MU conference call notes:https://finance.yahoo.com/news/micron-technology-inc-nasdaq-mu-163820417.html
Johnny: Just time to quickly scan the call transcript. The key take aways for me are decline in traditional PC sales and server sales offset by AI sales. The fact the 10 times the memory is required by a AI server is just offsetting traditional PC and server sales declines means AI is growing but not significantly as large an opportunity yet as being projected by analysts. Automotive sales seem to be stable. PC and mobile are projected to be down. Pricing is a issue as customers are demand better pricing due to supply glut in production and inventory.
"The ongoing improvement of customer inventories and memory content growth are driving higher industry demand, while production cuts across the industry continue to help reduce excess supply. As a result, pricing trends are improving, and we have increased confidence that the industry has passed the bottom for both quarterly revenue and year-on-year revenue growth. Our technology leadership and strengthening product portfolio position us well across diverse growth markets, including AI and memory-centric computing. Beyond this downturn, we expect to see record TAM in calendar 2025 along with a return to more normalized levels of profitability."
"The impact of the May 21 decision by the Cyberspace Administration of China on Micron's business remains uncertain and fluid. Several Micron customers, including mobile OEMs, have been contacted by certain critical information infrastructure operators or representatives of the government in China concerning the future use of Micron products. As discussed before, Micron's revenue with companies headquartered in mainland China and Hong Kong, including direct sales as well as indirect sales through distributors, accounts for approximately a quarter of Micron's worldwide revenue and remains the principal exposure. We currently estimate that approximately half of that China-headquartered customer revenue, which equates to a low double-digit percentage of Micron's worldwide revenue, is at risk of being impacted."
"Customers continued to make progress in reducing their excess inventory in fiscal Q3. Most customer inventories in the PC and smartphone segments are close to normal levels now, consistent with our forecast six months ago. Some of these inventory levels can get distorted by customer attempts to leverage current prices, which are deemed to be transient and unsustainable at these levels, to purchase additional volumes before prices rise significantly. Data center customer inventory is also improving and will likely normalize around the end of this calendar year or somewhat thereafter, depending on the growth in traditional data center spending."
In data center, we saw strong sequential revenue growth in both cloud and enterprise in fiscal Q3, driven by some recovery from depressed sales levels in fiscal Q2. The recent acceleration in the adoption of generative AI is driving higher-than-expected industry demand for memory and storage for AI servers, while traditional server demand for mainstream data center applications continues to be lackluster. Micron's product portfolio and roadmap of innovative products position us to capture growth opportunities from AI and data-centric computing architectures for both training and inferencing. Increasingly large AI models with an exponentially growing number of parameters are driving demand for dramatically higher memory content. As we have said before, AI servers have six to eight times the DRAM content of a regular server and three times the NAND content."
"In fact, some customers are deploying AI compute capability with substantially higher memory content. A striking example is NVIDIA's DGX GH200 supercluster, which shows just how memory-intensive AI workloads can be; it provides developers the ability to support giant models with a massive, shared memory space of 144TB."
"Inventory levels are stabilizing at distribution partners and at the majority of our customers. As a result, we expect an improvement in demand in the second half of calendar 2023. We are excited about our growth prospects in this market, as industrial customers continue to adopt and implement IoT, AI, and machine learning in the factory. Now, turning to industry outlook. Our expectations for calendar 2023 industry bit demand growth have been further reduced to low- to mid-single digits in DRAM and to high-single digits in NAND, which are well below the expected long-term CAGR of mid-teens percentage range in DRAM and low 20%s range in NAND. While the AI-driven demand has been stronger than our expectations three months ago, the PC, smartphone and traditional server demand forecasts are now lower."
"While the industry demand forecast for calendar 2023 is now lower, the significant supply reductions across the industry have started to stabilize the market. We see both DRAM and NAND year-over-year supply growth to be negative for the industry in calendar 2023 as utilization and CapEx cuts across the industry impact supply growth. While supply demand balance is improving, due to the excess inventory, profitability and cash flow will remain extremely challenged for some time. Market recovery can accelerate if there is further reduction in industry production and these cuts are sustained well into calendar 2024."
"NAND revenue increased 14% sequentially, with bit shipments increasing in the upper 30% range and prices declining in the mid-teens percentage range. Now turning to revenue by business unit. Compute and Networking Business Unit revenue was $1.4 billion, up 1% sequentially. Strong sequential growth in server and graphics revenues was offset by a decline in client. Embedded Business Unit revenue was $912 million, up 5% sequentially. On a sequential basis, automotive and consumer revenues were strong. Revenue for the Mobile Business Unit was $819 million, down 13% sequentially due to timing of shipments. As Sanjay mentioned, we expect growth in mobile revenues in fiscal Q4. Revenue for the Storage Business Unit was $627 million, up 24% sequentially and driven by increased shipments across most of the portfolio." |
