Investment in emerging technology
In the previous part of this series, we discussed how Micron (MU) is improving its operational efficiency. Additionally, in the long term the company will look to boost revenues by introducing emerging technologies. In fiscal 2015, it developed a breakthrough non-volatile memory technology, 3D XPoint (cross-point), in collaboration with Intel (INTC). The technology is expected to replace NAND flash memory and DRAM (dynamic random-access memory) used in PCs (personal computers) and deliver high performance for big data applications.
Application of 3D XPoint
3D XPoint has been in the news for the past few months. In the fiscal 4Q15 earnings call, Micron CEO (chief executive officer) Mark Durcan shed some light on the type of customer base this technology will target. He stated that 3D XPoint will enhance the PC experience, especially in gaming. It will also attract customers from system and enterprise storage applications or emerging medical diagnostic application. In regards to application, Micron CFO (chief financial officer) Ernie Maddock said, “think in terms of anywhere where you want a large in-memory database or anywhere where you want ultra high-performance storage systems.”
Intel bullish about 3D XPoint and 3D NAND
At a Raymond James event on September 22, 2015, Micron’s vice president of investor relations Kipp Bedard stated that Intel might consider manufacturing 3D XPoint and 3D NAND separately from its Micron joint venture. Intel expects the demand for these products to outgrow Micron’s wafer capacity. If these expectations come true, Micron would enjoy strong growth in the long run.
Both companies are developing individual products based on the 3D XPoint technology and will sample it with some select customers at the end of the calendar year 2015. If the technology proves to be a success, Micron will be in a strong competitive position.
If you are interested in Intel and Micron you can invest in the PowerShares QQQ ETF (QQQ). It has 3% exposure in Intel and 0.3% in Micron. In the next part, we’ll see how Micron leverages its product mix strategy to boost gross margins.