Mark Murphy (Micron CFO) interview with WF hardware and semiconductor analysts. These are the highlights.
Mark Murphy Prepared Comments:
- The 20% reduction in wafer starts (both DRAM and NAND) is relative to their FQ4-22 production levels
- The memory environment is very tough right now. Customers are working down inventory and there is weak end demand as well.
- While not providing guidance, pricing is trending well below what they expected at the beginning of the quarter
- Customers are entering calendar 2023 with high levels of inventory and the macro environment is weak
- Micron believes their DRAM production will contract sequentially. NAND production will increase slightly. These are both in terms of bits. The company believes bit demand will grow but that it will be below the long-term averages.
- The company believes the second half of their FY-23 will be higher in sales than the first half. That period begins in March of 2023.
- The market is grossly oversupplied and Micron can’t reverse this alone. This is a signal to Hynix and Samsung that they also need to reduce supply growth.
- Micron pools inventory, so if one memory type is soft enough to need an inventory write-down, they might not have to do that if the other memory type has high enough inventory value to make up for it
- The first fiscal quarter (the one now) will have free cash flow of more than $1.5B negative
- The long-term supply agreements they have with customers are giving Micron a level of detail into customer inventories and the demand they are seeing that was not previously available
- PC and Smartphone segments are still quite weak. This is the echo of the Pandemic as well as a soft macro environment.
- They believe end demand is still strong in data center but those customers are working down inventories
- The declines in memory revenue declines in the last few months has not been seen since the deflation of the post dot.com period
The memory market is worse than they thought it would be, even two months ago. This is weakness not seen in twenty years. When the market turns, it will be a sharp recovery, though that recovery seems to be further out than previously forecasted. I think an investment in Micron is dead money for at least four more months. They way to make money in the stock between now and the upturn is to trade the range with options. When it does turn, the increase in the share price will be sharp. If you are caught short when that happens, you will be run over by a freight train.
– S. Hughes (long MU)