Micron’s storage business unit
Micron Technology (MU) is looking to leverage its GDDR5 graphics memory solution to grow in the fast-growing segments of the cloud, graphics, and networking. The cloud segment is also driving growth in Micron’s SBU (storage business unit), the company’s second-largest business, accounting for 26% of total revenues in fiscal 2016.
The SBU serves client and enterprise laptops, the cloud, and traditional enterprise servers. This segment has a mixed blend of DRAM (dynamic random access memory) and NAND offerings. One of its key products is the SSD (solid state drive), which is increasingly replacing HDD (hard disk drive) in laptops and PCs (personal computers).
SBU earnings trend
SBU’s earnings are more stable compared to Micron’s other business segments. In fiscal 2016, the segment’s revenue fell 11.5% YoY (year-over-year) to $3.26 billion, while Micron’s overall revenue fell 23% YoY. The weakness in PC storage has been offset, however, by steady demand from cloud customers like Google (GOOG) and Amazon (AMZN), which consistently invest in servers.
SBU growth drivers and the cloud
At the 2017 Analyst Day, Micron’s Vice President of Storage, Darren Thomas, talked about the factors that would drive SBU’s growth in 2017. Thomas stated that the cloud is the fastest-growing segment in SBU. The increasing amounts of data generated from IoT (Internet of things) devices, social media, and other applications have led to the emergence of a large cloud environment. The cloud offers storage space on the network at lower costs than what’s required in setting up servers.
Cloud services maintain huge server farms, and so even a small difference in the cost of hardware, software, and firmware can bring significant cost savings. The increasing adoption of personal digital assistants, at the same time, can increase memory demand in both the device market and the server farm. Although Micron does not supply memory chips for personal assistant devices, it will likely still benefit from the secondary opportunity created in the form of increasing demand for server farms.
Enterprise and client space
In the enterprise space, companies place a lot of importance on performance, which requires more reliable, sustainable, and available sources of memory—and means that NAND (negative AND) has to be closer. And although PC demand has been falling, the demand for SSDs is growing as consumers are adding them externally to extend the lives of their PCs and laptops. At the same time, laptops are increasingly adopting SSDs to make their devices thinner and more secure.
Next, we’ll see how Micron stands to benefit from the above growth drivers.