Micron’s mobile business
Micron Technology (MU) supplies DRAM (dynamic random-access memory) and NAND (negative-AND) chips to major markets, including mobile. Micron stock has been falling since the start of September due to analyst downgrades. However, the stock rebounded on September 13, a day after Apple (AAPL) announced its iPhone Xs, XR, and X Max.
Micron’s MBU (mobile business unit), which contributes 22% to its revenue, offers TLC (triple-level cell) 3D NAND (negative-AND), low-power DDR4X (double data rate) DRAM (dynamic random-access memory), and managed NAND solutions such as eMMCs (embedded multimedia controller) and MCPs (multichip package), which combine DRAM and NAND on a single chip.
The smartphone market has started to slow, with the two largest smartphone makers, Samsung (SSNLF) and Apple, reporting slowdowns in shipment growth. Micron, however, has reported record revenue in its mobile business driven by an increasing amount of memory content per device.
Smartphones are becoming feature-rich with capabilities such as AR (augmented reality), AI, and facial recognition, which require more DRAM to process such high-resolution data. They also need more NAND to store these data. Micron expects future memory content in an average phone to be similar to what it is today for a flagship phone.
The fiscal first and fourth quarters are seasonally strong quarters for Micron’s MBU, as these periods are when Apple launches its flagship iPhones and many Chinese mobile companies launch their flagship phones. Apple sources memory chips for iPhones from Micron, Samsung, and SK Hynix. During these quarters, MBU revenue tends to rise in the double digits on a sequential basis.
In the fiscal fourth quarter, we expect Micron’s MBU revenue to rise 5% sequentially to $1.8 billion. We expect its growth rate to slow as falling NAND prices partially offset its gains from higher demand. A fall in NAND prices could cause MBU’s operating margin to contract from 49% in the fiscal third quarter to 44% in the fiscal fourth quarter, the same level at which NAND prices fell in the fiscal second quarter.
Next, we’ll look at Micron’s storage business.