2.12.25
Micron joined a semiconductor conference hosted by Wolfe research. Here are the highlights from the CFO’s (Mark Murphy) opening comments and Q&A.
- · No change to their guidance for FQ2-25 (the current quarter.)
- · They provided some guidance on FQ2-25, the period from March to June, inclusive. Revenue in that quarter will grow, but gross margins in that quarter will be lower by “a few hundred basis points sequentially,” primarily due to a higher mix of sales into consumer segments and overall NAND industry conditions. Underutilization charges in NAND fabs will weigh on their cost in the third fiscal quarter as well.
- · They believe industry conditions will improve beyond Q3. They are seeing improvement in PC and mobile inventory levels and they expect them to be healthy by the spring. This doesn’t seem to be leading to healthier conditions, at least before early summer, because they are forecasting lower gross margins in the spring. This is where I remind everyone that memory company executives don’t know much more than the rest of us beyond one quarter out. Murphy said content growth in phones and PCs will help demand. They always say that and it never matters.
- · They are seeing stronger volumes than anticipated in consumer markets. That is what is driving the mix higher in FQ3.
- · Bit shipments will be up in the third quarter vs. the second quarter. Bit shipments will also be higher in the second half of the year vs. the first. I don’t know if that second comment is referring to calendar or fiscal year, but I think it is fiscal.
- · Analyst: what happens when Samsung enters the HBM market? Will Micron be able to keep their market share there? Micron believes Samsung will succeed in entering HBM but Micron’s superior technology will allow them to achieve their market share gain.
- · HBM will be accretive to gross margin for Micron in FQ2 and in FQ3. Murphy didn’t sound convincing when he said this. I believe him, but I wonder if they are feeling the pressure of Samsung’s pending entrance.
- · NAND industry conditions are “weak” overall.
- · They believe margin growth will resume in the fourth fiscal quarter of 2025. I think this is a victory of hope over history.
- · There is oversupply in memory today. In NAND, they believe bit demand will grow low-double-digits in 2024 and 2025. Murphy called out the need for discipline in capacity management. He didn’t say it, but they are calling for other companies to reduce their supply.
- · The host asked about China. Murphy said the Chinese serve a different part of the market than Micron does, in both DRAM and NAND. He didn’t address the question about Chinese capacity and bit growth and how it may continue to disrupt the supply-demand balance in the market.
- · Analyst: what gives you confidence that, despite higher CapEx from the industry, that supply demand will get better in the second half of the year. The CFO’s answer started with content growth in smartphones and PCs, not a good sign. He also cited the growing capital expenditure budgets from hyperscalers. This is a compelling argument. Will AI demand stay ahead of HBM supply, even with the full force of Samsung flooding into that segment?
- · What will happen further out, in late 2025 and 2026? The CFO again started with content growth in PCs and a refresh cycle. Then he called out the data center growth projections before closing with Micron’s superior technology position.
The announcement they made about lower gross margin in the third quarter compared to the second had a smaller effect on the market than I thought it would. Investors seem to believe the company when they say the memory markets will improve in FQ4 and beyond. I think the lower guidance for gross margin is a strong indicator that the downturn is imminent. AI demand could continue to grow and stay ahead of supply. I am doubtful that an overall memory market, averaging in the non-AI and AI segments together, that is right on the edge of undersupply and oversupply, will recover in just a couple of quarters. This is not how things have happened in the past.
– S. Hughes (no MU position)