits percent of one quarter’s worth of DRAM production.
- · Data center (non-AI) inventories are on track to normalize by mid-year 2024. PC and mobile customers opportunistically added inventory anticipating tightness.
- · Micron views long-term DRAM bit growth rate to be mid-teens. NAND in the low-20% range for the long term. For Micron, DRAM and NAND wafer capacity is down low-double-digit percent from the peak in 2022. They believe this is similar for the rest of the industry.
- · HBM will be accretive to DRAM and overall gross margins in the current quarter (FQ3-24) and going forward. In FY-25, they expect HBM to be a multi-billion-dollar business for them. HBM in FY-24 will be several hundred million dollars of revenue for the company.
- · HBM demand is creating a tighter market for the rest of the DRAM industry.
- · For calendar year 2025, the LTAs for HBM from Micron including pricing. These bits are mostly allocated for 2025, with the agreements including pricing. I don’t know if this means the price is locked, or if it is locked in a range. The executives didn’t say these are take or pay. This executive team is promotional, so I suspect they are overstating how favorable their HBM contracts are with customers.
- · Micron HBM share is about 4% of bits this year. I think they meant fiscal year in this comment. It was 1-2% in FY-23.
- · Current HBM stacks are 8-die-tall. The next generation product, being sampled now, is a 12-high stack. That will be a calendar 2025 product. This higher density stacked memory increases the number of die available by 50% in each socket.
- · Executive comments on market strength outside of AI felt lukewarm to me. They talked about “AI-rich” and “AI-enabled” PCs and mobile devices having much more memory content. It felt like a reach that this will be a meaningful driver of demand for memory. Bhatia suggested that this cycle would be “more durable” because of this new source of demand. I don’t believe that will come to pass.
- · Their leading DRAM node now is 1-beta and NAND is 232-layer.
- · The 1-gamma DRAM node is on track to be introduced in 2025. This is the first node that requires EUV lithography.
- · Micron has not changed their through-cycle model, first introduced in the 2022 investor day.
Summary
I was underwhelmed with this interview. The two executives didn’t say much new. It left me with a lukewarm view of the non-AI segments of the memory market. The CFO restated that he sees FQ4-24 gross margin will be in the low-thirties percent. This is much lower than what I expect from a market that is increasingly undersupplied. It could be they are being conservative. Also, they may simply be under calling the coming rise in ASPs. The fourth quarter doesn’t begin for another two weeks. It is good to keep in mind that even the leaders of memory companies don’t predict future pricing trends with much accuracy. I believe Micron will update guidance for the third fiscal quarter when they do their next fireside chat on May 30th (next Thursday). I think this because they did the same thing during the last upturn. My guess is the guided range will rise to $6.8B to $7.2B in this update. I thought the company would be seeing more strength outside HBM DRAM today. They didn’t indicate that to be the case in this interview.
-Smooth Hughes (cyclical long MU)