To whom does Micron sell?
So far in this series, we’ve looked at Micron Technology’s (MU) business structure, operations, and strategies to stay competitive in the consolidating memory space. Now we’ll explore what markets the company serves, and how.
Micron manufactures advanced memory chips that are primarily sold to technology and automotive manufacturers.
Customer base by end product
Micron’s tag line “Our Memory Your Innovation” speaks to its products and customers. The company largely caters to PC (personal computer) and storage manufacturers. The Hewlett-Packard Company (HPQ), Intel Corporation (INTC) and Kingston account for ~30% of Micron’s net sales.
However, Micron is facing the heat of slowdown in PC shipments and is now eyeing the mobile space. It acquired Japan’s only mobile DRAM manufacturer Elpida, which increased the net sales from its mobile segment to 20% in fiscal 2014 from 15% a year before. The acquisition proved particularly fruitful for Micron, as Elpida won a huge order for Apple’s (AAPL) iPhone 5.
Customer base by geography
Even though Micron’s major operations are in the US, the country accounts for only 16% of the company’s net sales. Its biggest market is China (FXI), accounting for 41% of net sales in fiscal 2014, as most of the world’s smartphones and computers are manufactured here. The large concentration of sales in Asian country’s exposes Micron to risks associated with changes in foreign currency, export and import duties, and political and economic instability.
How does Micron sell its products?
The company sells its products under the Micron, SpecTek, Crucial, Lexar, and Elpida brand names and private labels. Depending on the type of the target customer, the company also sells its products through the following channels:
- independent sales representatives
- direct to customer via web
Customers avoid entering into long-term, fixed-price contracts due to demand fluctuations and industry conditions. They place orders when they require, making it difficult for Micron to predict order volumes and maintain sufficient inventory. The company maintains inventory at locations near its key customers in order to facilitate the rapid delivery of products, and it adjusts the terms of the contract to reflect market conditions at the date of shipment.
In the next part of this series, we’ll look at external risks that could threaten Micron’s operations.