During a conference call to discuss its financial results on Monday (April 10), Micron (Boise, Ida.) disclosed that its total capital expenditures would hit $2.6 billion in fiscal 2006, up from $2 billion from its previous estimate in the period. In fiscal 2005, Micron’s capital spending was about $1.5 billion.

“Capex for 2006 will be $2.6 billion, an increase over the previous guidance, due to picking up the Tech joint venture capex and a pull-in from IM Flash,” said analyst Doug Freedman of American Technology Research Inc.

In fiscal 2007, the company’s capital expenditures are expected to range from $3-to-$3.5 billion, according to Micron.

The spending includes Micron’s own wafer fabs, IM Flash Technologies LLC and Tech Semiconductor Singapore Pte Ltd. IM Flash is a joint NAND flash-memory venture between the company and Intel Corp.

IM Flash makes flash-memory devices in a 300-mm fab in Lehi, Utah. Starting this quarter, Micron itself will begin making flash-memory parts in its own 300-mm fab in Manassas, Virginia.

Founded in 1991, Tech Semiconductor is a joint DRAM venture between Micron, the Singapore Economic Development Board, Canon and Hewlett-Packard. The venture is producing DRAMs based on 0.11-micron technology within its 200-mm fab.

During the conference call, Micron said that it would convert Tech Semiconductor to a 300-mm fab, but it did not elaborate. Tech Semiconductor’s capital spending alone is expected to jump from $200 million in fiscal 2006 to $500 million in fiscal 2007.

Effective as of the beginning of the third quarter of fiscal 2006, Micron began consolidating the operating results of Tech Semiconductor. In the past, Tech Semiconductor operated like a standalone company. Production from Tech Semiconductor has approximated 20-to-25 percent of the company's overall memory production.

Meanwhile, Micron’s second fiscal quarter was mixed, as the chip maker missed Wall Street’s estimates. Micron reported revenue of $1.23 billion and EPS of $0.27 per share. Operating income included a one-time gain of $230 million from Intel for the sale of existing NAND flash memory designs.

“Without this gain, EPS would have been a loss of approximately $0.05,” Freedman said in a report. “Revenue was below our estimate of $1.38 billion and consensus of $1.34 billion. The earnings loss of $0.05 was well below the consensus estimate for a gain of $0.06 and below our estimate for a loss of $0.03.”

There were some positive signs, however. “Demand for CMOS image sensor showed strength in the quarter and demand for mobile phones remains healthy, with Micron gaining from market share wins as well as increased content. The company is also seeing strong demand in notebook computers,” he said.

“We believe that contract pricing in DRAM is poised to increase in 3Q as recent data points indicate a strong PC build,” he said. “The first qualified NAND product out of Virginia is expected to ship this quarter. There was a 30 percent increase in NAND production at Micron in Q2 over Q1, with an additional 20 percent planned for Q3 over Q2.”

Micron is also moving towards 70-nm NAND flash products, “which should help close the cost gap with SanDisk and Toshiba,” he said.

By: DocMemory
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