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$MU is reporting next week. Key points of the CFO's recent talk at the JPM conference:
- We are seeing pockets in the marketplace of price stabilization. In some isolated cases, we've actually seen some price increases (DDR5).
- We are seeing bit growth across DRAM and NAND. As we said in March, we feel that we're closer to a period of sequential growth revenue growth. The bits bottomed in November as we had expected. We saw a bit growth in the February quarter, and then we see bit growth again in this May quarter. Importantly, we're also seeing customer inventories coming down at a gradual pace.
- China and Hong Kong headquarter companies represent about 16% of our revenues. In addition, we have distributors that sell to China headquartered companies. We estimate that the combined direct sales and indirect sales through distributors to China headquarter companies is about 1/4 of our total revenue. We are evaluating what portion of our sales could be impacted by a critical information infrastructure ban. We are currently estimating a range of impact in the low single-digits percent of our company total revenue at the low end and high single-digit percentage of total company revenue at the high end.
- So PCs and mobiles are sort of ground zero and got hit very hard in the summer. The inventories have been getting worked down in PCs and smartphones for a long time now. So inventory levels are healthier than for data center. The data center was a disappointment in our February quarter. I mean it was much weaker than we had expected. And it was just customer inventory levels coming down more than anticipated. Was that related to a pause in hyperscale spend? Was it related to enterprise-related server? Not clear. Now we expect to see the May quarter stronger. We believe, a stronger second half, and that will help the inventories reach relatively healthy levels by the end of the calendar year.
- We have an outstanding DDR5 product on our 1-beta. And that product, our 1-beta technology has over 35% greater bit density, 15% better power consumption than 1-alpha.
- AI is very memory-intensive applications. And that's both on the training side and on inferencing. So it's going to be a strong growth vector for the business. It's going to drive DDR5 product volume now. On HBM, that's a very small portion of revenues right now. But we have a good product that's going to be qualified later this year that we think it puts us in a great position as that market grows out for AI.
- JPM analyst: 'And AI-based servers represent only mid-single digits of total server shipments. But an AI-based server carries anywhere from 3x to 5x more DRAM and NAND content versus a general-purpose cloud server.'
- We're still working on 1-gamma in DRAM. And as we said on the last call, that's where we see EUV being required. We were able to delay it because of our multi-patterning technology. But we have EUV tools in Taiwan and in Idaho. In fact, we inserted it into one of the layers in our 1-alpha node. And so we've been able to demonstrate it in production and are getting good yields. But of course, it's higher cost. So we will delay deployment in the technology until in the principal flow we need it.
- We've not given gross margin guidance out through the year. We've said that profitability will be challenged at these pricing levels. And so as the supply-demand balance improves, we expect to return to operating margin profitability within our FY '24.
- JPM analyst: 'Cross cycle financial model laid out at Micron’s analyst Day: revenue CAGR target of high single-digit percentage growth; operating margin 30%; EBITDA margin low 50s; capital intensity mid 30s; free cash flow margins > 10%.'
- We're confident that we'll deliver results in line with the cross-cycle model over the long term. But as you said, the downturn was severe, caused by a confluence of unprecedented factors. It's going to take some time for that to normalize. But in the near term, we're making the investments in the new fabs and that will pressure free cash flow a bit on the cross-cycle model. But longer term, we're confident in the profitability and growth of memory and storage.
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