Wednesday, January 10, 2018
Shares of Micron Technology (MU) are down $1.91, or 4%, at $43.64, following an appearance this morning by chief financial officer Ernie Maddock at an investment meeting held by J.P. Morgan, in which he was interviewed on stage by JPM analyst Harlan Sur.
The meeting was in conjunction with the Consumer Electronics Show trade show taking place in Las Vegas this week.
The discussion between the two included contemplation of falling prices for NAND flash chips, which Sur said has been “a particular concern of the market."
Maddock brushed aside the worry, saying that the expected amount of increase in “bit supply,” the basic measure of how much is produced by the industry in total, is 40% to 50% this year, and that such a level of production can easily be absorbed by rising demand.
“This has the setup to be an incredibly healthy environenrnt,” said Maddock:
At that level of bit supply, our belief is there is ample demand to absorb that level of bit supply. Remember, it is healthy for pricing to come down and follow the cost curve. That is way markets expand. That is the way that we will penetrate more of the client SSD market. That's the way densities will increase.
Sur kicked things off by asking Maddock about the announcement yesterday morning that Micron and Intel (INTC), its partner in NAND flash chip manufacturing, will be going separate ways after they finish the next version of 3-D NAND.
Maddock told Sur that the agreement does not change the joint use of the NAND fabs in Utah. He called the change “focused,” in that the companies will continue to work on the so-called Optane chips at that factory (formerly known as “3-D Xpoint”), while the shifting priorities for the two in their respective markets meant having to take diverging “technical roadmaps” for NAND.
But Sur pressed Maddock on what happens when Intel’s support of R&D costs goes away, and when Intel’s purchase of NAND goes away, saying “You've been obviously selling your bits to Intel at cost, and you're going to be able to take all of that now and sell it at fair market value."
Maddock noted that there is “natural expiration” to Micron’s agreement to sell parts to Intel, and implied there could at some point be “another agreement” between the two. He said Micron expects that the R&D expense for NAND, on the order of $10 million to $15 million, said Micron can “sustain that,” adding “I wouldn’t expect that there would be any sudden or dramatic increasing beyond those levels."
Sur prompted Maddock about cloud computing and other markets for solid-state drive (SSD) flash chips, and Maddock said the comapny intends to increase its share of SSDs from “mid single digits” to “upper single digits.” He said the company is going to “introduce a broader portfolio of products” for SSDs, “so this isn’t just a pipe dream."
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