Micron Technology (MU) is investing in cost-competitive DRAM (dynamic random-access memory) and NAND (negative-AND) technology and high-end memory products. This investment is not only increasing Micron’s capital spending and research and development costs but also yielding the company good returns by reducing costs.
Micron’s revenue and profits are driven by DRAM and NAND ASPs (average selling price), sales volumes, cost per bit, and product mix.
Micron’s DRAM earnings
In the second quarter of fiscal 2019, Micron earned 64% of its revenue from DRAM, lower than last year’s contribution of 71%. Its DRAM revenue fell 28% YoY (year-over-year) and 30% sequentially to $3.77 billion in the second quarter of fiscal 2019. Its sales volumes fell 10%–13%, and its ASP fell 20%–23% as PC CPU (central processing unit) shortages at Intel (INTC), excess DRAM inventory at NVIDIA (NVDA), and a slowdown in spending by data center customers reduced DRAM demand.
Micron’s DRAM industry outlook
Samsung (SSNLF) and SK Hynix also reported significant declines in their memory revenue. Micron expects DRAM demand to recover in the second half of 2019 as customers absorb excess inventory by mid-2019 and new product launches put them back into purchase mode. The company has lowered its DRAM industry demand growth rate for 2019 to the low to mid-teens from 20%.
To keep its supply in line with demand, Micron is reducing its DRAM capacity by 5%. It expects DRAM industry supply bit growth to be in the mid- to high teens in terms of percentage. Micron expects to accelerate DRAM production on its 1Y nanometer node in the second half of fiscal 2019.