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Understanding Micron’s Move to Upgrade DRAM Technology

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Micron’s DRAM strategy at a glance

At a time when companies like Samsung Electronics (SSNLF) are likely to reduce their spending in DRAM (dynamic random access memory) technology, Micron Technology (MU) is continuing to spend on advanced DRAM technology while diversifying its products across profitable segments.

Understanding Micron's Move to Upgrade DRAM Technology

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Micron increases exposure in DRAM

Micron has increased its DRAM exposure in mobile and embedded space and reduced spending in the PC space. Below are a few key details:

  • In July 2013, Micron acquired Japan-based (EWJ) Apple (AAPL) supplier, Elpida, increasing its mobile DRAM shipment volume from 4% to 24%.
  • In fiscal 2015, the company increased its production of low-power DDR4 and LP4 DRAM.
  • In December 2015, it acquired its Taiwanese joint venture partner, Inotera, to gain operational benefit from the latter’s 20nm DRAM production.

Status of 20nm ramp-up

As the above graph shows, Micron has compared the yield generated post the introduction of 25nm and 20nm. In the beginning, 20nm technology suffered from early ramp headwinds, which saw yields fall in fiscal 4Q15. However, the new technology’s combined yield is better than what was achieved for 25nm.

The company expects to start realizing the benefit from fiscal 3Q16 onward, especially after bits produced on 20nm surpass the bits produced on 25nm.

Benefits of 20nm

The 20nm node is critical for advanced mobile and embedded products. The shrink in node size should increase density and performance and thus enable Micron to produce 8GB (gigabyte) parts. Intel (INTC), Micron’s memory partner, should also benefit from the upgrade.

However, Micron will enjoy limited cost benefits from 20nm as rivals Samsung and SK Hynix are already using the 20nm node. This means that DRAM prices have already been adjusted to account for 20nm technology. Micron is thus moving fast on its 1X deployment and expects to introduce it before its rivals can. Specifically, it expects to start 1X manufacturing in Taiwan by early April 2016. Compared to the 20nm node, the 1X node is expected to improve density by 45% and reduce costs by 20%.

With all these efforts, the company expects to increase its DRAM output by 65%–75% and reduce costs by 15%–25% by fiscal 4Q17.

Now let’s analyze Micron’s NAND strategy.

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