Why LTE adoption in China should drive Micron’s DRAM business
Micron expects that its DRAM business will show better growth in 2015
In the previous part of this series, we discussed the PC business line of Micron’s (MU) DRAM segment and how the PC market’s slower-than-expected decline helped Micron. Although the PC business line contributes about 40% to Micron’s DRAM segment, the PC market is undergoing a structural decline. The Mobile business line contributes about 30% to Micron’s DRAM business in terms of revenues, and this segment would drive the future of Micron’s DRAM business. Although DRAM bit growth was flat in fiscal Q3 2014, Micron expects that the DRAM bit growth rate will range between 20% and 25% in calendar year 2015.
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The smartphone market will grow at an average of 10%
According to Gartner and as the chart above shows, worldwide, about 1 billion smartphones sold in 2013. This market could grow to 1.2 billion in 2014 and then to 1.7 billion by 2018 at a compound annual growth rate (or CAGR) of about 10%. This growth rate is much better than the PC growth rate we discussed in the previous part of this series, which is why the mobile segment could become the most important segment for Micron by 2015. In the earlier part of this series, we also discussed that the acquisition of Elpida helped Micron gain Apple (AAPL) as a customer for its mobile DRAM business. Apple is slated to release the iPhone 6 in September this year, and its success would also drive Micron’s DRAM business growth.
LTE adoption in China will drive mobile growth at Micron
During the conference call to announce fiscal Q3 2014 earnings, Micron’s management specifically discussed the LTE buildout in China and other emerging markets as the driving factor for its mobile segment growth. However, telecom operators in China such as China Mobile (CHL) have plans to completely roll out LTE only by the end of 2014. China Mobile is the world’s biggest telecom provider, with 800 million subscribers, but compared to smaller telecom players in China, such as China Telecom (CHA) and China Unicom (CHU), China Mobile was late to LTE adoption. This could be why Micron expects growth of its DRAM business by 2015.