Micron says it did right thing with Lehi plant
Associated Press
BOISE — Manufacturing computer memory chips continues to be a money-losing venture for Micron Technology Inc., which will keep it's unfinished fabrication plant in Lehi in mothballs until conditions change.
"We did the right thing," Micron President Steve Appleton told stockholders at the company's annual meeting on Thursday. "It's common to build and not use a factory until the market is ready. It's sitting there, ready to equip when we need it."
The plummeting price of computer memory chips has cost Micron Technology Inc.'s bottom line, but the company's ability to pare manufacturing costs has placed it in excellent financial shape, he said.
"We know the market cycles. This currently is reflective of the fourth cycle since I've been here," Appleton said at the annual shareholders' meeting on Thursday.
Micron lost $234 million last year due to the average selling price of chips, which declined 60 percent. It dropped $93 million in the fourth quarter of fiscal 1998 and lost $46 million in the first quarter of the current year.
But the Boise-based manufacturer also became a worldwide concern last September when it acquired most of Texas Instruments' computer memory business.
Last September, Micron also sold 15.8 million shares of stock to the Intel Corp. microprocessor manufacturer for $500 million. It made available to Intel a percentage of its chip output over a five-year period.
Micron also completed a stock-for-stock merger with Rendition Inc., which produces graphics accelerators for personal computers. Rendition shareholders got about 3.7 million shares of stock.
Micron's stock is selling for more than $70 a share this week, the highest price in more than three years.
The company's investment balance increased from $650 million last Sept. 3 to $1.9 billion on Dec. 3, primarily due to financing from the Texas Instruments acquisition and Intel investment.
The average selling price of Micron's top memory chip product, the 64 Meg SDRAM, increased 8 percent in the first quarter of this year. In the same time, total chip production rose 10 percent, while the production cost remained unchanged.
"Our cost-reduction efforts over the last two years have been nothing short than phenomenal," Appleton said. The company plans to spend about $325 million this year designing and perfecting its products and equipment, a 20 percent increase from 1998.
Last year, Micron lobbied to prevent the International Monetary Fund from handing over tax dollars to its competitors in South Korea.
Micron began construction on the Lehi plant in 1995 just before Asian competetition made finishing the plant impractical.
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