Micron’s Current Stock Rally: Is It Different This Time?

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Part 4
Micron’s Current Stock Rally: Is It Different This Time? PART 4 OF 13

Micron Changes Strategy with the Changing Memory Environment

How can China adapt to the changing memory environment?

The dynamics of the memory market are changing as its consumer markets diversify and production becomes more controlled. The diversified memory market is driving demand for specialized memory that can cater to the end-applications requirement. For instance, HBM (high-bandwidth memory) is used in data centers, and GDDR (graphics double data rate) memory is used in graphics cards.

These changing dynamics would ease the global oversupply concerns stemming from the Chinese (FXI) government’s attempt to manufacture memory chips. China is struggling to manufacture commoditized memory due to the lack of intellectual property. The increasing adoption of specialized memory in different markets would push China further behind in technology.

Micron Changes Strategy with the Changing Memory Environment

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Micron changes its strategy with a changing memory market

Micron (MU) is changing with the shifting industry. Its CEO, Sanjay Mehrotra, is looking to tap these secular trends by focusing the company’s products on high-value solutions. During the fiscal 4Q17 earnings call, Mehrotra highlighted Micron’s strategic priorities:

  • Micron looks to improve its cost competitiveness by increasing the percentage of output produced on leading-edge technologies.
  • Micron looks to improve execution by delivering customers’ desired solutions that are in line with their product launches.
  • Micron wants to accelerate its transition to high-value solutions and has created a center of excellence for DRAM (dynamic random access memory) and NAND (negative AND).
  • Micron looks to develop deeper collaboration and partnerships with marquee customers.
  • Micron is focusing on bringing in top industry talent. As it looks to expand its NAND business, it recently hired several key people from the second-largest NAND manufacturer, SanDisk, which was acquired by Western Digital (WDC).

Micron (MU) has increased its capital expenditure from $5.0 billion in fiscal 2017 to $7.5 billion in fiscal 2018. Its capital expenditure coincides with memory demand. This time, the company is spending on a disruptive technology change brought about by the advent of AI (artificial intelligence) and the increasing number of memory applications. The magnitude of this change is so large that it could reduce Micron’s cyclicality and increase its stability.

Micron offers HBM technology that maximizes performance while reducing power consumption. The company also offers automotive-grade LPDDR (low-power double data rate) memory and plans to offer high-bandwidth GDDR6 memory products for automotive applications.

Micron is also looking to reduce its costs by transitioning to advanced manufacturing processes. Next, we’ll look at Micron’s technology roadmap.


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