Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MarchDecember 1, 20182022
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to
Commission file number 1-10658
mu-20221201_g1.jpg
Micron Technology, Inc.
(Exact name of registrant as specified in its charter)
Delaware75-1618004
(State or other jurisdiction of incorporation or organization)(IRSI.R.S. Employer Identification No.)
incorporation or organization)
8000 S. Federal Way, Boise, Idaho83716-9632
(Address of principal executive offices)(Zip Code)
Registrant's(Registrant’s telephone number, including area codecode)(208) 368-4000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes T No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes T No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer x
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Accelerated Filer o
Non-Accelerated Filer oTrading Symbol
Name of each exchange on which registered
Common Stock, par value $0.10 per shareMUNasdaq Global Select Market
(Do not
Indicate by check ifmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.YesNo
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).YesNo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company)company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Accelerated Filer
Non-Accelerated FilerSmaller Reporting Companyo
Emerging Growth Companyo
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).YesNo
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x

The number of outstanding shares of the registrant'sregistrants common stock as of MarchDecember 16, 20182022 was 1,159,764,549.1,091,176,552.


Table of Contents
Micron Corporate Profile
mu-20221201_g2.jpg
Founded on October 5, 1978
Headquartered in
Boise, Idaho, USA
4th
Largest semiconductor company
in the world*
127
On the 2022 Fortune 500
~52,000
Patents granted and growing**
17
Countries**
11
Manufacturing sites and
19 customer labs**
~49,000
Team members**
It’s All About Data
Data is today’s new business currency, and memory and storage are a critical foundation for the data economy. Memory and storage innovations will help transform society and enable significant value forall.
Who We Are
Micron designs, develops, and manufactures industry-leading memory and storage products. By providing foundational capability for AI and 5G across data center, the intelligent edge, and consumer devices, we unlock innovation across industries including healthcare, automotive and communications. Our technology and expertise are central to maximizing value from cutting-edge computing applications and new business models which disrupt and advance the industry.
Our Vision
As a global leader in memory and storage solutions, we are transforming how the world uses information to enrich life for all. By advancing technologies to collect, store and manage data with unprecedented speed and efficiency, we lead the transformation of data to intelligence. In a world of change, we remain nimble, delivering products that help inspire the world to learn, communicate and advance faster than ever.
Our Commitment
*Based on Gartner Market Share: Semiconductors by End Market, Worldwide, 2021 (April 2022), excluding IP/software revenue.
**Micron data as of December 1, 2022.
Our customers depend on our innovative solutions every day. We dedicate ourselves to demonstrating our environmental conscience, an inclusive team culture where all voices are heard and respected, and engaging in our communities to enrich life for all.
Media Inquiries
mediarelations@micron.com

Government Inquiries
govaffairs@micron.com

Investor Inquiries
investorrelations@micron.com
Global Product Portfolio
DRAM | NAND | NOR | Solid-State Drives | Graphics and High Bandwidth Memory (HBM) | Managed NAND and Multichip Packages
Connect with us on micron.com
© 2022 Micron Technology, Inc. Micron, the Micron orbit logo, the M orbit logo, Intelligence AcceleratedTM, and other Micron trademarks are the property of Micron Technology, Inc. All other trademarks are the property of their respective owners. Products and specifications are subject to change without notice. Rev 12/22.



Table of Contents
PART I. Financial Information

mu-20221201_g3.jpg 3

Table of Contents
Definitions of Commonly Used Terms

As used herein, “we,” “our,” “us,” and similar terms include Micron Technology, Inc. and its consolidated subsidiaries, unless the context indicates otherwise. Abbreviations, terms, or acronyms are commonly used or found in multiple locations throughout this report and include the following:
TermDefinitionTermDefinition
2023 Notes2.497% Senior Notes due April 2023, repaid November 2021DDRDouble data rate DRAM
2024 Notes4.640% Senior Notes due February 2024, repaid November 2021EBITDAEarnings before interest, taxes, depreciation, and amortization
2024 Term Loan ASenior Term Loan A due October 2024ESGEnvironmental, social, and governance
2025 Term Loan ASenior Term Loan A due November 2025EUVExtreme ultraviolet lithography
2026 Term Loan ASenior Term Loan A due November 2026GDDRGraphics double data rate
2027 Term Loan ASenior Term Loan A due November 2027HBMHigh-bandwidth memory, a stacked DRAM technology optimized for memory-bandwidth intensive applications
2026 Notes4.975% Senior Notes due February 2026InoteraInotera Memories, Inc.
2027 Notes4.185% Senior Notes due February 2027LIBORLondon Interbank Offered Rate
2029 A Notes5.327% Senior Notes due February 2029LPDRAMLow-power DRAM
2029 B Notes6.750% Senior Notes due November 2029MCPMultichip packaged solutions with managed NAND and LPDRAM
2030 Notes4.663% Senior Notes due February 2030MicronMicron Technology, Inc. (Parent Company)
2032 Green Bonds2.703% Senior Notes due April 2032QimondaQimonda AG
2041 Notes3.366% Senior Notes due November 2041Revolving Credit Facility$2.5 billion Revolving Credit Facility due May 2026
2051 Notes3.477% Senior Notes due November 2051SOFRSecured Overnight Financing Rate
AIArtificial intelligenceSSDSolid state drive






Micron Technology, Inc., including its consolidated subsidiaries, isWe are an industry leader in innovative memory and storage solutions. Through our global brands – Micron®, Crucial®, and Ballistix® – our broad portfolio of high-performance memory and storage technologies, including DRAM, NAND, NOR Flash, and 3D XPointTM memory, issolutions transforming how the world uses information to enrich life. Backed by nearly 40 years oflife for all. With a relentless focus on our customers, technology leadership, ourand manufacturing and operational excellence, Micron delivers a rich portfolio of high-performance DRAM, NAND, and NOR memory and storage solutions enable disruptive trends, includingproducts through our Micron® and Crucial® brands. Every day, the innovations that our people create fuel the data economy, enabling advances in artificial intelligence machine learning, and autonomous vehicles, in key market segments like cloud,5G applications that unleash opportunities — from the data center networking,to the intelligent edge and mobile.across the client and mobile user experience.


Micron, Crucial, Ballistix, any associated logos, and all other Micron trademarks are the property of Micron. Intel and 3D XPoint is a trademarkare trademarks of Intel in the United States and/Corporation or other countries.its subsidiaries. Other product names or trademarks that are not owned by Micron are for identification purposes only and may be the registered or unregistered trademarks of their respective owners.


Available Information

Investors and others should note that we announce material financial information about our business and products through a variety of means, including our investor relations website (investors.micron.com), filings with the U.S. Securities and Exchange Commission (“SEC”), press releases, public conference calls, blog posts (micron.com/about/blog), and webcasts. We use these channels to achieve broad, non-exclusionary distribution of information to the public and for complying with our disclosure obligations under Regulation FD. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on such channels.


4 |2023 Q1 10-Q

Table of Contents
Forward-Looking Statements


This Form 10-Q contains trend information and other forward-looking statements that involve a number of risks and uncertainties. Forward-lookingSuch forward-looking statements may be identified by words such as "anticipate," "expect," "intend," "pledge," "committed," "plan," "opportunities," "future," "believe," "target," "on track," "estimate," "continue," "likely," "may," "will," "would," "should," "could," and variations of such words and similar expressions. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. Specific forward-looking statements include, but are not limited to, statements such as those made regarding restructure plans and related charges; market conditions and profitability in our industry; reductions in our wafer starts and the corresponding impact on our costs in 2023; the timing for construction and ramping of product introductions; our expected NAND development activities with Intel;production for new memory manufacturing fabs in the effectUnited States; the receipt of U.S.government grants and investment tax reform; our expectation to engage, from time to time, in additional financing transactions;credits; the sufficiency of our cash and investments, cash flows from operations, and available financing to meet our requirements for at least the next 12 months; andinvestments; capital spending in 2018. We are under no obligation to update these forward-looking statements.2023; funding of sustainability-focused projects; and allocation and dispersal of the net proceeds of our 2032 Green Bonds. Our actual results could differ materially from our historical results and those discussed in the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, those identified in "Part II,“Part II. Other Information – Item 1A. Risk Factors."

Definitions of Commonly Used Terms

As used herein, "we," "our," "us," and similar terms include Micron Technology, Inc. and our consolidated subsidiaries, unless the context indicates otherwise. Abbreviations, terms, or acronyms are commonly used or found in multiple locations throughout this report and include the following:
mu-20221201_g3.jpg 5
TermDefinitionTermDefinition
2021 MSAC Term LoanVariable Rate MSAC Senior Secured Term Loan due 2021IntelIntel Corporation
2021 MSTW Term LoanVariable Rate MSTW Senior Secured Term Loan due 2021Japan CourtTokyo District Court
2022 Term Loan BSenior Secured Term Loan B due 2022MicronMicron Technology, Inc. (Parent Company)
2023 Notes5.25% Senior Notes due 2023MMJMicron Memory Japan, Inc.
2023 Secured Notes7.50% Senior Secured Notes due 2023MMJ GroupMMJ and its subsidiaries
2024 Notes5.25% Senior Notes due 2024MMTMicron Memory Taiwan Co., Ltd.
2025 Notes5.50% Senior Notes due 2025MSPMicron Semiconductor Products, Inc.
2026 Notes5.63% Senior Notes due 2026MSTWMicron Semiconductor Taiwan Co., Ltd.
2032C Notes2.38% Convertible Senior Notes due 2032MTTWMicron Technology Taiwan, Inc.
2032D Notes3.13% Convertible Senior Notes due 2032QimondaQimonda AG
2033 Notes2033E and 2033F NotesR&DResearch and Development
2033E Notes1.63% Convertible Senior Notes due 2033SG&ASelling, General, and Administrative
2033F Notes2.13% Convertible Senior Notes due 2033SSDSolid-State Drive
2043G Notes3.00% Convertible Senior Notes due 2043Tera ProbeTera Probe, Inc.
IMFTIM Flash Technologies, LLCTLCTriple-Level Cell
InoteraInotera Memories, Inc.VIEVariable Interest Entity


Table of Contents


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS


MICRON TECHNOLOGY, INC.Micron Technology, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONSConsolidated Statements of Operations
(inIn millions, except per share amounts)
(Unaudited)

Three months endedDecember 1,
2022
December 2,
2021
Revenue$4,085 $7,687 
Cost of goods sold3,192 4,122 
Gross margin893 3,565 
Research and development849 712 
Selling, general, and administrative251 259 
Restructure and asset impairments13 38 
Other operating (income) expense, net(11)(75)
Operating income (loss)(209)2,631 
Interest income88 10 
Interest expense(51)(45)
Other non-operating income (expense), net(4)(75)
(176)2,521 
Income tax (provision) benefit(8)(219)
Equity in net income (loss) of equity method investees(11)
Net income (loss)$(195)$2,306 
Earnings (loss) per share
Basic$(0.18)$2.06 
Diluted(0.18)2.04 
Number of shares used in per share calculations
Basic1,090 1,119 
Diluted1,090 1,130 
 Quarter ended Six months ended
 March 1,
2018
 March 2,
2017
 March 1,
2018
 March 2,
2017
Net sales$7,351
 $4,648
 $14,154
 $8,618
Cost of goods sold3,081
 2,944
 6,137
 5,903
Gross margin4,270
 1,704
 8,017
 2,715
        
Selling, general, and administrative196
 187
 387
 346
Research and development523
 473
 971
 943
Other operating (income) expense, net(16) 
 (5) 23
Operating income3,567
 1,044
 6,664
 1,403
        
Interest income27
 8
 50
 15
Interest expense(88) (161) (212) (300)
Other non-operating income (expense), net(53) 34
 (257) 20
 3,453
 925
 6,245
 1,138
        
Income tax (provision) benefit(143) (38) (257) (69)
Equity in net income (loss) of equity method investees1
 7
 1
 5
Net income3,311
 894
 5,989
 1,074
        
Net (income) attributable to noncontrolling interests(2) 
 (2) 
Net income attributable to Micron$3,309
 $894
 $5,987
 $1,074
        
Earnings per share       
Basic$2.86
 $0.81
 $5.23
 $1.00
Diluted2.67
 0.77
 4.86
 0.95
        
Number of shares used in per share calculations       
Basic1,156
 1,099
 1,145
 1,070
Diluted1,238
 1,160
 1,232
 1,125











See accompanying notes to consolidated financial statements.

6 |2023 Q1 10-Q


MICRON TECHNOLOGY, INC.Micron Technology, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEConsolidated Statements of Comprehensive Income (Loss)
(inIn millions)
(Unaudited)

Three months endedDecember 1,
2022
December 2,
2021
Net income (loss)$(195)$2,306 
Other comprehensive income (loss), net of tax
Gains (losses) on derivative instruments108 (86)
Pension liability adjustments— 
Gains (losses) on investments(19)(7)
Foreign currency translation adjustments(3)— 
Other comprehensive income (loss)87 (93)
Total comprehensive income (loss)$(108)$2,213 
 Quarter ended Six months ended
 March 1,
2018
 March 2,
2017
 March 1,
2018
 March 2,
2017
Net income$3,311
 $894
 $5,989
 $1,074
        
Other comprehensive income (loss), net of tax       
Gain (loss) on derivatives, net18
 
 15
 (7)
Pension liability adjustments2
 
 1
 (1)
Gain (loss) on investments, net(1) 
 (2) (1)
Foreign currency translation adjustments
 
 
 37
Other comprehensive income (loss)19
 
 14
 28
Total comprehensive income3,330
 894
 6,003
 1,102
Comprehensive (income) attributable to noncontrolling interests(2) 
 (2) 
Comprehensive income attributable to Micron$3,328
 $894
 $6,001
 $1,102



































See accompanying notes to consolidated financial statements.

mu-20221201_g3.jpg 7


MICRON TECHNOLOGY, INC.Micron Technology, Inc.

CONSOLIDATED BALANCE SHEETSConsolidated Balance Sheets
(inIn millions, except par value amounts)
(Unaudited)

As ofDecember 1,
2022
September 1,
2022
Assets
Cash and equivalents$9,574 $8,262 
Short-term investments1,007 1,069 
Receivables3,318 5,130 
Inventories8,359 6,663 
Other current assets663 657 
Total current assets22,921 21,781 
Long-term marketable investments1,426 1,647 
Property, plant, and equipment39,335 38,549 
Operating lease right-of-use assets693 678 
Intangible assets428 421 
Deferred tax assets672 702 
Goodwill1,228 1,228 
Other noncurrent assets1,171 1,277 
Total assets$67,874 $66,283 
Liabilities and equity
Accounts payable and accrued expenses$5,438 $6,090 
Current debt171 103 
Other current liabilities916 1,346 
Total current liabilities6,525 7,539 
Long-term debt10,094 6,803 
Noncurrent operating lease liabilities625 610 
Noncurrent unearned government incentives516 589 
Other noncurrent liabilities808 835 
Total liabilities18,568 16,376 
Commitments and contingencies
Shareholders’ equity
Common stock, $0.10 par value, 3,000 shares authorized, 1,232 shares issued and 1,091 outstanding (1,226 shares issued and 1,094 outstanding as of September 1, 2022)123 123 
Additional capital10,335 10,197 
Retained earnings46,873 47,274 
Treasury stock, 141 shares held (132 shares as of September 1, 2022)(7,552)(7,127)
Accumulated other comprehensive income (loss)(473)(560)
Total equity49,306 49,907 
Total liabilities and equity$67,874 $66,283 
As of March 1,
2018
 August 31,
2017
Assets    
Cash and equivalents $7,828
 $5,109
Short-term investments 214
 319
Receivables 4,437
 3,759
Inventories 3,184
 3,123
Other current assets 173
 147
Total current assets 15,836
 12,457
Long-term marketable investments 520
 617
Property, plant, and equipment, net 21,864
 19,431
Intangible assets, net 348
 387
Deferred tax assets 1,026
 766
Goodwill 1,228
 1,228
Other noncurrent assets 441
 450
Total assets $41,263
 $35,336
     
Liabilities and equity    
Accounts payable and accrued expenses $4,194
 $3,664
Deferred income 427
 408
Current debt 1,514
 1,262
Total current liabilities 6,135
 5,334
Long-term debt 7,802
 9,872
Other noncurrent liabilities 746
 639
Total liabilities 14,683
 15,845
     
Commitments and contingencies 

 

     
Redeemable convertible notes 14
 21
     
Micron shareholders' equity    
Common stock, $0.10 par value, 3,000 shares authorized, 1,165 shares issued and 1,158 outstanding (1,116 shares issued and 1,112 outstanding as of August 31, 2017) 116
 112
Additional capital 9,604
 8,287
Retained earnings 16,247
 10,260
Treasury stock, 7 shares (4 shares as of August 31, 2017) (313) (67)
Accumulated other comprehensive income 43
 29
Total Micron shareholders' equity 25,697
 18,621
Noncontrolling interests in subsidiaries 869
 849
Total equity 26,566
 19,470
Total liabilities and equity $41,263
 $35,336




See accompanying notes to consolidated financial statements.

8 |2023 Q1 10-Q


MICRON TECHNOLOGY, INC.Micron Technology, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWSConsolidated Statements of Changes in Equity
(in millions)In millions, except per share amounts)
(Unaudited)
Six months ended March 1,
2018
 March 2,
2017
Cash flows from operating activities    
Net income $5,989
 $1,074
Adjustments to reconcile net income to net cash provided by operating activities  
  
Depreciation expense and amortization of intangible assets 2,241
 1,774
Amortization of debt discount and other costs 55
 63
Loss on debt repurchases and conversions 218
 1
Stock-based compensation 103
 101
Gain on remeasurement of previously-held equity interest in Inotera 
 (71)
Change in operating assets and liabilities  
  
Receivables (630) (773)
Inventories (62) 174
Accounts payable and accrued expenses 93
 399
Payments attributed to intercompany balances with Inotera 
 (361)
Deferred income taxes, net (262) 59
Other noncurrent liabilities 229
 (23)
Other 10
 126
Net cash provided by operating activities 7,984
 2,543
     
Cash flows from investing activities  
  
Expenditures for property, plant, and equipment (4,217) (2,428)
Purchases of available-for-sale securities (502) (803)
Payments to settle hedging activities (28) (249)
Acquisition of Inotera 
 (2,634)
Proceeds from sales of available-for-sale securities 562
 548
Proceeds from maturities of available-for-sale securities 138
 72
Proceeds from settlement of hedging activities 111
 74
Other 93
 35
Net cash provided by (used for) investing activities (3,843) (5,385)
     
Cash flows from financing activities  
  
Repayments of debt (3,379) (556)
Payments on equipment purchase contracts (153) (33)
Proceeds from issuance of stock 1,554
 68
Proceeds from issuance of debt 650
 2,961
Other (92) (99)
Net cash provided by (used for) financing activities (1,420) 2,341
     
Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash 4
 (33)
     
Net increase (decrease) in cash, cash equivalents, and restricted cash 2,725
 (534)
Cash, cash equivalents, and restricted cash at beginning of period 5,216
 4,263
Cash, cash equivalents, and restricted cash at end of period $7,941
 $3,729
Common StockAdditional CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive
Income (Loss)
Total Shareholders’ Equity
Number
of Shares
Amount
Balance at September 1, 20221,226$123 $10,197 $47,274 $(7,127)$(560)$49,907 
Net income (loss)— — — (195)— — (195)
Other comprehensive income (loss), net— — — — — 87 87 
Stock issued under stock plans— — — — 
Stock-based compensation expense— — 146 — — — 146 
Repurchase of stock - repurchase program— — — — (425)— (425)
Repurchase of stock - withholdings on employee equity awards(2)— (15)(80)— — (95)
Dividends and dividend equivalents declared ($0.115 per share)— — — (126)— — (126)
Balance at December 1, 20221,232$123 $10,335 $46,873 $(7,552)$(473)$49,306 



Common StockAdditional CapitalRetained EarningsTreasury StockAccumulated Other Comprehensive
Income (Loss)
Total Shareholders’ Equity
Number
of Shares
Amount
Balance at September 2, 20211,216$122 $9,453 $39,051 $(4,695)$$43,933 
Net income (loss)— — — 2,306 — — 2,306 
Other comprehensive income (loss), net— — — — — (93)(93)
Stock issued under stock plans— — — — 
Stock-based compensation expense— — 118 — — — 118 
Repurchase of stock - repurchase program— — — — (259)— (259)
Repurchase of stock - withholdings on employee equity awards(1)— (12)(90)— — (102)
Balance at December 2, 20211,220$122 $9,564 $41,267 $(4,954)$(91)$45,908 

See accompanying notes to consolidated financial statements.

mu-20221201_g3.jpg 9


MICRON TECHNOLOGY, INC.Micron Technology, Inc.

Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
Three months endedDecember 1,
2022
December 2,
2021
Cash flows from operating activities
Net income (loss)$(195)$2,306 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:  
Depreciation expense and amortization of intangible assets1,921 1,671 
Stock-based compensation146 118 
(Gain) loss on debt repurchases— 83 
Change in operating assets and liabilities:  
Receivables1,842 67 
Inventories(1,697)(344)
Accounts payable and accrued expenses(1,056)(42)
Other(18)79 
Net cash provided by operating activities943 3,938 
Cash flows from investing activities 
Expenditures for property, plant, and equipment(2,449)(3,265)
Purchases of available-for-sale securities(90)(528)
Proceeds from maturities of available-for-sale securities358 313 
Proceeds from sales of available-for-sale securities124 
Proceeds from government incentives55 
Proceeds from sale of Lehi, Utah fab— 893 
Other(91)(77)
Net cash provided by (used for) investing activities(2,266)(2,485)
Cash flows from financing activities  
Proceeds from issuance of debt3,349 2,000 
Repurchases of common stock - repurchase program(425)(259)
Payments of dividends to shareholders(126)(112)
Payments on equipment purchase contracts(47)(78)
Repayments of debt(20)(1,949)
Other(99)(115)
Net cash provided by (used for) financing activities2,632 (513)
Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash(6)(6)
Net increase (decrease) in cash, cash equivalents, and restricted cash1,303 934 
Cash, cash equivalents, and restricted cash at beginning of period8,339 7,829 
Cash, cash equivalents, and restricted cash at end of period$9,642 $8,763 

See accompanying notes to consolidated financial statements.
10 |2023 Q1 10-Q

Micron Technology, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All tabular amounts in millions, except per share amounts)
(Unaudited)


Significant Accounting Policies

For a discussion of our significant accounting policies, see “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Significant Accounting Policies” of our Annual Report on Form 10-K for the year ended September 1, 2022. There have been no changes to our significant accounting policies since our Annual Report on Form 10-K for the year ended September 1, 2022.

Basis of Presentation


The accompanying consolidated financial statements include the accounts of Micron Technology, Inc. and our consolidated subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) consistent in all material respects with those applied in our Annual Report on Form 10-K for the year ended August 31, 2017. September 1, 2022.

In the opinion of our management, the accompanying unaudited consolidated financial statements contain all necessary adjustments, consisting of a normal recurring nature, to fairly state the financial information set forth herein. Certain reclassifications have been made to prior period amounts to conform to current period presentation.


Our fiscal year is the 52 or 53-week period ending on the Thursday closest to August 31. Fiscal years 20182023 and 20172022 each contain 52 weeks. All period references are to our fiscal periods unless otherwise indicated. These interim financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended August 31, 2017.September 1, 2022.



Variable Interest Entities

We have interests in entities that are VIEs. If we are the primary beneficiary of a VIE, we are required to consolidate it. To determine if we are the primary beneficiary, we evaluate whether we have the power to direct the activities that most significantly impact the VIE's economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our evaluation includes identification of significant activities and an assessment of our ability to direct those activities based on governance provisions and arrangements to provide or receive product and process technology, product supply, operations services, equity funding, financing, and other applicable agreements and circumstances. Our assessments of whether we are the primary beneficiary of our VIEs require significant assumptions and judgments.

Unconsolidated VIE

PTI Xi'an: Powertech Technology Inc. Xi'an ("PTI Xi'an") is a wholly-owned subsidiary of Powertech Technology Inc. ("PTI") and was created to provide assembly services to us at our manufacturing site in Xi'an, China. We do not have an equity interest in PTI Xi'an. PTI Xi'an is a VIE because of the terms of its service agreement with us and its dependency on PTI to finance its operations. We have determined that we do not have the power to direct the activities of PTI Xi'an that most significantly impact its economic performance, primarily because we have no governance rights. Therefore, we do not consolidate PTI Xi'an. In connection therewith, we had capital lease obligations and net property, plant, and equipment of $78 million and $74 million, respectively, as of March 1, 2018, and $80 million and $76 million, respectively, as of August 31, 2017.

Consolidated VIE

IMFT: IMFT is a VIE because all of its costs are passed to us and its other member, Intel, through product purchase agreements and because IMFT is dependent upon us or Intel for additional cash requirements. The primary activities of IMFT are driven by the constant introduction of product and process technology. Because we perform a significant majority of the technology development, we have the power to direct its key activities. We consolidate IMFT because we have the power to direct the activities of IMFT that most significantly impact its economic performance and because we have the obligation to absorb losses and the right to receive benefits from IMFT that could potentially be significant to it. (See "Equity – Noncontrolling Interests in Subsidiaries – IMFT" note.)




Recently Issued Accounting Standards

In October 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-16 – Intra-Entity Transfers Other Than Inventory, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This ASU will be effective for us in the first quarter of 2019 and requires modified retrospective adoption. We are evaluating the effects of our adoption of this ASU on our financial statements.

In June 2016, the FASB issued ASU 2016-13 – Measurement of Credit Losses on Financial Instruments, which requires a financial asset (or a group of financial assets) measured on the basis of amortized cost to be presented at the net amount expected to be collected. This ASU requires that the income statement reflect the measurement of credit losses for newly recognized financial assets as well as the expected increases or decreases of expected credit losses that have taken place during the period. This ASU requires that credit losses of debt securities designated as available-for-sale be recorded through an allowance for credit losses and limits the credit loss to the amount by which fair value is below amortized cost. This ASU will be effective for us in the first quarter of 2021 with adoption permitted as early as the first quarter of 2020. This ASU requires modified retrospective adoption, with prospective adoption for debt securities for which an other-than-temporary impairment had been recognized before the effective date. We are evaluating the timing and effects of our adoption of this ASU on our financial statements.

In February 2016, the FASB issued ASU 2016-02 – Leases, which amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of- use asset and corresponding liability, measured at the present value of the lease payments. This ASU will be effective for us in the first quarter of 2020 with early adoption permitted and requires modified retrospective adoption. The adoption of this ASU will result in an increase in right-of-use assets and corresponding liabilities. We are evaluating the timing and other effects of our adoption of this ASU on our financial statements.

In January 2016, the FASB issued ASU 2016-01 – Recognition and Measurement of Financial Assets and Financial Liabilities, which provides guidance for the recognition, measurement, presentation, and disclosure of financial assets and liabilities. This ASU will be effective for us in the first quarter of 2019 and requires modified retrospective adoption. Our assets and liabilities subject to this standard are not material.

In May 2014, the FASB issued ASU 2014-09 – Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under generally accepted accounting principles in the United States. The core principal of this ASU, as amended, is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. This ASU will be effective for us in the first quarter of 2019 and we expect to elect the modified retrospective adoption method.

As a result of the adoption of this ASU, we expect to recognize revenue from sales of products to our distributors (which generally have agreements allowing rights of return or price protection) at the time control transfers to our distributors, which is generally earlier than recognizing revenue only upon resale by our distributors under existing revenue recognition guidance. Revenue recognized upon resale by our distributors under these arrangements was 17% and 19% of our consolidated revenue for the second quarter and first six months of 2018, respectively, and 20% and 22% of our consolidated revenue for the second quarter and first six months of 2017, respectively. On the date of initial application of this ASU, we will derecognize the deferred income on sales made to our distributors through a cumulative adjustment to retained earnings. We expect the revenue deferral, historically recognized in the following period, to be offset by the earlier recognition of revenue as described above as control of product transfers to our distributors. As a result of the adoption of this ASU, we expect to recognize interest expense from the financing component for contracts with advanced payments under which we transfer control of our products to our customers for periods extending beyond one year, although historically such arrangements would not have resulted in significant amounts of interest expense. As a result of the adoption of this ASU, we expect that revenue recognized under our current license agreements will not change materially.




Acquisition of Inotera

Through December 6, 2016, we held a 33% ownership interest in Inotera, now known as Micron Technology Taiwan, Inc. ("MTTW") and accounted for our ownership interest under the equity method. On December 6, 2016, we acquired the remaining 67% ownership interest in Inotera not owned by us (the "Inotera Acquisition") and began consolidating Inotera's operating results. Inotera manufactures DRAM products at its 300mm wafer fabrication facility in Taoyuan City, Taiwan, and previously sold such products exclusively to us through supply agreements, under which we purchased $504 million of DRAM products in the first quarter of 2017, based on a pricing formula that equally shared margin between Inotera and us.

Pro Forma Financial Information

The following pro forma financial information presents the combined results of operations as if the Inotera Acquisition had occurred on September 4, 2015. The pro forma financial information includes the accounting effects of the business combination, including adjustments for depreciation of property, plant, and equipment, interest expense, elimination of intercompany activities, and revaluation of inventories. The pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the Inotera Acquisition occurred on September 4, 2015.
mu-20221201_g3.jpg 11
 Quarter ended Six months ended
 March 2,
2017
 March 2,
2017
Net sales$4,648
 $8,613
Net income890
 1,080
Net income attributable to Micron890
 1,080
Earnings per share   
Basic0.81
 0.98
Diluted0.77
 0.93

The pro forma financial information includes our results for the quarter and six months ended March 2, 2017 (which includes the resultsTable of Inotera since our acquisition of Inotera on December 6, 2016), the results of Inotera for the three months ended November 30, 2016, and the adjustments described above.Contents




Cash and Investments


All of our short-term investments and long-term marketable investments were classified as available-for-sale as of the dates noted below. Cash and equivalents and the fair values of our available-for-sale investments, which approximated amortized costs, were as follows:
December 1, 2022September 1, 2022
As ofCash and EquivalentsShort-term Investments
Long-term Marketable Investments(1)
Total Fair ValueCash and EquivalentsShort-term Investments
Long-term Marketable Investments(1)
Total Fair Value
Cash$6,706 $— $— $6,706 $6,055 $— $— $6,055 
Level 1(2)
Money market funds925 — — 925 1,196 — — 1,196 
Level 2(3)
Certificates of deposit1,879 50 — 1,929 976 50 — 1,026 
Corporate bonds757 839 1,604 — 759 995 1,754 
Asset-backed securities— 20 547 567 — 20 608 628 
Government securities13 130 40 183 155 44 201 
Commercial paper43 50 — 93 33 85 — 118 
9,574 $1,007 $1,426 $12,007 8,262 $1,069 $1,647 $10,978 
Restricted cash(4)
68 77 
Cash, cash equivalents, and restricted cash$9,642 $8,339 
(1)The maturities of long-term marketable securities primarily range fromone tofour years.
As of March 1, 2018 August 31, 2017
  Cash and Equivalents Short-term Investments 
Long-term Marketable Investments(1)
 Total Fair Value Cash and Equivalents Short-term Investments 
Long-term Marketable Investments(1)
 Total Fair Value
Cash $2,496
 $
 $
 $2,496
 $2,237
 $
 $
 $2,237
Level 1(2)
                
Money market funds 5,099
 
 
 5,099
 2,332
 
 
 2,332
Level 2(3)
                
Corporate bonds 
 122
 299
 421
 
 193
 315
 508
Government securities 39
 55
 95
 189
 1
 90
 126
 217
Certificates of deposit 172
 7
 1
 180
 483
 24
 3
 510
Asset-backed securities 
 14
 125
 139
 
 2
 173
 175
Commercial paper 22
 16
 
 38
 56
 10
 
 66
  7,828
 $214
 $520
 $8,562
 5,109
 $319
 $617
 $6,045
Restricted cash(4)
 113
       107
      
Cash, cash equivalents, and restricted cash $7,941
       $5,216
      
(2)The fair value of Level 1 securities is measured based on quoted prices in active markets for identical assets.
(1)
The maturities of long-term marketable securities range from one to four years.
(2)
The fair value of Level 1 securities is measured based on quoted prices in active markets for identical assets.
(3)
The fair value of Level 2 securities is measured using information obtained from pricing services, which obtain quoted market prices for similar instruments, non-binding market consensus prices that are corroborated by observable market data, or various other methodologies, to determine the appropriate value at the measurement date. We perform supplemental analyses to validate information obtained from these pricing services. No adjustments were made to the fair values indicated by such pricing information as of March 1, 2018 or August 31, 2017.
(4)
Restricted cash is included in other noncurrent assets and primarily represents balances related to the MMJ Creditor Payments and interest reserve balances related to the 2021 MSTW Term Loan.

(3)The fair value of Level 2 securities is measured using information obtained from pricing services, which obtain quoted market prices for similar instruments, non-binding market consensus prices that are corroborated by observable market data, or various other methodologies, to determine the appropriate value at the measurement date. We perform supplemental analysis to validate information obtained from these pricing services. No adjustments were made to the fair values indicated by such pricing information as of December 1, 2022 or September 1, 2022.
(4)Restricted cash is included in other current assets and other noncurrent assets and primarily relates to certain government incentives received prior to being earned and for which restrictions lapse upon achieving certain performance conditions.

Gross realized gains and losses from sales of available-for-sale securities were not materialsignificant for any period presented. As

Non-marketable Equity Investments

In addition to the amounts included in the table above, we had $218 million and $222 million of Marchnon-marketable equity investments without a readily determinable fair value that were included in other noncurrent assets as of December 1, 2018, there were no available-for-sale securities that had been in a loss position for longer than 2022 and September 1, 2022, respectively.


12 months.|2023 Q1 10-Q



Receivables

As ofDecember 1, 2022September 1, 2022
Trade receivables$2,875 $4,765 
Income and other taxes279 251 
Other164 114 
$3,318 $5,130 

As of March 1,
2018
 August 31,
2017
Trade receivables $4,050
 $3,490
Income and other taxes 134
 100
Other 253
 169
  $4,437
 $3,759





Inventories

As ofDecember 1, 2022September 1, 2022
Finished goods$1,649 $1,028 
Work in process5,839 4,830 
Raw materials and supplies871 805 
$8,359 $6,663 


As of March 1,
2018
 August 31,
2017
Finished goods $876
 $856
Work in process 1,974
 1,968
Raw materials and supplies 334
 299
  $3,184
 $3,123


Property, Plant, and Equipment
As ofDecember 1, 2022September 1, 2022
Land$280 $280 
Buildings17,133 16,676 
Equipment(1)
63,450 61,354 
Construction in progress(2)
1,828 1,897 
Software1,170 1,124 
 83,861 81,331 
Accumulated depreciation(44,526)(42,782)
 $39,335 $38,549 

(1)Includes costs related to equipment not placed into service of $4.10 billion as of December 1, 2022 and $3.35 billion as of September 1, 2022.
(2)Includes building-related construction, tool installation, and software costs for assets not placed into service.
As of March 1,
2018
 August 31,
2017
Land $345
 $345
Buildings 8,367
 7,958
Equipment(1)
 35,600
 32,187
Construction in progress(2)
 599
 499
Software 611
 544
  45,522
 41,533
Accumulated depreciation (23,658) (22,102)
  $21,864
 $19,431
(1)
Included costs related to equipment not placed into service of $1.92 billion and $994 million, as of March 1, 2018 and August 31, 2017, respectively.
(2)
Includes building-related construction and tool installation costs for assets not placed into service.




Intangible Assets and Goodwill

December 1, 2022September 1, 2022
As ofGross
Amount
Accumulated
Amortization
Gross
Amount
Accumulated
Amortization
Product and process technology$763 $(335)$742 $(321)
Goodwill1,228 1,228 

As of March 1, 2018 August 31, 2017
  
Gross
Amount
 
Accumulated
Amortization
 
Gross
Amount
 
Accumulated
Amortization
Amortizing assets        
Product and process technology $731
 $(491) $756
 $(477)
Non-amortizing assets        
In-process R&D 108
 
 108
 
         
Total intangible assets $839
 $(491) $864
 $(477)
         
Goodwill $1,228
   $1,228
  

DuringIn the first six monthsquarters of 20182023 and 2017,2022, we capitalized $15$30 million and $14$18 million, respectively, for product and process technology with weighted-average useful lives of 1210 years, and 1011 years, respectively. Amortization expense was $23 million and $20 million for the first three months of 2023 and 2022, respectively. Expected amortization expense is $45$65 million for the remainder of 2018, $502023, $76 million for 2019, $352024, $55 million for 2020, $292025, $46 million for 2021,2026, and $20$39 million for 2022.2027.



mu-20221201_g3.jpg 13



Leases

The components of lease cost are presented below:
Three months endedDecember 1, 2022December 2, 2021
Finance lease cost
Amortization of right-of-use assets$24 $25 
Interest on lease liabilities
Operating lease cost(1)
36 29 
$66 $60 
(1)Operating lease cost includes short-term and variable lease expenses, which were not material for the periods presented.

Supplemental cash flow information related to leases was as follows:
Three months endedDecember 1, 2022December 2, 2021
Cash flows used for operating activities
Finance leases$$
Operating leases33 27 
Cash flows used for financing activities – Finance leases20 20 
Noncash acquisitions of right-of-use assets
Finance leases43 198 
Operating leases35 39 

Supplemental balance sheet information related to leases was as follows:
As ofDecember 1, 2022September 1, 2022
Finance lease right-of-use assets (included in property, plant, and equipment)$924 $904 
Current operating lease liabilities (included in accounts payable and accrued expenses)61 60 
Weighted-average remaining lease term (in years)
Finance leases1112
Operating leases1212
Weighted-average discount rate
Finance leases2.67 %2.65 %
Operating leases3.04 %2.90 %

14 |2023 Q1 10-Q

As of December 1, 2022, maturities of lease liabilities by fiscal year were as follows:
For the year endingFinance LeasesOperating Leases
Remainder of 2023$96 $34 
2024105 72 
202594 71 
202693 74 
202793 72 
2028 and thereafter569 524 
Less imputed interest(136)(161)
$914 $686 

The table above excludes obligations for leases that have been executed but have not yet commenced. As of December 1, 2022, excluded obligations consisted of $186 million of estimated finance lease payments over a weighted-average period of 13 years for gas supply arrangements deemed to contain embedded leases and equipment leases. We will recognize right-of-use assets and associated lease liabilities at the time such assets become available for our use.


Accounts Payable and Accrued Expenses

As ofDecember 1, 2022September 1, 2022
Accounts payable$1,789 $2,142 
Property, plant, and equipment2,294 2,170 
Salaries, wages, and benefits594 877 
Income and other taxes419 420 
Other342 481 
$5,438 $6,090 


mu-20221201_g3.jpg 15
As of March 1,
2018
 August 31,
2017
Accounts payable $1,557
 $1,333
Property, plant, and equipment payables 1,351
 1,018
Salaries, wages, and benefits 517
 603
Income and other taxes 288
 163
Customer advances 176
 197
Other 305
 350
  $4,194
 $3,664



Debt

December 1, 2022September 1, 2022
Net Carrying AmountNet Carrying Amount
As ofStated RateEffective RateCurrentLong-TermTotalCurrentLong-TermTotal
2024 Term Loan A4.720 %4.76 %$— $1,187 $1,187 $— $1,187 $1,187 
2025 Term Loan A5.436 %5.57 %— 925 925 — — — 
2026 Term Loan A5.561 %5.70 %28 717 745 — — — 
2027 Term Loan A5.686 %5.82 %34 890 924 — — — 
2026 Notes4.975 %5.07 %— 499 499 — 498 498 
2027 Notes(1)
4.185 %4.27 %— 796 796 — 806 806 
2029 A Notes5.327 %5.40 %— 697 697 — 697 697 
2029 B Notes6.750 %6.89 %— 744 744 — — — 
2030 Notes4.663 %4.73 %— 846 846 — 846 846 
2032 Green Bonds2.703 %2.77 %— 995 995 — 994 994 
2041 Notes3.366 %3.41 %— 497 497 — 496 496 
2051 Notes3.477 %3.52 %— 496 496 — 496 496 
Finance lease obligations
N/A2.67 %109 805 914 103 783 886 
 $171 $10,094 $10,265 $103 $6,803 $6,906 
As of March 1, 2018 August 31, 2017
Instrument Stated Rate Effective Rate Current Long-Term Total Current Long-Term Total
MMJ Creditor Payments N/A
 6.52% $238
 $261
 $499
 $157
 $474
 $631
Capital lease obligations N/A
 3.75% 371
 679
 1,050
 357
 833
 1,190
2021 MSAC Term Loan 3.89% 4.13% 199
 578
 777
 99
 697
 796
2021 MSTW Term Loan 2.85% 3.01% 
 2,716
 2,716
 
 2,640
 2,640
2022 Term Loan B 3.65% 4.06% 5
 723
 728
 5
 725
 730
2023 Notes 5.25% 5.43% 
 
 
 
 991
 991
2023 Secured Notes 7.50% 7.69% 
 
 
 
 1,238
 1,238
2024 Notes 5.25% 5.38% 
 546
 546
 
 546
 546
2025 Notes 5.50% 5.56% 
 515
 515
 
 515
 515
2026 Notes 5.63% 5.73% 
 129
 129
 
 128
 128
2032C Notes(1)
 2.38% 5.95% 
 165
 165
 
 211
 211
2032D Notes(1)
 3.13% 6.33% 
 161
 161
 
 159
 159
2033E Notes(1)(2)
 1.63% 1.63% 197
 
 197
 202
 
 202
2033F Notes(1)(2)
 2.13% 4.93% 378
 
 378
 278
 
 278
2043G Notes(1)
 3.00% 6.76% 
 679
 679
 
 671
 671
IMFT Member Debt 0.00% 0.00% 
 650
 650
 
 
 
Other notes 2.09% 2.65% 126
 
 126
 164
 44
 208
      $1,514
 $7,802
 $9,316
 $1,262
 $9,872
 $11,134
(1)
Since the closing price of our common stock exceeded 130% of the conversion price per share for at least 20 trading days in the 30 trading day period ended(1) In 2021, we entered into fixed-to-floating interest rate swaps on December 31, 2017, these notes are convertible by the holders through the calendar quarter ended March 31, 2018. The 2033 Notes were classified as current because the terms of these notes require us to pay cash for the principal amount of any converted notes and holders of these notes had the right to convert their notes as of the dates presented.
(2)
Amounts as of March 1, 2018 include $178 million and $129 million for the settlement obligation (principal and amounts in excess of principal) of 2033E Notes and 2033F Notes, respectively, that had been converted but not settled. Amounts as of August 31, 2017 include $88 million for the settlement obligation (principal and amounts in excess of principal) of 2033E Notes that had been converted but not settled.

Debt Repurchases and Conversions

During the first six months2027 Notes with an aggregate $900 million notional amount equal to the principal amount of 2018, we repurchased or settledthe 2027 Notes. The resulting variable interest paid is at a rate equal to SOFR plus approximately 3.33%. The fixed-to-floating interest rate swaps are accounted for as fair value hedges, as a result, of conversion an aggregate of $2.42 billion principal amountthe carrying values of our debt. When we receive a notice of conversion for any of our convertible notes and elect to settle2027 Notes reflect adjustments in cash any amount of the conversion obligation in excess of the principal amount, the cash settlement obligations become derivative debt liabilities subject to mark-to-market accounting treatment based on the volume-weighted-average price of our commonfair value.



Debt Activity
stock over a period of 20 consecutive trading days. Accordingly, at the date of our election to settle a conversion in cash, we reclassify the fair value of the equity component of the converted notes from additional capital to derivative debt liability within current debt in our consolidated balance sheet.


The following table below presents the effects of repurchases and conversions of our debt financing activities in the first six monthsquarter of 2018:2023.
Increase in PrincipalIncrease in Carrying ValueIncrease in Cash
2025 Term Loan A$927 $925 $925 
2026 Term Loan A746 745 745 
2027 Term Loan A927 924 924 
2029 B Notes750 744 744 
$3,350 $3,338 $3,338 
Six months ended March 1, 2018 Decrease in Principal Increase (Decrease) in Carrying Value Decrease in Cash Decrease in Equity Gain (Loss)
Repurchases          
2023 Notes $(1,000) $(991) $(1,046) $
 $(55)
2023 Secured Notes (1,250) (1,238) (1,373) 
 (135)
Settled Conversions          
2032C Notes (52) (49) (240) (195) 4
2033E Notes(1)
 (113) (143) (249) (97) (9)
2033F Notes (5) (5) (22) (17) 
Conversions not settled          
2033E Notes(2)
 
 137
 
 (124) (13)
2033F Notes(2)
 
 101
 
 (91) (10)
  $(2,420) $(2,188) $(2,930) $(524) $(218)
(1)
Settlement included 4 million shares of our treasury stock in addition to cash.
(2)
As of March 1, 2018, $41 million in principal amount of the 2033E Notes and $30 million in principal amount of the 2033F Notes had converted but not settled. These notes will settle in cash in the third quarter of 2018.


IMFT Member DebtTerm Loan Agreement


InOn November 20173, 2022, we entered into a term loan agreement consisting of three tranches and December 2017, Intel provided debt financing ("IMFT Member Debt"borrowed $2.60 billion in aggregate principal amount, including $927 million due November 3, 2025; $746 million due November 3, 2026; and $927 million due November 3, 2027 (the “Term Loan Agreement”). We incurred aggregate fees of $150$6 million in connection with these borrowings. The 2026 Term Loan A and $500 million, respectively,2027 Term Loan A each require equal quarterly installment payments in an amount equal to IMFT pursuant to the terms1.25% of the IMFT joint venture agreement. IMFT Member Debt bears nooriginal principal amount. The 2025 Term Loan A does not require quarterly installment payments. Borrowings under the Term Loan Agreement will generally bear interest matures uponat adjusted term SOFR plus an applicable interest rate margin ranging from 1.00% to 2.00%, varying by tranche and depending on our corporate credit ratings.

The Term Loan Agreement requires us to maintain, on a consolidated basis, a leverage ratio of total indebtedness to adjusted EBITDA, as defined in the completionTerm Loan Agreement and calculated as of the auctionlast day of each fiscal quarter, not to exceed 3.25 to 1.00, subject to a temporary four fiscal quarter increase in such maximum ratio to 3.75 to 1.00 following certain material acquisitions. Our obligations under the Term Loan Agreement are unsecured.

16 |2023 Q1 10-Q

2029 B Notes

On October 31, 2022, we issued $750 million principal amount of senior unsecured 2029 B Notes in a public offering. The 2029 B Notes bear interest at a rate of 6.750% per year and will mature on November 1, 2029. Issuance costs and debt discount for these notes were $6 million. We may redeem the sale of assets of IMFT prior to the dissolution, liquidation, or other wind-up of IMFT, and is convertible, at the election of Intel,2029 B Notes, in whole or in part, intoat our option prior to their maturity date at a capital contribution to IMFT. Additionally,redemption price equal to the extent IMFT distributes cashgreater of (i) 100% of the principal amount of the notes to its members underbe redeemed and (ii) the present value of the remaining scheduled payments of principal and interest, plus accrued interest in each case. We may also redeem the 2029 B Notes, in whole or in part, at a price equal to par two months prior to maturity in accordance with the terms of the IMFT joint venture agreement, Intel may,2029 B Notes.

The 2029 B Notes contain covenants that, among other things, limit, in certain circumstances, our ability and/or the ability of our restricted subsidiaries (which are generally domestic subsidiaries in which we own at its option, designate any portionleast 80% of the distributionvoting stock and which own principal property, as defined in the indenture governing such notes) to be a repayment of the IMFT Member Debt. In the event Intel exercises its right to put its interest in IMFT to us,(1) create or if we exercise our right to call from Intel its interest in IMFT, Intel willincur certain liens; (2) enter into certain sale and lease-back transactions; and (3) consolidate with or merge with or into, or convey, transfer, to Micron any IMFT Member Debt outstanding at the time of the closing of the put or call transaction. (See "Equity – Noncontrolling Interest in Subsidiaries – IMFT" note.)

2022 Senior Secured Term Loan B Repricing Amendment

On October 26, 2017, we amended our 2022 Term Loan B,lease all or substantially all of which was treatedour properties and assets, to another entity. These covenants are subject to a number of limitations and exceptions. Additionally, if a change of control triggering event occurs, as a debt modification,defined in the indenture governing our 2029 B Notes, we will be required to reduceoffer to purchase such notes at 101% of the outstanding aggregate principal amount plus accrued interest rate margins. As of March 1, 2018,up to the 2022 Term Loan B bears interest at LIBOR plus 2.00%.purchase date.

Convertible Senior NotesRevolving Credit Facility


As of MarchDecember 1, 2018,2022, $2.50 billion was available to us under the trading priceRevolving Credit Facility and no amounts were outstanding. Any amounts outstanding under the Revolving Credit Facility would mature in May 2026 and amounts borrowed may be prepaid any time without penalty. Any amounts drawn under the Revolving Credit Facility would generally bear interest at a rate equal to LIBOR plus 1.00% to 1.75%, depending on our corporate credit ratings. The credit facility agreement provides for a transition to SOFR or other alternate benchmark rate upon the retirement of our common stock was higher than the initial conversion pricesLIBOR in 2023.

Maturities of our convertibles notes. Notes Payable

As a result, the conversion values for theseof December 1, 2022, maturities of notes exceeded the principal amountspayable by $3.18 billionfiscal year were as follows:
Remainder of 2023$42 
202484 
20251,271 
20261,510 
20271,562 
2028 and thereafter5,019 
Unamortized discounts(36)
Hedge accounting fair value adjustment(101)
$9,351 


mu-20221201_g3.jpg 17



Contingencies


We have accrued a liability and charged operations for the estimated costs of adjudication or settlement of various asserted and unasserted claims existing as of the balance sheet date, including those described below. We are currently a party to other legal actions other than those described below arising from the normal course of business, none of which are expected to have a material adverse effect on our business, results of operations, or financial condition.




Patent Matters


As is typical in the semiconductor and other high-tech industries, from time to time, others have asserted, and may in the future assert, that our products or manufacturing processes infringe upon their intellectual property rights.

On November 21, 2014, Elm 3DS Innovations, LLC ("Elm") filed a patent infringement action against Micron, MSP, and Micron Consumer Products Group, Inc. in the U.S. District Court for the District of Delaware. On March 27, 2015, Elm filed an amended complaint against the same entities. The amended complaint alleges that unspecified semiconductor products of ours that incorporate multiple stacked die infringe 13 U.S. patents and seeks damages, attorneys' fees, and costs.


On December 15, 2014, Innovative Memory Solutions, Inc. filed a patent infringement action against Micron in the U.S. District Court for the District of Delaware. The complaint alleges that a variety of our NAND products infringe eight U.S. patents and seeks damages, attorneys'attorneys’ fees, and costs.

On June 24, 2016, the President and Fellows of Harvard University filed a patent infringement action against Micron Subsequently, six patents were invalidated or withdrawn, leaving two asserted patents in the U.S. District Court for the District of Massachusetts.Court. The complaint alleged that a variety of our DRAM products infringed two U.S. patents and sought damages, injunctive relief, and other unspecified relief. On March 1, 2018, we executed a settlementwas dismissed on November 21, 2022 pursuant to an agreement resolving this litigation. The settlement amount did not have a material effect on our business, results of operations, or financial condition.between the parties.


On March 19, 2018, Micron Semiconductor (Xi’an) Co., Ltd. ("MXA"(“MXA”) was served with a patent infringement complaint filed by Fujian Jinhua Integrated Circuit Co., Ltd. ("Jinhua"(“Jinhua”) in the Fuzhou Intermediate People’s Court in Fujian Province, China.China (the “Fuzhou Court”). On April 3, 2018, Micron Semiconductor (Shanghai) Co. Ltd. (“MSS”) was served with the same complaint. The complaint alleges that MXA and Micron Semiconductor (Shanghai) Co., Ltd. infringe aMSS infringed one Chinese patent by manufacturing and selling certain Crucial DDR4 DRAM modules. The complaint seeks an order requiring the defendantsMXA and MSS to destroy inventory of the accused products and equipment for manufacturing the accused products in China; to stop manufacturing, using, selling, and offering for sale the accused products in China; and to pay damages of 98 million Chinese yuan plus court fees incurred.


On March 21, 2018, MXA was served with a patent infringement complaint filed by United Microelectronics Corporation ("UMC"(“UMC”) in the Fuzhou Intermediate People's Court in Fujian Province, China.Court. On April 3, 2018, MSS was served with the same complaint. The complaint alleges that MXA and Micron Semiconductor (Shanghai) Co., Ltd. infringe aMSS infringed one Chinese patent by manufacturing and selling certain Crucial DDR4 DRAM modules. The complaint seeks an order requiring the defendantsMXA and MSS to destroy inventory of the accused products and equipment for manufacturing the accused products in China; to stop manufacturing, using, selling, and offering for sale the accused products in China; and to pay damages of 90 million Chinese yuan plus court fees incurred. On November 26, 2021, pursuant to a settlement agreement between UMC and Micron, UMC filed an application to the Fuzhou Court to withdraw its complaints against MXA and MSS.


On April 3, 2018, MSS was served with another patent infringement complaint filed by Jinhua and an additional complaint filed by UMC in the Fuzhou Court. The additional complaints allege that MSS infringes two Chinese patents by manufacturing and selling certain Crucial MX300 SSDs. The complaint filed by UMC seeks an order requiring MSS to destroy inventory of the accused products and equipment for manufacturing the accused products in China; to stop manufacturing, using, selling, and offering for sale the accused products in China; and to pay damages of 90 million Chinese yuan plus court fees incurred. The complaint filed by Jinhua seeks an order requiring MSS to destroy inventory of the accused products and equipment for manufacturing the accused products in China; to stop manufacturing, using, selling, and offering for sale the accused products in China; and to pay damages of 98 million Chinese yuan plus court fees incurred. On November 26, 2021, pursuant to a settlement agreement between UMC and Micron, UMC filed an application to the Fuzhou Court to withdraw its complaint against MSS.

On July 5, 2018, MXA and MSS were notified that the Fuzhou Court granted a preliminary injunction against those entities that enjoins them from manufacturing, selling, or importing certain Crucial and Ballistix-branded DRAM modules and solid-state drives in China. We are complying with the ruling and have requested the Fuzhou Court to reconsider or stay its decision.

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On May 4, 2020, Flash-Control, LLC filed a patent infringement action against Micron in the U.S. District Court for the Western District of Texas. The complaint alleges that four U.S. patents are infringed by unspecified DDR4 SDRAM, NVRDIMM, NVDIMM, 3D XPoint, and/or SSD products that incorporate memory controllers and flash memory. The complaint seeks damages, attorneys’ fees, and costs. On July 21, 2020, in a separate matter, the District Court ruled that two of the four asserted patents are invalid, and on July 14, 2021, the U.S. Court of Appeals for the Federal Circuit affirmed the ruling of invalidity.

On April 28, 2021, Netlist, Inc. (“Netlist”) filed two patent infringement actions against Micron, Micron Semiconductor Products, Inc. (“MSP”) and Micron Technology Texas, LLC (“MTEC”) in the U.S. District Court for the Western District of Texas. The first complaint alleges that one U.S. patent is infringed by certain of our non-volatile dual in-line memory modules. The second complaint alleges that three U.S. patents are infringed by certain of our load-reduced dual in-line memory modules (“LRDIMMs”). Each complaint seeks injunctive relief, damages, attorneys’ fees, and costs. On March 31, 2022, Netlist filed a patent infringement complaint against Micron and Micron Semiconductor Germany, GmbH in Dusseldorf Regional Court alleging that two German patents are infringed by certain of our LRDIMMs. The complaint seeks damages and costs. On June 24, 2022, Netlist amended its complaint to also seek injunctive relief. On June 10, 2022, Netlist filed a patent infringement complaint against Micron, MSP, and MTEC in the U.S. District Court for the Eastern District of Texas (“E.D. Tex.”) alleging that six U.S. patents are infringed by certain of our memory modules and HBM products. The complaint seeks injunctive relief, damages, and attorneys’ fees. On August 1, 2022, Netlist filed a second patent infringement complaint against Micron, MSP, and MTEC in E.D. Tex. alleging that one U.S. patent is infringed by certain of our LRDIMMs. On August 15, 2022, Netlist amended the second complaint to assert that two additional U.S. patents are infringed by certain of our LRDIMMs. The second complaint in E.D. Tex. seeks injunctive relief, damages, and attorneys’ fees.

On May 10, 2021, Vervain, LLC filed a patent infringement action against Micron, MSP, and MTEC in the U.S. District Court for the Western District of Texas. The complaint alleges that four U.S. patents are infringed by certain SSD products. The complaint seeks injunctive relief, damages, attorneys’ fees, and costs.

Between April 27, 2022 and October 18, 2022, Bell Semiconductor, LLC (“Bell”) filed four patent infringement complaints against Micron in the U.S. District Court for the District of Idaho. These complaints allege that a total of six U.S. patents are infringed by certain SSDs, a process for designing a NAND flash device included in certain SSDs, and an SSD controller. On September 30, 2022, Bell filed a complaint against Micron in the U.S. District Court for the District of Delaware alleging that six U.S. patents are infringed by certain SSD, GDDR5, GDDR6, GDDR6X, and DDR3 SDRAM products. Each of Bell’s complaints in the District Courts seeks damages, injunctive relief, attorneys’ fees, and costs. On October 6, 2022, Bell filed a complaint with the ITC alleging violations of Section 337 of the Tariff Act of 1930 based on alleged importation of certain SSDs that infringe two U.S. patents also asserted by Bell in two of the lawsuits pending in the District of Idaho. The complaint requests institution of an investigation, which was granted on November 8, 2022, and, after the investigation, issuance of a limited exclusion order and cease and desist orders prohibiting Micron from importing, selling, offering for sale, or marketing the accused products in the United States.

On August 16, 2022, Sonrai Memory Ltd. filed a patent infringement action against Micron in the U.S. District Court for the Western District of Texas. The complaint alleges that two U.S. patents are infringed by certain SSD and NAND flash products. The complaint seeks damages, attorneys’ fees, and costs.

Among other things, the above lawsuits pertain to certainsubstantially all of our DDR DRAM, DDR2 DRAM, DDR3 DRAM, DDR4 DRAM, SDR SDRAM, PSRAM, RLDRAM, LPDRAM, NAND, and certain other memory and storage products we manufacture, which account for a significant portionsubstantially all of our net sales.revenue.

We are unable to predict the outcome of assertions of infringement made against us and therefore cannot estimate the range of possible loss. A determination that our products or manufacturing processes infringe the intellectual property rights of others or entering into a license agreement covering such intellectual property could result in significant liability and/or require us to make material changes to our products and/or manufacturing processes. Any of the foregoing could have a material adverse effect on our business, results of operations, or financial condition.


Qimonda


On January 20, 2011, Dr. Michael Jaffé, administrator for Qimonda'sQimonda’s insolvency proceedings, filed suit against Micron and Micron Semiconductor B.V., our Netherlands subsidiary (" (“Micron B.V."), in the District Court of Munich, Civil Chamber. The complaint seeks to void, under Section 133 of the German Insolvency Act, a share purchase agreement between Micron B.V. and Qimonda signed in fall 2008, pursuant to which Micron B.V. purchased substantially all of Qimonda'sQimonda’s shares of Inotera (the "Inotera Shares"“Inotera Shares”), representing approximately 18% of Inotera'sInotera’s outstanding shares as of March 1, 2018,at that time, and seeks an order requiring us to re-transfer those shares to the Qimonda estate. The complaint also seeks, among other things, to recover damages for the alleged value of the joint venture relationship with Inotera and to terminate, under Sections 103 or 133 of the German Insolvency Code, a patent cross-license between us and Qimonda entered into at the same time as the share purchase agreement.

mu-20221201_g3.jpg 19


Following a series of hearings with pleadings, arguments, and witnesses on behalf of the Qimonda estate, on March 13, 2014, the court issued judgments: (1) ordering Micron B.V. to pay approximately $1 million in respect of certain Inotera Shares


sold in connection with the original share purchase; (2) ordering Micron B.V. to disclose certain information with respect to any Inotera Shares sold by it to third parties; (3) ordering Micron B.V. to disclose the benefits derived by it from ownership of the Inotera Shares, including in particular, any profits distributed on the Inotera Shares and all other benefits; (4) denying Qimonda'sQimonda’s claims against Micron for any damages relating to the joint venture relationship with Inotera; and (5) determining that Qimonda'sQimonda’s obligations under the patent cross-license agreement are canceled. In addition, the court issued interlocutory judgments ordering, among other things: (1) that Micron B.V. transfer to the Qimonda estate the Inotera Shares still owned by Micron B.V. and pay to the Qimonda estate compensation in an amount to be specified for any Inotera Shares sold to third parties; and (2) that Micron B.V. pay the Qimonda estate as compensation an amount to be specified for benefits derived by Micron B.V. from ownership of the Inotera Shares. The interlocutory judgments havehad no immediate, enforceable effect on us, and Micron, accordingly, we expect to behas been able to continue to operate with full control of the Inotera Shares subject to further developments in the case. WeMicron and Micron B.V. appealed the judgments to the German Appeals Court, which thereafter appointed an independent expert to perform an evaluation of Dr. Jaffé’s claims that the amount Micron paid for Qimonda was less than fair market value. On March 31, 2020, the expert presented an opinion to the Appeals Court concluding that the amount paid by Micron was within an acceptable range of fair value. On October 5, 2022, the Appeals Court ruled that the relevant issue to be addressed is whether Qimonda's creditors were prejudiced such that the original transaction should be voided. The Appeals Court set a date of May 23, 2023 for issuing a decision.

Antitrust Matters

Six cases have been filed a noticeagainst Micron alleging price fixing of appeal,DRAM products in the following Canadian courts on the dates indicated: Superior Court of Quebec (April 30, 2018 and May 3, 2018), the Federal Court of Canada (May 2, 2018), the Ontario Superior Court of Justice (May 15, 2018), and the parties have submitted briefsSupreme Court of British Columbia (May 10, 2018). The plaintiffs in these cases are individuals seeking certification of class actions on behalf of direct and indirect purchasers of DRAM in Canada (or regions of Canada) between June 1, 2016 and February 1, 2018.

On May 15, 2018, the Chinese State Administration for Market Regulation (“SAMR”) notified Micron that it was investigating potential collusion and other anticompetitive conduct by DRAM suppliers in China. On May 31, 2018, SAMR made unannounced visits to the appeals court.

our sales offices in Beijing, Shanghai, and Shenzhen to seek certain information as part of its investigation. We are unable to predict the outcome of the matter and therefore cannot estimate the range of possible loss. The final resolution of this lawsuit could resultcooperating with SAMR in the loss of the Inotera Shares or monetary damages, unspecified damages based on the benefits derived by Micron B.V. from the ownership of the Inotera Shares, and/or the termination of the patent cross-license, which could have a material adverse effect on our business, results of operation, or financial condition.its investigation.


OtherSecurities Matters


On DecemberMarch 5, 2017,2019, a derivative complaint was filed by a shareholder against certain current and former officers and directors of Micron, filed a complaint against UMCallegedly on behalf of and Jinhuafor the benefit of Micron, in the U.S. District Court for the Northern District of California.Delaware alleging securities fraud, breaches of fiduciary duties, and other violations of law involving misrepresentations about purported anticompetitive behavior in the DRAM industry. The complaint alleges that UMC and Jinhua violated the Defend Trade Secrets Act, the civil provisionswas dismissed on November 15, 2022, pursuant to a stipulation of the Racketeer Influenced and Corrupt Organizations Act, and California's Uniform Trade Secrets Actvoluntary dismissal.

On February 9, 2021, a derivative complaint was filed by misappropriating Micron's trade secretsa shareholder against Sanjay Mehrotra and other misconduct. Micron'scurrent and former directors of Micron, allegedly on behalf of and for the benefit of Micron, in the U.S. District Court for the District of Delaware alleging violations of securities laws, breaches of fiduciary duties, and other violations of law involving allegedly false and misleading statements about Micron’s commitment to diversity and progress in diversifying its workforce, executive leadership, and Board of Directors. The complaint seeks damages, restitution, disgorgementfees, interest, costs, and an order requiring Micron to take various actions to allegedly improve its corporate governance and internal procedures.

20 |2023 Q1 10-Q


Other Matters

In the normal course of business, we are a party to a variety of agreements pursuant to which we may be obligated to indemnify the otheranother party. It is not possible to predict the maximum potential amount of future payments under these types of agreements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. Historically, our payments under these types of agreements have not had a material adverse effect on our business, results of operations, or financial condition.



Contingency Assessment

We are unable to predict the outcome of any of the matters noted above and cannot make a reasonable estimate of the potential loss or range of possible losses. A determination that our products or manufacturing processes infringe the intellectual property rights of others or entering into a license agreement covering such intellectual property could result in significant liability and/or require us to make material changes to our products and/or manufacturing processes. Any of the foregoing, as well as the resolution of any other legal matter noted above, could have a material adverse effect on our business, results of operations, or financial condition.


Equity


Micron Shareholders' Equity

Common Stock IssuanceRepurchases: Our Board of Directors has authorized the discretionary repurchase of up to $10 billion of our outstanding common stock through open-market purchases, block trades, privately-negotiated transactions, derivative transactions, and/or pursuant to Rule 10b5-1 trading plans. The repurchase authorization has no expiration date, does not obligate us to acquire any common stock, and is subject to market conditions and our ongoing determination of the best use of available cash. In October 2017,the first quarter of 2023, we issued 34repurchased 8.6 million shares of our common stock for $41.00 per share$425 million. Through December 1, 2022, we had repurchased an aggregate of $6.89 billion under the authorization. Amounts repurchased are included in a public offering for proceeds of $1.36 billion, net of underwriting fees and other offering costs.

Outstanding Capped Calls: In connection with certain of our convertible notes, we entered into capped call transactions, which are intended to reduce the effect of potential dilution. The capped calls provide for our receipt of cash or shares, at our election, from our counterparties if the trading price of our stock is above the strike prices on the expiration dates. As of March 1, 2018, the dollar value of cash or shares that we would receive from our outstanding capped calls upon their expiration dates range from $0, if the trading price of our stock is below the strike prices for all capped calls at expiration, to $214 million, if the trading price of our stock is at or above the cap prices for all capped calls. Settlement of the capped calls prior to the expiration dates may be for an amount less than the maximum value at expiration.

Settlement of Capped Calls: During the first six months of 2018, we share-settled portions of our capped calls upon expiration, and received 7 million shares (equal to a value of $313 million) based on the volume-weighted trading stock prices at the expiration dates. Shares received were recorded as treasury stock.




Noncontrolling Interests in Subsidiaries

As of March 1, 2018 August 31, 2017
  Noncontrolling Interest Balance Noncontrolling Interest Percentage Noncontrolling Interest Balance Noncontrolling Interest Percentage
IMFT $852
 49% $832
 49%
Other 17
 Various
 17
 Various
  $869
   $849
  

IMFTDividends:Since 2006, we have owned 51% of IMFT, a joint venture between us and Intel. IMFT is governed by a Board of Managers, for which the number of managers appointed by each member varies based on the members' respective ownership interests. IMFT manufactures semiconductor products exclusively for its members under a long-term supply agreement at prices approximating cost.

IMFT's capital requirements are generally determined based on an annual plan approved by the members, and capital contributions to IMFT are requested as needed. Capital requests are made to the members in proportion to their then-current ownership interest. Members may elect to not contribute their proportional share, and in such event, the contributing member may elect to contribute any amount of the remaining capital request, either in the form of an equity contribution or member debt financing. Under the supply agreement, the members have rights and obligations to the capacity of IMFT in proportion to their investment, including member debt financing. Any capital contribution or member debt financing results in a proportionate adjustment to the sharing of output on an eight-month lag. Members pay their proportionate share of fixed costs associated with IMFT's capacity.

IMFT sales to Intel were $115 million and $227 million for the second quarter and first six months of 2018, respectively, and $142 million and $252 million for the second quarter and first six months of 2017, respectively. In the first quarter of 2018, IMFT discontinued production2023, we declared and paid dividends of NAND and subsequent$126 million ($0.115 per share) to that time is entirely focused on 3D XPoint memory production.shareholders of record as of October 11, 2022.


The IMFT joint venture agreement extends through 2024 and includes certain buy-sell rights. At any time through December 2018, Intel can put to us, and from January 2019 through December 2021, we can call from Intel, Intel's interestAccumulated Other Comprehensive Income (Loss):Changes in IMFT, in either case, for a price that approximates Intel's interest in the net book value of IMFT plus member debt at the time of the closing. If Intel exercises its put right, we can elect to set the closing date of the transaction any time between six months and two years following such electionaccumulated other comprehensive income (loss) by Intel and we can elect to receive financing of the purchase price from Intel for one to two years from the closing date. If we exercise our call right, Intel can elect to set the closing date of the transaction to be any time between six months and one year following such election. Following the closing date resulting from exercise of either the put or the call, we will continue to supply to Intel for a period of one year, at Intel's choice, between 50% and 100% of Intel's immediately preceding six-month period pre-closing volumes of IMFT productscomponent for the first six-month period following the closing and, at Intel's choice, between 0% and 100%three months ended December 1, 2022 were as follows:
Gains (Losses) on Derivative InstrumentsUnrealized Gains (Losses) on InvestmentsPension Liability AdjustmentsCumulative Foreign Currency Translation AdjustmentTotal
As of September 1, 2022$(538)$(47)$25 $— $(560)
Other comprehensive income (loss) before reclassifications70 (7)(3)60 
Amount reclassified out of accumulated other comprehensive income (loss)68 — 70 
Tax effects(30)(13)— — (43)
Other comprehensive income (loss)108 (19)(3)87 
As of December 1, 2022$(430)$(66)$26 $(3)$(473)


mu-20221201_g3.jpg 21




Creditors of IMFT have recourse only to IMFT's assets and do not have recourse to any other of our assets. The following table presents the assets and liabilities of IMFT included in our consolidated balance sheets:
As of March 1,
2018
 August 31,
2017
Assets    
Cash and equivalents $317
 $87
Receivables 87
 81
Inventories 99
 128
Other current assets 5
 7
Total current assets 508
 303
Property, plant, and equipment, net 2,496
 1,852
Other noncurrent assets 43
 49
Total assets $3,047
 $2,204
     
Liabilities  
  
Accounts payable and accrued expenses $472
 $299
Deferred income 10
 6
Current debt 19
 19
Total current liabilities 501
 324
Long-term debt 715
 75
Other noncurrent liabilities 79
 88
Total liabilities $1,295
 $487
Amounts exclude intercompany balances that were eliminated in our consolidated balance sheets.

Restrictions on Net Assets

As a result of the corporate reorganization proceedings of MMJ, the 2021 MSTW Term Loan covenants, and the IMFT joint venture agreement, our total restricted net assets (excluding intercompany balances and noncontrolling interests) as of March 1, 2018 were $3.86 billion for the MMJ Group, $2.54 billion for MSTW and MTTW, and $900 million for IMFT.


Fair Value Measurements


All of our marketable debt and equity investments were classified as available-for-sale and carried at fair value. Amounts reported as cash and equivalents, receivables, and accounts payable and accrued expenses approximate fair value. The estimated fair valuevalues and carrying valuevalues of our outstanding debt instruments (excluding the carrying value of equity and mezzanine equity components of our convertible notes) were as follows:
December 1, 2022September 1, 2022
As ofFair
Value
Carrying
Value
Fair
Value
Carrying
Value
Notes$8,902 $9,351 $5,472 $6,020 
As of March 1, 2018 August 31, 2017
  
Fair
Value
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
Notes and MMJ Creditor Payments$6,792
 $6,686
 $8,793
 $8,423
Convertible notes 4,922
 1,580
 3,901
 1,521


The fair values of our convertible notesdebt instruments were determinedestimated based on Level 2 inputs, including the trading price of our convertible notes when available, our stock price, and interest rates based on similar debt issued by parties with credit ratings similar to ours. The fair values of our other debt instruments were estimated based on Level 2 inputs, including discounted cash flows, including the trading price of our notes, when available, and interest rates based on similar debt issued by parties with credit ratings similar to ours.






Derivative Instruments

Notional or Contractual AmountFair Value of
Assets(1)
Liabilities(2)
As of December 1, 2022
Derivative instruments with hedge accounting designation
Cash flow currency hedges$4,604 $59 $(182)
Cash flow commodity hedges111 (10)
Fair value interest rate hedges900 — (101)
Derivative instruments without hedge accounting designation
Non-designated currency hedges2,042 16 (5)
$76 $(298)
As of September 1, 2022
Derivative instruments with hedge accounting designation
Cash flow currency hedges$5,427 $— $(330)
    Cash flow commodity hedges97 (6)
    Fair value interest rate hedges900 — (91)
Derivative instruments without hedge accounting designation
Non-designated currency hedges2,821 (13)
$$(440)
(1)Included in receivables and other noncurrent assets.
  
Gross Notional Amount(1)
 Fair Value of
Current Assets(2)
 
Current Liabilities(3)
 
Noncurrent Assets(4)
As of March 1, 2018        
Derivative instruments with hedge accounting designation        
Cash flow currency hedges $565
 $20
 $(1) $
Fair value currency hedges 2,567
 44
 (2) 
  $3,132
 64
 (3) 
         
Derivative instruments without hedge accounting designation        
Non-designated currency hedges $1,763
 11
 (3) 
Convertible notes settlement obligation 6
 
 (309) 
    11
 (312) 
         
    $75
 $(315) $
         
As of August 31, 2017        
Derivative instruments with hedge accounting designation        
Cash flow currency hedges $456
 $17
 $
 $
         
Derivative instruments without hedge accounting designation        
Non-designated currency hedges $4,847
 34
 (5) 1
Convertible notes settlement obligation 2
 
 (47) 
    34
 (52) 1
         
    $51
 $(52) $1
(2)Included in accounts payable and accrued expenses and other noncurrent liabilities.
(1)
Notional amounts of currency forward hedge contracts in U.S. dollars and convertible notes settlement obligations in shares.
(2)
Included in receivables – other.
(3)
Included in accounts payable and accrued expenses – other for forward contracts and in current debt for convertible notes settlement obligations.
(4)
Included in other noncurrent assets.


Derivative Instruments with Hedge Accounting Designation


Cash Flow Hedges:We utilize currency forward and swap contracts that generally mature within twelve monthstwo years designated as cash flow hedges to hedgeminimize our exposure to changes in currency exchange rates. Currency forwardrates or commodity prices for certain capital expenditures and manufacturing costs. Forward and swap contracts are measured at fair value based on market-based observable inputs including currency exchangemarket spot and forward rates, interest rates, and credit-risk spreads (Level 2).

Cash Flow Hedges: We utilizerecognized gains from cash flow hedges to hedge our exposure to changes in cash flows from changes in currency exchange ratesof $53 million and losses of $100 million for certain capital expenditures. For derivative instruments designated as cash flow hedges, the effective portionfirst quarters of the realized2023 and unrealized gain or loss on the derivatives is included as a component of accumulated other comprehensive income. Amounts2022, respectively, in accumulated other comprehensive income are reclassified into earnings in the same line items and in the same periods in which the underlying transactions affect earnings. For the periods presented prior to the second quarter of 2018, the ineffective and excluded portion of the realized and unrealized gain or loss was included in other non-operating income (expense)(loss). As a result of adopting ASU 2017-12, beginning in the second quarterDecember 1, 2022, we expect to reclassify $239 million of 2018, such amounts are included in the same line item in which the underlying transactions affect earnings.

We recognized gains in accumulated other comprehensive income from the effective portion ofpre-tax losses related to cash flow hedges of $21 million and $17 million for the second quarter and first six months of 2018, respectively, and losses of $9 million in the first six months of 2017. Neither the amount excluded from hedge effectiveness nor the reclassifications from accumulated other comprehensive income to earnings were material in the second quarters or first six months of 2018 and 2017. The amounts


from cash flow hedges included in accumulated other comprehensive income that are expected to be reclassified(loss) into earnings in the next 12 months were also not material.months.


22 |2023 Q1 10-Q

Fair Value Hedges:We utilize fair value hedges to hedge our exposure to certain changes in fair values from changes in currency exchange rates for certain monetary assets and liabilities. For derivative forward contractsfixed-to-floating interest rate swaps designated as fair value hedges hedge effectiveness is determined by the change ofto minimize certain exposures to changes in the fair value of fixed-rate debt that result from fluctuations in benchmark interest rates. Interest rate swaps are measured at fair value based on market-based observable inputs including interest rates and credit-risk spreads (Level 2). The changes in the undiscounted spot ratefair values of derivatives designated as fair value hedges and the offsetting changes in the underlying fair values of the forward contract. The changehedged items are both recognized in earnings. When a derivative is no longer designated as a fair value hedge for any reason, including termination and maturity, the remaining unamortized difference between the carrying value of the hedge instrument attributed to changes inhedged item at that time and the undiscounted spot rate is recognized in other non-operating income (expense). The timeface value associated with the hedge instrument is excluded from the assessment of the effectiveness ofhedged item is amortized to earnings over the hedge and is recognized on a straight-line basis over theremaining life of the hedge to other non-operating income (expense). Amounts recorded to other comprehensive income (loss) forhedged item, or immediately if the second quarter of 2018 were not material.hedged item has matured or been extinguished. The effects of fair value hedges on our consolidated statements of operations, recognized in interest expense, were as follows:not significant for the periods presented.
Quarter ended March 1, 2018 
Other
Non-Operating
Income (Expense)
Gain (loss) on remeasurement of hedged assets and liabilities $(56)
Gain (loss) on derivatives designated as hedging instruments 56
Amortization of amounts excluded from hedge effectiveness (19)
  $(19)


Derivative Instruments without Hedge Accounting Designation


Currency Derivatives: Except for certain asset and liabilities hedged using fair value hedges, weWe generally utilize a rolling hedge strategy with currency forward contracts that mature within ninethree months to hedge our exposures of monetary assets and liabilities tofrom changes in currency exchange rates. At the end of each reporting period, monetary assets and liabilities denominated in currencies other than the U.S. dollar are remeasured into U.S. dollars and the associated outstanding forward contracts are marked to market. Currency forward contracts are valued at fair values based on the middle of bid and ask prices of dealers or exchange quotations (Level 2). Realized and unrealized gains and losses on derivative instruments without hedge accounting designation as well as the changes in the underlying monetary assets and liabilities due tofrom changes in currency exchange rates are included in other non-operating income (expense). For, net. The amounts recognized for derivative instruments without hedge accounting designation we recognized gains of $50 million and $52 millionwere not significant for the second quarter and first six months of 2018, respectively, and gains of $61 million and losses of $117 millionperiods presented. We do not use derivative instruments for the second quarter and first six months of 2017, respectively.speculative purposes.


Convertible Notes Settlement Obligations: For settlement obligations associated with our convertible notes that become derivative debt liabilities subject to mark-to-market accounting treatment, the fair values of the underlying derivative settlement obligations were initially determined using the Black-Scholes option valuation model (Level 2), which requires inputs of stock price, expected stock-price volatility, estimated option life, risk-free interest rate, and dividend rate. The subsequent measurement amounts of our convertible note settlement obligations were based on the volume-weighted-average stock price (Level 2). (See "Debt" note.) We recognized losses of $20 million and $24 million for the second quarter and first six months of 2018, respectively, for the changes in fair value of the derivative settlement obligations in other non-operating income (expense), net.


Equity Plans


As of MarchDecember 1, 2018, 942022, 51 million shares of our common stock were available for future awards under our equity plans.plans, including 18 million shares approved for issuance under our employee stock purchase plan (“ESPP”).




Stock Options

 Quarter ended Six months ended
 March 1, 2018 March 2, 2017 March 1, 2018 March 2, 2017
Stock options granted1
 4
 2
 6
Weighted-average grant-date fair value per share$18.61
 $8.37
 $18.13
 $8.15
Average expected life in years5.5
 5.5
 5.5
 5.5
Weighted-average expected volatility44% 47% 44% 47%
Weighted-average risk-free interest rate2.2% 1.9% 2.2% 1.8%
Expected dividend yield0.0% 0.0% 0.0% 0.0%

Restricted Stock and Restricted Stock Units ("(“Restricted Stock Awards"Awards”)


Restricted Stock Awards activity is summarized as follows:

Three months endedDecember 1, 2022December 2, 2021
Restricted stock award shares granted1410
Weighted-average grant-date fair value per share$53.94 $70.42 

mu-20221201_g3.jpg 23

 Quarter ended Six months ended
 March 1,
2018
 March 2,
2017
 March 1,
2018
 March 2,
2017
Restricted stock award shares granted2
 5
 4
 8
Weighted-average grant-date fair value per share$43.21
 $18.67
 $41.51
 $18.52

Stock-based Compensation Expense


 Quarter ended Six months ended
 March 1,
2018
 March 2,
2017
 March 1,
2018
 March 2,
2017
Stock-based compensation expense by caption       
Cost of goods sold$22
 $23
 $42
 $42
Selling, general, and administrative16
 18
 34
 33
Research and development14
 14
 27
 26
 $52
 $55
 $103
 $101
        
Stock-based compensation expense by type of award 
  
    
Stock options$14
 $18
 $31
 $35
Restricted stock awards38
 37
 72
 66
 $52
 $55
 $103
 $101

The income tax benefit related to share-basedStock-based compensation expense was $58recognized in our statements of operations is presented below. Stock-based compensation expense of $69 million and $116$48 million for the second quarterwas capitalized and first six monthsremained in inventory as of 2018, respectively,December 1, 2022 and $42 million and $63 million for the second quarter and first six months of 2017,September 1, 2022, respectively. The income tax benefits related to share-based compensation expense for the periods presented prior to the second quarter of 2018 were offset by an increase in the U.S. valuation allowance.

Three months endedDecember 1, 2022December 2, 2021
Stock-based compensation expense by caption
Research and development$53 $38 
Selling, general, and administrative37 35 
Cost of goods sold36 43 
Restructure— (5)
$126 $111 
Stock-based compensation expense by type of award
Restricted stock awards$109 $96 
ESPP17 14 
Stock options— 
$126 $111 

As of MarchDecember 1, 2018, $402 million2022, $1.59 billion of total unrecognized compensation costs for unvested awards, before the effect of any future forfeitures, was expected to be recognized through the secondfirst quarter of 2022,2027, resulting in a weighted-average period of 1.41.5 years.



Revenue
Research
Revenue is primarily recognized at a point in time when control of the promised goods is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods. Substantially all contracts with our customers are short-term in duration at fixed, negotiated prices with payment generally due shortly after delivery. From time to time, we have contracts with initial terms that include performance obligations that extend beyond one year. As of December 1, 2022, our future performance obligations beyond one year were not significant.

As of December 1, 2022 and Development

We share the cost of certain product and process development activities with development partners. Our R&D expenses were reduced by reimbursements under these arrangements of $58September 1, 2022, other current liabilities included $829 million and $114 million$1.26 billion for the second quarterestimates of consideration payable to customers, respectively, including estimates for pricing adjustments and first six monthsreturns.

Revenue by Technology

Three months endedDecember 1, 2022December 2, 2021
DRAM$2,829 $5,587 
NAND1,103 1,878 
Other (primarily NOR and 3D XPoint memory)153 222 
$4,085 $7,687 

See “Segment and Other Information” for disclosure of 2018, respectively, and $59 million and $115 million for the second quarter and first six monthsdisaggregated revenue by market segment.


24 |2023 Q1 10-Q





Other Non-Operating Income (Expense), Net

Three months endedDecember 1, 2022December 2, 2021
Gain (loss) on investments$(9)$10 
Gain (loss) on debt repurchases— (83)
Other(2)
$(4)$(75)

 Quarter ended Six months ended
 March 1,
2018
 March 2,
2017
 March 1,
2018
 March 2,
2017
Loss on debt repurchases and conversions$(23) $
 $(218) $(2)
Loss from changes in currency exchange rates(27) (28) (36) (40)
Gain on remeasurement of previously-held equity interest in Inotera
 71
 
 71
Other(3) (9) (3) (9)
 $(53) $34
 $(257) $20


In connection with the Inotera Acquisition, we revalued our previously-held 33% equity interest to its fair value. In determining the fair value, we used various valuation techniques, including the share price of Inotera prior to the announcement of the acquisition and discounted cash flow projections using inputs including discount rate and terminal growth rate (Level 3). As a result, we recognized a non-operating gain of $71 million in the second quarter of 2017.


Income Taxes


On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act") that lowers the U.S. corporate income tax rate from 35% to 21% and significantly affects how income from foreign operations is taxed in the United States. As a result of our fiscal year-end, our U.S. statutory federal rate will be 25.7% for 2018 (based on the 35% corporate rate through December 31, 2017 and 21% from that date through the end of fiscal year 2018) and 21% for subsequent years. The Tax Act imposes a one-time transition tax in 2018 on the higher of our accumulated foreign income, as determined as of November 2, 2017 or December 31, 2017 (the "Repatriation Tax"); provides a U.S. federal tax exemption on foreign earnings distributed to the United States; and, beginning in 2019, creates a new minimum tax on certain foreign earnings in excess of a deemed return on tangible assets (the "Foreign Minimum Tax"). The Tax Act allows us to elect to pay any Repatriation Tax due in eight annual interest-free payments in increasing amounts beginning in December 2018. In connection with the provisions of the Tax Act, we are continuing to evaluate whether to account for the Foreign Minimum Tax provisions that begin for us in 2019 as a period cost or in our measurement of deferred taxes.

The Securities and Exchange Commission's Staff Accounting Bulletin No. 118 ("SAB 118") allows the use of provisional amounts (reasonable estimates) if our analyses of the impacts of the Tax Act has not been completed when our financial statements for the second quarter of fiscal year 2018 are issued. Provisional amounts may be adjusted during a one-year measurement period as accounting for the income tax effects of the Tax Act are completed or as estimates are revised.



In accordance with SAB 118, we recorded certain provisional estimates included in the table below. Although the provisional estimates are based on the best available interpretations of the Tax Act, the final impacts may differ from the estimates due to, among other things, the issuance of additional regulatory and legislative guidance related to the Tax Act. Our income tax (provision) benefit consisted of the following:
Three months endedDecember 1, 2022December 2, 2021
Income (loss) before taxes$(176)$2,521 
Income tax (provision) benefit(8)(219)
Effective tax rate(4.5)%8.7 %

 Quarter ended Six months ended
 March 1, 2018 March 2, 2017 March 1, 2018 March 2, 2017
Provisional estimate for the Repatriation Tax on substantially all of our accumulated foreign earnings, net of adjustments related to uncertain tax positions$(1,335) $
 $(1,335) $
Remeasurement of deferred tax assets and liabilities reflecting the lower U.S. corporate tax rates(133) 
 (133) 
Provisional estimate for the release of the valuation allowance on the net deferred tax assets of our U.S. operations1,337
 
 1,337
 
Utilization of and other changes in net deferred tax assets of MMJ, MMT, and MTTW(17) (8) (43) (21)
Other income tax (provision) benefit5
 (30) (83) (48)
 $(143) $(38) $(257) $(69)

As noted above, provisional estimates were recorded for the Repatriation Tax and the release of the valuation allowance on the net deferred tax assets of our U.S. operations. To determine the amount of the Repatriation Tax, we must determine the accumulated foreign earnings of our foreign subsidiaries and the amount of foreign income tax paid on such earnings. The provisional estimate of the Repatriation Tax is also based,change in part, on the amount of cash and other specified assets anticipated to be held by our foreign subsidiaries as of August 30, 2018, the end of our fiscal year 2018, which may determine the portion of the accumulated foreign earnings taxed at an effective rate of 15.5% or 8%. As a result, the Repatriation Tax may change as amounts are finalized. The U.S. Department of Treasury has issued interpretive guidance regarding the Repatriation Tax and we expect that they will issue additional guidance. Based on the information available, we can reasonably estimate the Repatriation Tax and therefore recorded a provisional amount; however, we are continuing to gather additional information and analyze authoritative guidance to finalize the computation of the Repatriation Tax as well as the impacts on the valuation allowance release of the Repatriation Tax and the Tax Act.

As of March 1, 2018, we had gross unrecognized income tax benefits of $209 million, of which $196 million would affect our effective tax rate for the first quarter of 2023 as compared to the first quarter of 2022 was primarily due to a loss before taxes in the future, if recognized.first quarter of 2023, which eliminated substantially all of our U.S. tax on foreign operations. The Tax Act reduced unrecognizedgeographic mix of our income, together with U.S. and foreign tax benefits by $123 million. The amount accrued for interest and penalties related to uncertainrules, results in more variability in our tax positions was not material for any period presented.rate at lower profitability levels.


We operate in a number of tax jurisdictions outside the United States, including Singapore, where we have tax incentive arrangements thatarrangements. These incentives expire, in whole or in part, at various dates through 2034 and are conditional, in part, upon meeting certain business operations and employment thresholds. The effect ofbenefit from tax incentive arrangements which expire in whole or in part at various dates through 2030,was not material for the first quarter of 2023. These arrangements reduced our tax provision by $436$290 million (benefitting our diluted earnings per share by $0.35) and $827 million ($0.670.26 per diluted share) for the secondfirst quarter and first six months of 2018, respectively, and $132 million ($0.11 per diluted share) and $172 million ($0.15 per diluted share), for the second quarter and first six months of 2017, respectively.2022.






Earnings Per Share

Three months endedDecember 1, 2022December 2, 2021
Net income (loss) – Basic and Diluted$(195)$2,306 
Weighted-average common shares outstanding – Basic1,090 1,119 
Dilutive effect of equity plans— 11 
Weighted-average common shares outstanding – Diluted1,090 1,130 
Earnings (loss) per share
Basic$(0.18)$2.06 
Diluted(0.18)2.04 
 Quarter ended Six months ended
 March 1,
2018
 March 2,
2017
 March 1,
2018
 March 2,
2017
Net income attributable to Micron – Basic and Diluted$3,309
 $894
 $5,987
 $1,074
        
Weighted-average common shares outstanding – Basic1,156
 1,099
 1,145
 1,070
Dilutive effect of equity plans and convertible notes82
 61
 87
 55
Weighted-average common shares outstanding – Diluted1,238
 1,160
 1,232
 1,125
        
Earnings per share       
Basic$2.86
 $0.81
 $5.23
 $1.00
Diluted2.67
 0.77
 4.86
 0.95


Antidilutive potential common shares excluded from the computation of diluted earnings per share, that could dilute basic earnings per share in the future, were 35 million and 3 million for the second quarterfirst quarters of 2023 and first six months2022, respectively.


mu-20221201_g3.jpg 25



Segment and Other Information


Segment information reported herein is consistent with how it is reviewed and evaluated by our chief operating decision maker. We have the following four business units, which are our reportable segments:


Compute and Networking Business Unit ("CNBU"(“CNBU”):Includes memory products sold into compute, networking,client, cloud server, enterprise, graphics, and cloud servernetworking markets.
Mobile Business Unit ("MBU"(“MBU”):Includes memory products sold into smartphone, tablet, and other mobile-device markets.
Storage Business Unit ("SBU"):Includes memory and storage products sold into enterprise, client, cloud,smartphone and removable storageother mobile-device markets.
Embedded Business Unit ("EBU"(“EBU”):Includes memory and storage products sold into automotive, industrial, connected home, and consumer electronics markets.

Storage Business Unit (“SBU”):Includes SSDs and component-level solutions sold into enterprise and cloud, client, and consumer storage markets, and other discrete storage products sold in component and wafer form.

Certain operating expenses directly associated with the activities of a specific segment are charged to that segment. Other indirect operating income and expenses (income) are generally allocated to segments based on their respective percentage of cost of goods sold or forecasted wafer production. We do not identify or report internally our assets (other than goodwill) or capital expenditures by segment, nor do we allocate gains and losses from equity method investments, interest, other non-operating income or expense items, or taxes to segments.



Three months endedDecember 1, 2022December 2, 2021
Revenue
CNBU$1,746 $3,406 
MBU655 1,907 
EBU1,000 1,220 
SBU680 1,150 
All Other
$4,085 $7,687 
Operating income (loss)
CNBU$190 $1,524 
MBU(195)624 
EBU194 422 
SBU(257)152 
All Other
(65)2,725 
Unallocated
Stock-based compensation(126)(116)
Restructure and asset impairments(13)(38)
Other(5)60 
(144)(94)
Operating income (loss)$(209)$2,631 



26 |2023 Q1 10-Q
 Quarter ended Six months ended
 March 1,
2018
 March 2,
2017
 March 1,
2018
 March 2,
2017
Net sales       
CNBU$3,691
 $1,917
 $6,903
 $3,387
MBU1,566
 1,082
 2,931
 2,114
SBU1,254
 1,041
 2,637
 1,901
EBU829
 590
 1,659
 1,168
All Other11
 18
 24
 48
 $7,351
 $4,648
 $14,154
 $8,618
        
Operating income (loss)       
CNBU$2,329
 $736
 $4,243
 $940
MBU689
 170
 1,194
 259
SBU251
 71
 651
 26
EBU363
 193
 705
 371
All Other(2) 7
 (6) 19
 3,630
 1,177
 6,787
 1,615
        
Unallocated       
Stock-based compensation(52) (55) (103) (101)
Restructure and asset impairments(7) (4) (13) (33)
Flow-through of Inotera inventory step-up
 (60) 
 (60)
Other(4) (14) (7) (18)
 (63) (133) (123) (212)
        
Operating income$3,567
 $1,044
 $6,664

$1,403


Certain Concentrations




Revenue for key market segments as an approximate percent of total revenue is presented in the table below:
Three months endedDecember 1, 2022December 2, 2021
Automotive, industrial, and consumer25 %15 %
Enterprise and cloud server20 %20 %
Client and graphics15 %20 %
SSDs and other storage15 %15 %
Mobile15 %25 %


Subsequent Events

On December 19, 2022, we reached an agreement in principle to settle an insurance claim involving an operational disruption in 2017, under which we will receive $120 million in cash, the majority of which is for business interruption and will be recognized in revenue.

On December 19, 2022, our Board of Directors declared a quarterly dividend of $0.115 per share, payable in cash on January 19, 2023, to shareholders of record as of the close of business on January 3, 2023.

On December 21, 2022, we announced a restructure plan in response to challenging industry conditions. Under the restructure plan, we expect to reduce our headcount by approximately 10% over calendar year 2023, through a combination of voluntary attrition and personnel reductions. In connection with the plan, we expect to incur charges of at least $30 million in the second quarter of fiscal 2023.


mu-20221201_g3.jpg 27

ITEM 2. MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


This discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended August 31, 2017.September 1, 2022. All period references are to our fiscal periods unless otherwise indicated. Our fiscal year is the 52 or 53-week period ending on the Thursday closest to August 31. Our fiscal 2018Fiscal years 2023 and 20172022 each contain 52 weeks. All production data includes the production of IMFT and Inotera. All tabular dollar amounts are in millions, except per share amounts.

Our Management's Discussion and Analysis is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. This discussion is organized as follows:

Overview: Overview of our operations, business, and highlights of key events.
Results of Operations: An analysis of our financial results consisting of the following:
Consolidated results;
Operating results by business segment;
Operating results by product; and
Operating expenses and other.
Liquidity and Capital Resources: An analysis of changes in our balance sheet and cash flows and discussion of our financial condition and liquidity.
Critical Accounting Estimates
Recently Issued Accounting Standards



Overview


Micron Technology, Inc., including its consolidated subsidiaries, isWe are an industry leader in innovative memory and storage solutions. Through our global brands – Micron, Crucial, and Ballistix– our broad portfolio of high-performance memory and storage technologies, including DRAM, NAND, NOR Flash, and 3D XPoint memory, issolutions transforming how the world uses information to enrich life. Backed by nearly 40 years oflife for all. With a relentless focus on our customers, technology leadership, ourand manufacturing and operational excellence, Micron delivers a rich portfolio of high-performance DRAM, NAND, and NOR memory and storage solutions enable disruptive trends, includingproducts through our Micron® and Crucial® brands. Every day, the innovations that our people create fuel the data economy, enabling advances in artificial intelligence machine learning, and autonomous vehicles in key market segments like cloud,5G applications that unleash opportunities — from the data center networking,to the intelligent edge and mobile.across the client and mobile user experience.


We manufacture our products at wholly-owned facilities and also utilize subcontractors for certain manufacturing processes. Our global network of manufacturing centers of excellence not only allows us to benefit from scale while streamlining processes and operations, but it also brings together some of the world’s brightest talent to work on the most advanced memory technology. Centers of excellence bring expertise together in one location, providing an efficient support structure for end-to-end manufacturing, with quicker cycle times, in partnership with teams such as research and development (“R&D”), product engineering, human resources, procurement, and supply chain. For our worldwide wholly-ownedlocations in Singapore and joint venture facilities. In recent years, we have increased ourTaiwan, this is also a combination of bringing fabrication and back-end manufacturing scale and product diversity through strategic acquisitions, expansion, and various partnering arrangements.

together. We make significant investments to develop the proprietary product and process technology, which is implemented in our manufacturing facilities. We generally increase theincreases bit density per wafer and reducereduces per-bit manufacturing costs of each generation of product through advancements in product and process technology, such as our leading-edge line-width process technology and 3D NAND architecture.product. We continue to introduce new generations of products that offer improved performance characteristics, including higher data transfer rates, reduced package size,advanced packaging solutions, lower power consumption, improved read/write reliability, and increased memory density. Storage products incorporating NAND, a controller, and firmware constitute a significant portion of our sales. We generally develop firmware and expect to introduce proprietary controllers into our SSDs in new products starting in 2018. Development of advanced technologies enables us to diversify our product portfolio toward a richer mix of differentiated, high-value solutions and target high-growth markets.


We market our products through our internal sales force, independent sales representatives, and distributors primarily to original equipment manufacturers and retailers located around the world. We face intense competition in the semiconductor memory and storage markets and in order to remain competitive we must continuously develop and implement new products and technologies and decrease manufacturing costs.costs in spite of ongoing inflationary cost pressures. Our success is largely dependent on obtaining returns on our R&D investments, efficient utilization of our manufacturing infrastructure, development and integration of advanced product and process technologies, market acceptance of our diversified portfolio of semiconductor-based memory and storage solutions, and efficient utilizationcapital spending.

Impact of COVID-19 on Our Business

The COVID-19 pandemic has had, and continues to have, a significant impact around the world, prompting governments and businesses to take measures such as restrictions on travel and business operations, temporary closures of businesses, and quarantine and shelter-in-place orders. The pandemic and efforts to address it have at times significantly curtailed global economic activity and caused volatility and disruption in global financial markets and may do so in the future. In addition, our workforce and operations, the operations of our manufacturing infrastructure, successful ongoing developmentcustomers, and integrationthose of advanced productour vendors and process technology, return-driven capital spending,suppliers around the world have been impacted at times and successful R&D investments.may in the future be impacted by the pandemic and related measures to address it.


To leverage our significant investments in R&D,Throughout the pandemic, we have formed,implemented and may continueupdated our protocols and procedures in an effort to form, strategic joint ventures that allow usmaintain a healthy and safe environment. We remain committed to share the costshealth and safety of developingour team members, contractors, suppliers, customers, distributors, and communities. We cannot predict how the pandemic or the steps we, our team members, government entities, suppliers, or customers take in response will ultimately impact our business, outlook, or results of operations.

28 |2023 Q1 10-Q

Product Technologies

Our product portfolio of memory and storage productsolutions, advanced solutions, and process technologystorage platforms is based on our high-performance semiconductor memory and storage technologies, including DRAM, NAND, and NOR. We sell our products into various markets through our business units in numerous forms, including components, modules, SSDs, managed NAND, MCPs, and wafers. Our system-level solutions, including SSDs and managed NAND, combine NAND, a controller, firmware, and in some cases DRAM.

DRAM: DRAM products are dynamic random access memory semiconductor devices with third parties. In addition,


from timelow latency that provide high-speed data retrieval with a variety of performance characteristics. DRAM products lose content when power is turned off (“volatile”) and are most commonly used in client, cloud server, enterprise, networking, graphics, industrial, and automotive markets. LPDRAM products, which are engineered to time, we also sell and/or license technology to other parties. We continue to pursue additional opportunities to monetize our investment in intellectual property through partneringmeet standards for performance and power consumption, are sold into smartphone and other arrangements.mobile-device markets (including client markets for Chromebooks and notebook PCs), as well as into the automotive, industrial, and consumer markets.


NAND: NAND products are non-volatile, re-writeable semiconductor storage devices that provide high-capacity, low-cost storage with a variety of performance characteristics. NAND is used in SSDs for the enterprise and cloud, client, and consumer markets and in removable storage markets. Managed NAND is used in smartphones and other mobile devices, and in consumer, automotive, and embedded markets. Low-density NAND is ideal for applications like automotive, surveillance, machine-to-machine, automation, printer, and home networking.

NOR: NOR products are non-volatile re-writable semiconductor memory devices that provide fast read speeds. NOR is most commonly used for reliable code storage (e.g., boot, application, operating system, and execute-in-place code in an embedded system) and for frequently changing small data storage and is ideal for automotive, industrial, and consumer applications.


mu-20221201_g3.jpg 29

Results of Operations


Consolidated Results

First QuarterFourth QuarterFirst Quarter
202320222022
Revenue$4,085 100 %$6,643 100 %$7,687 100 %
Cost of goods sold3,192 78 %4,021 61 %4,122 54 %
Gross margin893 22 %2,622 39 %3,565 46 %
Research and development849 21 %839 13 %712 %
Selling, general, and administrative251 %280 %259 %
Restructure and asset impairments13 — %— %38 — %
Other operating (income) expense, net(11)— %(23)— %(75)(1)%
Operating income (loss)(209)(5)%1,521 23 %2,631 34 %
Interest income (expense), net37 %— %(35)— %
Other non-operating income (expense), net(4)— %23 — %(75)(1)%
Income tax (provision) benefit(8)— %(56)(1)%(219)(3)%
Equity in net income (loss) of equity method investees(11)— %(5)— %— %
Net income (loss)$(195)(5)%$1,492 22 %$2,306 30 %

 Second Quarter First Quarter Six Months
 2018 % of Net Sales 2017 % of Net Sales 2018 % of Net Sales 2018 % of Net Sales 2017 % of Net Sales
Net sales$7,351
 100 % $4,648
 100 % $6,803
 100 % $14,154
 100 % $8,618
 100 %
Cost of goods sold3,081
 42 % 2,944
 63 % 3,056
 45 % 6,137
 43 % 5,903
 68 %
Gross margin4,270
 58 % 1,704
 37 % 3,747
 55 % 8,017
 57 % 2,715
 32 %
                    
SG&A196
 3 % 187
 4 % 191
 3 % 387
 3 % 346
 4 %
R&D523
 7 % 473
 10 % 448
 7 % 971
 7 % 943
 11 %
Other operating (income) expense, net(16)  % 
  % 11
  % (5)  % 23
  %
Operating income3,567
 49 % 1,044
 22 % 3,097
 46 % 6,664
 47 % 1,403
 16 %
   

                
Interest income (expense), net(61) (1)% (153) (3)% (101) (1)% (162) (1)% (285) (3)%
Other non-operating income (expense), net(53) (1)% 34
 1 % (204) (3)% (257) (2)% 20
  %
Income tax (provision) benefit(143) (2)% (38) (1)% (114) (2)% (257) (2)% (69) (1)%
Equity in net income (loss) of equity method investees1
  % 7
  % 
  % 1
  % 5
  %
Net income attributable to noncontrolling interests(2)  % 
  % 
  % (2)  % 
  %
Net income attributable to Micron$3,309
 45 % $894
 19 % $2,678
 39 % $5,987
 42 % $1,074
 12 %

Net Sales
 Second Quarter First Quarter Six Months
 2018 % of Total 2017 % of Total 2018 % of Total 2018 % of Total 2017 % of Total
CNBU$3,691
 50% $1,917
 41% $3,212
 47% $6,903
 49% $3,387
 39%
MBU1,566
 21% 1,082
 23% 1,365
 20% 2,931
 21% 2,114
 25%
SBU1,254
 17% 1,041
 22% 1,383
 20% 2,637
 19% 1,901
 22%
EBU829
 11% 590
 13% 830
 12% 1,659
 12% 1,168
 14%
All Other11
 % 18
 % 13
 % 24
 % 48
 1%
 $7,351
   $4,648
   $6,803
 

 $14,154
 

 $8,618
 

PercentagesIndustry Conditions: The memory and storage industry environment deteriorated sharply in the fourth quarter of total net sales reflect rounding2022 and may not total 100%.

Total net salesfirst quarter of 2023 due to global and macroeconomic challenges combined with downward inventory adjustments by customers and weak demand in many end markets. This led to significant reductions in bit shipments and average selling prices for both DRAM and NAND as well as declines in revenue across nearly all our end markets. Given the challenging pricing environment, elevated levels of inventories for suppliers and customers, and significant supply demand mismatch, we expect industry profitability will remain challenged throughout calendar 2023. As a result of these conditions and increases in our inventory levels, we are reducing wafer starts and capital expenditures. We estimate an approximate $460 million increase to our costs of goods sold in 2023 from wafer start reductions, starting in the second quarter of 2018 increased 8%2023, with most of the impact expected in the second half of 2023.

We are also taking significant steps to reduce our costs and operating expenses. These actions include reductions in external spending, productivity programs across the business, suspension of our 2023 bonus company-wide, select product program reductions, lower discretionary spending, and cuts to 2023 executive salaries across the company. In addition, in the second quarter of 2023, we initiated a restructure plan to reduce our headcount by approximately 10% over calendar 2023, through a combination of voluntary attrition and personnel reductions. In connection with the plan, we expect to incur charges of at least $30 million in the second quarter of 2023.

Total Revenue: Total revenue for the first quarter of 2023 decreased 39% as compared to the fourth quarter of 2022 primarily due to decreases in sales of both DRAM and NAND products.

Sales of DRAM products decreased 41% primarily due to decreases in bit shipments in the mid-20 percent range and a low-20 percent range decline in average selling prices.
Sales of NAND products decreased 35% primarily due to a low-20 percent range decline in average selling prices and a mid-teens percent range decrease in bit shipments.

Total revenue for the first quarter of 2023 decreased 47% as compared to the first quarter of 20182022 primarily due to strong executiondecreases in sales of both DRAM and market conditionsNAND products.

Sales of DRAM products decreased 49% primarily due to a high-30 percent range decline in average selling prices and decreases in bit shipments in the high-teens percent range.
Sales of NAND products decreased 41% primarily due to a mid-20 percent range decline in average selling prices and decreases in bit shipments in the low-20 percent range.
30 |2023 Q1 10-Q

Consolidated Gross Margin:Our consolidated gross margin percentage decreased to 22% for the first quarter of 2023 from 39% for the fourth quarter of 2022, as a result of reductions in margins for both DRAM across our primary markets, particularlyand NAND products, primarily due to declines in average selling prices. Our consolidated gross margin percentage declined to 22% for server, mobile,the first quarter of 2023 from 46% for the first quarter of 2022 as a result of reductions in margins for both DRAM and client. The strong demandNAND products, primarily due to declines in average selling prices. Cost of goods sold for our products enabled usthe first quarter of 2023 were adversely impacted by reductions in sales volumes and inflationary cost pressures.

Revenue by Business Unit
First QuarterFourth QuarterFirst Quarter
202320222022
CNBU$1,746 43 %$2,931 44 %$3,406 44 %
MBU655 16 %1,511 23 %1,907 25 %
EBU1,000 24 %1,303 20 %1,220 16 %
SBU680 17 %891 13 %1,150 15 %
All Other— %— %— %
 $4,085 $6,643 $7,687 
Percentages of total revenue may not total 100% due to increaserounding.

Changes in revenue for each business unit for the first quarter of 2023 as compared to the fourth quarter of 2022 were as follows:

CNBU revenue decreased 40% primarily due to declines in DRAM average selling prices and sales volumes resultingdecreases in higher CNBUbit shipments reflecting weakness across markets.
MBU revenue decreased 57% primarily due to decreases in bit shipments and MBU sales. Despite significant increasesdeclines in SSDaverage selling prices for both DRAM and NAND.
EBU revenue decreased 23% primarily due to decreases in bit shipments and declines in DRAM average selling prices.
SBU revenue decreased 24% primarily due to declines in average selling prices for NAND.

Changes in revenue for each business unit for the secondfirst quarter of 20182023 as compared to the first quarter of 2018, SBU2022 were as follows:

CNBU revenue decreased 49% primarily due to declines in NAND component revenue.DRAM average selling prices and decreases in bit shipments.

Total net sales for the second quarterMBU revenue decreased 66% primarily due to declines in average selling prices and first six months of 2018 increased 58% and 64%, respectively, as compared to the corresponding periods of 2017. Solid execution and strong demand for our products across our primary markets, particularlydecreases in client, enterprise, mobile, and cloud, drove higher sales in the second quarter of 2018 for all operating segments and significant increases in sales volumesbit shipments for both DRAM and Trade NAND products as well as increasesNAND.
EBU revenue decreased 18% primarily due to lower DRAM revenue resulting from declines in DRAM average selling prices and decreases in bit shipments.
SBU revenue decreased 41% primarily due to declines in average selling prices and decreases in bit shipments for DRAM products.NAND.



mu-20221201_g3.jpg 31


Operating Income (Loss) by Business Unit
Gross Margin
First QuarterFourth QuarterFirst Quarter
202320222022
CNBU$190 11 %$980 33 %$1,524 45 %
MBU(195)(30)%308 20 %624 33 %
EBU194 19 %405 31 %422 35 %
SBU(257)(38)%(38)(4)%152 13 %
All Other75 %100 %75 %
 $(65)$1,662 $2,725 

Percentages reflect operating income (loss) as a percentage of revenue for each business unit.
Our overall gross margin percentage increased to 58%
Changes in operating income or loss for the second quarter of 2018 from 55%each business unit for the first quarter of 20182023 as compared to the fourth quarter of 2022 were as follows:

CNBU operating income decreased primarily due to strong demanddeclines in average selling prices and lower bit shipments.
MBU operating income (loss) deteriorated primarily due to declines in average selling prices and lower bit shipments.
EBU operating income decreased primarily due to lower bit shipments and declines in DRAM average selling prices.
SBU operating loss increased primarily due to declines in average selling prices.

Changes in operating income or loss for our DRAM products that drove favorable pricing conditions, combined with overall reductions in manufacturing costs. The increase in our gross margin percentageeach business unit for the secondfirst quarter of 2018 reflects margin expansion for DRAM products driven by the continued growth in product offerings and sales for server and mobile products featuring our 1X nm DRAM technology. Gross margin percentages increased for CNBU, MBU, and EBU operating segments in the second quarter of 20182023 as compared to the first quarter of 2018.2022 were as follows:


Our overall gross margin percentage increased to 58% for the second quarter of 2018 from 37% for the second quarter of 2017 and increased to 57% for the first six months of 2018 from 32% for the first six months of 2017, reflecting increases in the gross margin percentages for allCNBU operating segments,income decreased primarily due to strong executiondeclines in average selling prices and market demand togetherlower bit shipments.
MBU operating income (loss) deteriorated primarily due to declines in average selling prices and lower bit shipments.
EBU operating income decreased primarily due to declines in average selling prices.
SBU operating income (loss) deteriorated primarily due to declines in average selling prices and lower bit shipments.

Operating Expenses and Other

Research and Development: R&D expenses vary primarily with manufacturingthe number of development and pre-qualification wafers processed, the cost reductions. From January 2016of advanced equipment dedicated to new product and process development, and personnel costs. Because of the lead times necessary to manufacture our products, we typically begin to process wafers before completion of performance and reliability testing. Development of a product is deemed complete when it is qualified through December 6, 2016,internal reviews and tests for performance and reliability. R&D expenses can vary significantly depending on the date we acquired the remaining interest in Inotera, we purchased alltiming of Inotera's DRAM output under supply agreements at prices based on a formula that equally shared margin between Inotera and us. Forproduct qualification.

R&D expenses for the first quarter of 2017, we purchased $504 million2023 were relatively unchanged as compared to the fourth quarter of DRAM products from Inotera under these agreements, representing 37% of our aggregate DRAM bit production.

Operating Results by Business Segments

CNBU
 Second Quarter First Quarter Six Months
 2018 2017 2018 2018 2017
Net sales$3,691
 $1,917
 $3,212
 $6,903
 $3,387
Operating income2,329
 736
 1,914
 4,243
 940

CNBU sales2022. R&D expenses for the secondfirst quarter of 2018 increased 15%2023 were 19% higher as compared to the first quarter of 20182022 primarily due to higher sales into cloud servervolumes of development and client marketsprequalification wafers, increases in employee compensation, and improved pricingdepreciation expense.

Selling, General, and Administrative: SG&A expenses for our DRAM products. As a result, CNBU operating income improved for the second quarter of 2018 compared to the first quarter of 2018. See "Operating Results by Product – DRAM" for further detail.

CNBU sales for the second quarter and first six months of 2018 increased 93% and 104%, respectively,2023 were 10% lower as compared to the corresponding periodsfourth quarter of 2017 due to increases in average selling prices for our products sold into the client market, growth in the cloud market driven by significant increases in DRAM content per server, and increases in sales into the enterprise market. Favorable conditions in key CNBU markets for the second quarter and first six months of 2018 drove increases in average selling prices and sales volumes as compared to the corresponding periods of 2017. CNBU operating income for the second quarter and first six months of 2018 improved from the corresponding periods of 20172022 primarily due to improved pricing, manufacturing cost reductions, and product mix.

MBU
 Second Quarter First Quarter Six Months
 2018 2017 2018 2018 2017
Net sales$1,566
 $1,082
 $1,365
 $2,931
 $2,114
Operating income689
 170
 505
 1,194
 259

MBU sales are comprised primarily of DRAM and NAND, with mobile DRAM products accounting for a significant majority of the sales. MBU salesincremental decreases across multiple expense categories. SG&A expenses for the secondfirst quarter of 2018 increased 15%2023 were relatively unchanged as compared to the first quarter of 2018 primarily due to strong acceptance2022.

32 |2023 Q1 10-Q





 Second Quarter First Quarter Six Months
 2018 2017 2018 2018 2017
Net sales$1,254
 $1,041
 $1,383
 $2,637
 $1,901
Operating income251
 71
 400
 651
 26

SBU sales of Trade NAND products for the second quarter of 2018 decreased 7% as compared to the first quarter of 2018 due to declines in NAND component sales from lower average selling prices, partially offset by increases in SSD sales. Sales of SSD storage products for the second quarter of 2018 increased 22% as compared to the first quarter of 2018, driven by strong demand in cloud and client markets for products incorporating our TLC 3D NAND technology. SBU Non-Trade sales were $136 million for the second quarter of 2018 as compared to $122 million for the first quarter of 2018 and $158 million for the second quarter of 2017. SBU operatingIncome Taxes: Our income for the second quarter of 2018 was also adversely affected by costs associated with IMFT's production of 3D XPoint products at less than full capacity, partially offset by a mix shift to SSD products and NAND manufacturing cost reductions. See "Operating Results by Product – Trade NAND" for further details.

SBU sales of Trade NAND products for the second quarter and first six months of 2018 increased 23% and 40%, respectively, as compared to the corresponding periods of 2017 primarily due to increases in sales volumes from strong demand, particularly for sales of SSD products into the cloud market. SBU sales of SSD storage products for the second quarter and first six months of 2018 increased by 81% and 103%, respectively, as compared to the corresponding periods of 2017 primarily as a result of the launch of new SSD products incorporating our TLC 3D NAND technology. SBU operating income for the second quarter and first six months of 2018 improved from the corresponding periods of 2017 primarily due to manufacturing cost reductions and improvements in product mix.

EBU
 Second Quarter First Quarter Six Months
 2018 2017 2018 2018 2017
Net sales$829
 $590
 $830
 $1,659
 $1,168
Operating income363
 193
 342
 705
 371

EBU sales are comprised of DRAM, NAND, and NOR Flash in decreasing order of revenue. EBU sales for the second quarter of 2018 were relatively unchanged from the first quarter of 2018. EBU operating income for the second quarter of 2018 increased from the first quarter of 2018 primarily due to manufacturing cost reductions and improved pricing for DRAM products resulting from strong demand for our products.

EBU sales for the second quarter and first six months of 2018 increased 41% and 42%, respectively, as compared to the corresponding periods of 2017 primarily due to strong demand and higher sales volumes for DRAM, NAND, and eMCP in consumer markets. EBU operating income for the second quarter and first six months of 2018 increased as compared to the corresponding periods of 2017 as a result of increases in average selling prices, manufacturing cost reductions, and increases in sales volumes.



Operating Results by Product

Net Sales by Product
 Second Quarter First Quarter Six Months
 2018 % of Total 2017 % of Total 2018 % of Total 2018 % of Total 2017 % of Total
DRAM$5,213
 71% $2,960
 64% $4,562
 67% $9,775
 69% $5,381
 62%
Trade NAND1,805
 25% 1,412
 30% 1,866
 27% 3,671
 26% 2,684
 31%
Non-Trade136
 2% 158
 3% 122
 2% 258
 2% 281
 3%
Other197
 3% 118
 3% 253
 4% 450
 3% 272
 3%
 $7,351
   $4,648
   $6,803
   $14,154
   $8,618
  
Percentages of total net sales reflect rounding and may not total 100%.

Non-Trade consists of NAND and 3D XPoint products manufactured and sold to Intel through IMFT under a long-term supply agreement at prices approximating cost. Information regarding products that combine both NAND and DRAM components is reported within Trade NAND. Other includes sales of NOR and trade 3D XPoint products.

DRAM
Second Quarter 2018 VersusFirst Six Months 2018 Versus
First Quarter 2018Second Quarter 2017First Six Months 2017
(percentage change)
Average selling prices per gigabitincreased low double digitincreased low 40% rangeincreased high 40% range
Gigabits soldincreased mid single digitincreased low 20% rangeincreased low 20% range

Increases in sales volumes and prices for the second quarter of 2018 as compared to the first quarter of 2018 and second quarter of 2017 resulted from strong conditions for server, mobile, and client markets. Our gross margin percentage on sales of DRAM products for the second quarter of 2018 improved from the first quarter of 2018 and second quarter of 2017 primarily due to increases in average selling prices due to favorable market conditions and manufacturing cost reductions.

Trade NAND
Second Quarter 2018 VersusFirst Six Months 2018 Versus
First Quarter 2018Second Quarter 2017First Six Months 2017
(percentage change)
Average selling prices per gigabytedecreased mid-teens rangedecreased high single digitdecreased mid single digit
Gigabytes soldincreased low double digitincreased low 40% rangeincreased low 40% range

Decreases in net sales for the second quarter of 2018 as compared to the first quarter of 2018 resulted from declines in average selling prices partially offset by increase in sales of cloud and client SSDs driven by growth and gains in market share for SSD products. Increases in net sales for the second quarter of 2018 as compared to the second quarter of 2017 primarily resulted from increases in sales of cloud and client SSDs. Our ability to meet increased demand for SSDs and other NAND products in the second quarter of 2018 was primarily due to improvements in process technology, including our transition to 3D NAND products and strong execution. Our gross margin percentage on sales of Trade NAND for the second quarter of 2018 declined slightly from the first quarter of 2018 as declines in average selling prices outpaced manufacturing cost reductions. Our gross margin percentage on sales of Trade NAND for the second quarter of 2018 improved from the second quarter of 2017 as manufacturing cost reductions outpaced declines in average selling prices.



Operating Expenses and Other

Selling, General, and Administrative

SG&A expenses for the second quarter of 2018 were relatively unchanged compared to the first quarter of 2018. SG&A expenses for the second quarter of 2018 were 5% higher than the second quarter of 2017 primarily due to increases in payroll costs. SG&A expenses for the first six months of 2018 were 12% higher than the first six months of 2017 primarily due to increases in performance-based pay and other payroll costs.

Research and Development

R&D expenses for the second quarter of 2018 were 17% higher than the first quarter of 2018 primarily due to higher volumes of product being processed that had not been qualified and increases in payroll costs. R&D expenses for the second quarter of 2018 were 11% higher than the second quarter of 2017 primarily due to increases in payroll costs. R&D expenses for the first six months of 2018 were slightly higher as compared to the first six months of 2017 due to increases in payroll costs, partially offset by lower volumes of product being processed that had not been qualified.

We share the cost of certain product and process development activities with development partners, including Intel. We expect to continue to jointly develop NAND technologies with Intel through the third generation of 3D NAND, which is expected to be delivered in 2019. In the second quarter of 2018, we and Intel mutually agreed to independently develop subsequent generations of 3D NAND in order to better optimize the technology and products for each individual business' needs. Our R&D expenses were reduced by reimbursements under our arrangements by $58 million for the second quarter of 2018, $56 million for the first quarter of 2018, and $59 million for the second quarter of 2017.

Income Taxes

Income tax (provision) benefit consisted of the following:
First QuarterFourth QuarterFirst Quarter
202320222022
Income (loss) before taxes$(176)$1,553 $2,521 
Income tax (provision) benefit(8)(56)(219)
Effective tax rate(4.5)%3.6 %8.7 %

 Second Quarter First Quarter Six Months
 2018 2017 2018 2018 2017
Provisional estimate for the Repatriation Tax, net of adjustments related to uncertain tax positions$(1,335) $
 $
 $(1,335) $
Remeasurement of deferred tax assets and liabilities reflecting lower U.S. corporate tax rates(133) 
 
 (133) 
Provisional estimate for the release of the valuation allowance on the net deferred tax assets of our U.S. operations1,337
 
 
 1,337
 
Utilization of and other changes in net deferred tax assets of MMJ, MMT, and MTTW(17) (8) (26) (43) (21)
Other income tax (provision) benefit5
 (30) (88) (83) (48)
 $(143) $(38) $(114) $(257) $(69)
          
Effective tax rate4.1% 4.1% 4.1% 4.1% 6.1%

Our income taxes reflect the following:

various provisional estimatesThe changes in our effective tax rate for the impactsfirst quarter of 2023 as compared to the Tax Act, includingfourth quarter of 2022 and the Repatriation Tax, remeasurementfirst quarter of deferred tax assets and liabilities at2022 were primarily due to a loss before taxes in the lower U.S. corporate ratefirst quarter of 21%, and release of a substantial portion of the valuation allowance on the net deferred tax assets2023, which eliminated substantially all of our U.S. operations;tax on foreign operations. The geographic mix of our income, together with U.S. and foreign tax rules, results in more variability in our tax rate at lower profitability levels.
operations
We operate in a number of jurisdictions outside the United States, including Singapore, where we have tax incentive arrangements that further decrease our effective tax rates.

On December 22, 2017, the U.S. government enacted the Tax Act which lowers the U.S. corporate income tax rate from 35% to 21% and significantly affects how income from foreign operations is taxedarrangements. These incentives expire, in the United States. As a result of our fiscal year-end, our U.S. statutory federal rate will be 25.7% for 2018 (based on the 35% corporate rate through December 31, 2017 and 21% from that date through the end of fiscal year 2018) and 21% for subsequent years. The Tax Act imposes a Repatriation


Tax in 2018; provides a U.S. federal tax exemption on foreign earnings distributed to the United States; and, beginning in 2019, creates a Foreign Minimum Tax. The Tax Act allows us to elect to pay any Repatriation Tax due in eight annual interest-free payments in increasing amounts beginning in December 2018. In connection with the provisions of the Tax Act, we are continuing to evaluate whether to account for the Foreign Minimum Tax provisions that begin for us in 2019 as a period costwhole or in our measurement of deferred taxes.

SAB 118 allows the use of provisional amounts (reasonable estimates) if our analyses of the impacts of the Tax Act has not been completed when our financial statements for the second quarter of fiscal year 2018 are issued. Provisional amounts may be adjusted during a one-year measurement period as accounting for the income tax effects of the Tax Act are completed or as estimates are revised.

In accordance with SAB 118, we recorded certain provisional estimates included in the table above. Although the provisional estimates are based on the best available interpretations of the Tax Act, the final impacts may differ from the estimates due to, among other things, the issuance of additional regulatorypart, at various dates through 2034 and legislative guidance related to the Tax Act.

As noted above, provisional estimates were recorded for the Repatriation Tax and the release of the valuation allowance on the net deferred tax assets of our U.S. operations. To determine the amount of the Repatriation Tax, we must determine the accumulated foreign earnings of our foreign subsidiaries and the amount of foreign income tax paid on such earnings. The provisional estimate of the Repatriation Tax is also based, in part, on the amount of cash and other specified assets anticipated to be held by our foreign subsidiaries as of August 30, 2018, the end of our fiscal year 2018, which may determine the portion of the accumulated foreign earnings taxed at an effective rate of 15.5% or 8%. As a result, the Repatriation Tax may change as amounts are finalized. The U.S. Department of Treasury has issued interpretive guidance regarding the Repatriation Tax and we expect that they will issue additional guidance. Based on the information available, we can reasonably estimate the Repatriation Tax and therefore recorded a provisional amount; however, we are continuing to gather additional information and analyze authoritative guidance to finalize the computation of the Repatriation Tax as well as the impacts on the valuation allowance release of the Repatriation Tax and the Tax Act.

We operate in a number of locations outside the Unites States, including Singapore, where we have tax incentive arrangements that are conditional, in part, upon meeting certain business operations and employment thresholds. The effect ofbenefit from tax incentive arrangements which expire in whole or in part at various dates through 2030,was not material for the first quarter of 2023. These arrangements reduced our tax provision by $436$161 million (benefiting our diluted earnings per share by $0.35) for the second quarter of 2018, by $391 million ($0.32 per diluted share) in the first quarter of 2018, and by $132 million ($0.110.15 per diluted share) for the secondfourth quarter of 2017. The Tax Act establishes a new provision designed to impose the Foreign Minimum Tax beginning in 2019. Consequently, we may incur additional U.S. tax expense on income of our foreign subsidiaries that could offset a significant portion of the benefits realized from our tax incentive arrangements. Beginning in 2019, our tax rate may increase to the low teens percentage depending on profitability.

Other

Net interest expense decreased 40%2022 and by $290 million ($0.26 per diluted share) for the second quarter of 2018 as compared to the first quarter of 2018 primarily due to decreases in debt obligations in the first six months of 2018. Net interest expense decreased 60% for the second quarter of 2018 as compared to the second quarter of 2017 primarily due to decreases in debt obligations, including the redemption of $600 million in principal amount of notes in the fourth quarter of 2017 and the redemption and conversion of an aggregate of $2.42 billion in principal amount of notes in the first six months of 2018, as well as an increase in capitalized interest from higher levels of capital spending. Interest income also increased in the second quarter of 2018 as compared to the second quarter of 2017 primarily due to increases in our aggregate cash and investments. Net interest expense decreased 43% for the first six months of 2018 as compared to the first six months of 2017 primarily due to decreases in debt obligations, increases in interest income as a result of increases in our cash and investments, and increases in capitalized interest.2022.


Other:Further discussion ofinformation on other operating and non-operating income and expensesitems can be found in "Item“Item 1. Financial Statements – Notes to Consolidated Financial Statements – Equity Plans and Other Non-Operating Income (Expense), Net" notes.Statements.”






Liquidity and Capital Resources


Our primary sources of liquidity are cash generated from operations and financing obtained from capital markets and financial institutions. Cash generated from operations is highly dependent on selling prices for our products, which can vary significantly from period to period. Cash and marketable investments totaled $12.01 billion as of December 1, 2022, and $10.98 billion as of September 1, 2022. Our cash and investments consist primarily of bank deposits, money market funds, and liquid investment-grade, fixed-income securities, which are diversified among industries and individual issuers. To mitigate credit risk, we invest through high-credit-quality financial institutions and by policy generally limit the concentration of credit exposure by restricting the amount of investments with any single obligor. As of December 1, 2022, $1.37 billion of our cash and marketable investments was held by our foreign subsidiaries.

We are continuously evaluating alternatives for efficiently funding our capital expenditures and ongoing operations. We expect, from time to time, in the future, to engage in a variety of financing transactions for such purposes, including the issuance of securities. We have an undrawn revolving credit facility that expires in February 2020As of December 1, 2022, $2.50 billion was available to draw under our Revolving Credit Facility. Funding of certain significant capital projects is also dependent on the receipt of government incentives, which are subject to conditions and provides for additional borrowings of up to $750 million based on eligible receivables. We expect that our cash and investments, cash flows from operations, and available financing willmay not be sufficient to meet our requirements at least through the next 12 months.obtained.


To develop new product and process technology, support future growth, achieve operating efficiencies, and maintain product quality, we must continue to invest in manufacturing technologies, facilities and equipment, and R&D. We estimate thatcapital expenditures in 20182023 for property, plant, and equipment, net of partner contributions, to be in the range of $7.0 billion to $7.5 billion plus or minus 5 percent, focused on technology transitions and product enablement. The actualbillion. Actual amounts for 20182023 will vary depending on market conditions. As of MarchDecember 1, 2018,2022, we had commitmentspurchase obligations of approximately $1.6$3.56 billion for the acquisition of property, plant, and equipment, substantially all of which approximately $2.73 billion is expected to be paid within one year.

Cash For a description of other contractual obligations, such as debt and marketable investments totaled $8.56 billion and $6.05 billion as of March 1, 2018 and August 31, 2017, respectively. Our investments consist primarily of money market funds and liquid investment-grade fixed-income securities, diversified among industries and individual issuers. As of March 1, 2018, $3.94 billion of our cash and marketable investments was held by our foreign subsidiaries. To mitigate credit risk, we invest through high-credit-quality financial institutions and by policy generally limit the concentration of credit exposure by restricting the amount of investments with any single obligor.

In October 2017, we issued 34 million shares of our common stock for $41.00 per share in a public offering for proceeds of $1.36 billion, net of underwriting fees and other offering costs. In the first six months of 2018, we paid $2.93 billion in cash for the repurchase or settlement upon conversion of notes with an aggregate principal amount of $2.42 billion. See "Itemleases, see “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Leases” and “ – Debt." We may redeem, repurchase, or otherwise retire additional debt

mu-20221201_g3.jpg 33

To support expected memory demand in the future.

Limitations on the Use of Cash and Investments

MMJ Group:Cash and marketable investments included $495 million held by the MMJ Group as of March 1, 2018. As a resultsecond half of the corporate reorganization proceedingsdecade, we will need to add new DRAM wafer capacity. Following the enactment of MMJ initiatedthe U.S. CHIPS and Science Act of 2022 (“CHIPS Act”), we announced plans to invest in March 2012,two leading-edge memory manufacturing fabs in the United States, contingent on CHIPS Act support through grants and for so long as such proceedings are continuing,investment tax credits. As part of this plan, in September 2022, we broke ground on a leading-edge memory manufacturing fab in Boise, Idaho. Construction of the MMJ Groupfab is prohibited from paying dividendsexpected to us.begin in calendar 2023 with DRAM production targeted to start in calendar 2025. In addition, in October 2022, we announced plans to build a second leading-edge DRAM manufacturing fab in Clay, New York. We plan to start site preparation work in calendar 2023 and expect construction to begin in calendar 2024, with production anticipated to ramp in the latter half of the decade. We expect these new fabs to fulfill our requirements for additional wafer capacity starting in the second half of the decade and beyond, in line with industry demand trends.

On November 1, 2021, we issued $1 billion in aggregate principal amount of unsecured 2032 Green Bonds. Over time, we plan to allocate an amount equal to the net proceeds to fund eligible sustainability-focused projects involving renewable energy, green buildings, energy efficiency, water management, waste abatement, and a circular economy. Through November 1, 2022, the date of our 2022 Green Bond Report, we had allocated $676 million toward this commitment. We currently anticipate that 100% of net proceeds of the 2032 Green Bonds will be allocated and dispersed for eligible projects by November 1, 2023.

Our Board of Directors has authorized the discretionary repurchase of up to $10 billion of our outstanding common stock through open-market purchases, block trades, privately-negotiated transactions, derivative transactions, and/or pursuant to an order of the Japan Court, the MMJ Group cannot make loans or advances, other than certain ordinary course advances,Rule 10b5-1 trading plans. The repurchase authorization has no expiration date, does not obligate us to us without the consent of the Japan Courtacquire any common stock, and may, under certain circumstances, be subject to the approval of the legal trustee. As a result, the assets of the MMJ Group are not available for use by us in our other operations. Furthermore, certain uses of the assets of the MMJ Group, including investments in certain capital expenditures and in MMT, may require consent of MMJ's trustees and/or the Japan Court.

MSTW and MTTW: Cash and marketable investments included $59 million held by MSTW and MTTW as of March 1, 2018. The 2021 MSTW Term Loan contains covenants that limit or restrict the ability of MSTW and MTTW to pay dividends. As a result, the assets of MSTW and MTTW are not available for use by us in our other operations.

IMFT: Cash and marketable investments included $317 million held by IMFT as of March 1, 2018. Our ability to access funds held by IMFT to finance our other operations is subject to agreement by Intelmarket conditions and contractual limitations. Amounts held by IMFT are not anticipated to beour ongoing determination of the best use of available to finance our other operations.

Indefinitely Reinvested: Ascash. Through December 1, 2022, we had repurchased an aggregate of March 1, 2018, $3.18$6.89 billion of cash and marketable investments, including substantially all of the amounts held by MMJ, MSTW, and MTTW, was held by foreign subsidiaries whose earnings were considered to be indefinitely reinvested. As a result of the Tax Act, substantially all of our accumulated foreign earnings earned before December 31, 2017 were treated as taxable for U.S. federal income taxes; however, the repatriation of all or a portion of these earnings would continue to be subject to foreign and state tax upon repatriation to the United States. As we evaluate the impact of the Tax Act and the future cash needs of our global operations, we may revise the amount of the foreign earnings considered to be indefinitely reinvested outside of the United States. Determination of the amount of unrecognized deferred tax liabilities related to investments in these foreign subsidiaries is not practicable.



Cash Flows

 First Six Months
 2018 2017
Net cash provided by operating activities$7,984
 $2,543
Net cash provided by (used for) investing activities(3,843) (5,385)
Net cash provided by (used for) financing activities(1,420) 2,341
Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash4
 (33)
Net increase (decrease) in cash, cash equivalents, and restricted cash$2,725
 $(534)

Operating Activities:For the first six months of 2018, cash provided by operating activities was due primarily to cash generated by our operations and the effect of working capital adjustments, which included $630 million of cash used for increases in receivables, partially offset by $93 million of cash provided by an increase in accounts payable and accrued expenses. For the first six months of 2017, cash provided by operating activities was due primarily to cash generated by our operations and the effect of working capital adjustments, which included $773 million of cash used for net increases in receivables, $361 million of payments attributed to intercompany balances with Inotera, and $399 million of cash provided by net increases in accounts payable and accrued expenses.

Investing Activities: For the first six months of 2018, net cash used for investing activities consisted primarily of $4.22 billion of expenditures for property, plant, and equipment (which excludes offsets of amounts funded by our partners), partially offset by $198 million of net inflows from sales, maturities, and purchases of available-for-sale securities. For the first six months of 2017, net cash used for investing activities consisted primarily of $2.63 billion of net cash paid for the Inotera Acquisition (net of $361 million of payments attributed to intercompany balances with Inotera included in operating activities) and $2.43 billion of expenditures for property, plant, and equipment (which excludes offsets of amounts funded by our partners).

Financing Activities: For the first six months of 2018, net cash used for financing activities consisted primarily of redemption of our 2023 Secured Notes for $1.37 billion in cash, redemption of our 2023 Notes for $1.05 billion in cash, conversions of our convertible notes for $511 million of cash, and $449 million for repayments of other notes payable and capital leases, partially offset by net proceeds of $1.36 billion from the issuance of 34 million shares of our common stock for $41.00 per share in a public offering and $650 million of proceeds from IMFT Member Debt. For the first six months of 2017, net cash provided by financing activities consisted primarily of $2.48 billion of net proceeds from the 2021 MSTW Term Loan and $445 million of net proceeds from the 2021 MSAC Term Loan, partially offset by $556 million for repayments of debt.authorized amount. See "Item“Item 1. Financial Statements – Notes to Consolidated Financial Statements – Debt."Equity.”



On December 19, 2022, our Board of Directors declared a quarterly dividend of $0.115 per share, payable in cash on January 19, 2023, to shareholders of record as of the close of business on January 3, 2023. The declaration and payment of any future cash dividends are at the discretion and subject to the approval of our Board of Directors. Our Board of Directors' decisions regarding the amount and payment of dividends will depend on many factors, including, but not limited to, our financial condition, results of operations, capital requirements, business conditions, debt service obligations, contractual restrictions, industry practice, legal requirements, regulatory constraints, and other factors that our Board of Directors may deem relevant.


Potential Settlement ObligationsWe expect that our cash and investments, cash flows from operations, and available financing will be sufficient to meet our requirements at least through the next 12 months and thereafter for the foreseeable future.

Cash Flows
First Quarter
20232022
Net cash provided by operating activities$943 $3,938 
Net cash provided by (used for) investing activities(2,266)(2,485)
Net cash provided by (used for) financing activities2,632 (513)
Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash(6)(6)
Net increase (decrease) in cash, cash equivalents, and restricted cash$1,303 $934 

Operating Activities: Cash provided by operating activities reflects net income (loss) adjusted for certain non-cash items, including depreciation expense, amortization of Convertibleintangible assets, and stock-based compensation, and the effects of changes in operating assets and liabilities. The decrease in cash provided by operating activities for the first quarter of 2023 as compared to the first quarter of 2022 was primarily due to a net loss in the current quarter adjusted for non-cash items and the effect of lower receivables, partially offset by an increase in inventories and a decline in accounts payable and accrued expenses.

Investing Activities: For the first quarter of 2023, net cash used for investing activities consisted primarily of $2.45 billion of expenditures for property, plant, and equipment, partially offset by $272 million of net inflows from maturities, sales, and purchases of available-for-sale securities.

34 |2023 Q1 10-Q

For the first quarter of 2022, net cash used for investing activities consisted primarily of $3.27 billion of expenditures for property, plant, and equipment; inflows of $55 million of partner contributions for capital expenditures; $893 million of net inflows from the sale of the Lehi, Utah fab; and $91 million of net outflows from purchases, sales, and maturities of available-for-sale securities.

Financing Activities: For the first quarter of 2023, net cash provided by financing activities consisted primarily of $2.60 billion of proceeds from our 2025, 2026, and 2027 Term Loan A borrowings and $749 million (net of original issue discount) from the issuance of the 2029 B Notes. See “Item 1. Financial Statements – Notes

Since to Consolidated Financial Statements – Debt.” Cash used for financing activities included $425 million for the closing priceacquisition of 8.6 million shares of our common stock exceeded 130%under our share repurchase authorization, $126 million of cash payments of dividends to shareholders, and $47 million of payments on equipment purchase contracts.

For the first quarter of 2022, net cash used for financing activities included $1.95 billion of repayments of debt primarily to redeem the 2023 Notes and 2024 Notes, $259 million for the acquisition of 3.6 million shares of our common stock under our share repurchase authorization, $112 million of cash payments of dividends to shareholders, $102 million used for stock repurchases related to tax withholdings for employee equity awards, and $78 million of payments on equipment purchase contracts. Cash used for financing activities was partially offset by aggregate proceeds of $2.00 billion from the issuance of the conversion price per shareunsecured 2032 Green Bonds, 2041 Notes, and 2051 Notes.


Critical Accounting Estimates

For a discussion of all our convertible notes for at least 20 trading days in the 30 trading day period ended on December 31, 2017, holders may convert their notes through the calendar quarter ended March 31, 2018. The following table summarizes the potential settlements that we could be required to make for the calendar quarter ending March 31, 2018 if all holders converted their notes. The amounts in the table below are based on our closing share price of $47.62 as of March 1, 2018.
 Settlement Option   If Settled With Minimum Cash Required If Settled Entirely With Cash
 Principal Amount Amount in Excess of Principal Underlying Shares Cash Remainder in Shares 
2032C NotesCash and/or shares Cash and/or shares 18
 $
 18
 $849
2032D NotesCash and/or shares Cash and/or shares 18
 
 18
 845
2033E Notes(1)
Cash Cash and/or shares 5
 197
 1
 261
2033F Notes(1)
Cash Cash and/or shares 27
 393
 18
 1,272
2043G NotesCash and/or shares Cash and/or shares 35
 
 35
 1,674
   
 103
 $590
 90
 $4,901
(1)
Amounts as of March 1, 2018 include $178 million and $129 million for the settlement obligation (principal and amounts in excess of principal) of 2033E Notes and 2033F Notes, respectively, that had been converted but not settled. The settlement obligation of these notes will settle in cash in the third quarter of 2018.

Contractual Obligations

As of March 1, 2018, the contractual obligations of principal and interest of all our notes payable was $9.80 billion, of which $610 million is due in the remainder of 2018, $3.30 billion is due in 2019 and 2020, $2.77 billion is due in 2021 and 2022, and $3.12 billion is due in 2023 and thereafter. There have been no other material changes to our contractual obligations as described in "Part Icritical accounting estimates, see “Part II – Item 2. Management's7. Management’s Discussion and Analysis of Financial Condition and Results of Operations"Operations – Critical Accounting Estimates” of our Annual Report on Form 10-K for the year ended August 31, 2017, other than our purchase commitments for the acquisition of property, plant, and equipment as described above.


Critical Accounting Estimates

For a discussion of our critical accounting estimates, see "Part I - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year ended August 31, 2017. Except for the critical accounting estimates associated with our income taxes as discussed below, thereSeptember 1, 2022. There have been no material changes to our critical accounting estimates since our Annual Report on Form 10-K for the year ended August 31, 2017.September 1, 2022.


Income taxes: We are required to estimate our provision for income taxes and amounts ultimately payable or recoverable in numerous tax jurisdictions around the world. These estimates involve significant judgment and interpretations of regulations and are inherently complex. Resolution of income tax treatments in individual jurisdictions may not be known for many years after completion of any fiscal year. We are also required to evaluate the realizability of our deferred tax assets on an ongoing basis in accordance with U.S. GAAP, which requires the assessment of our performance and other relevant factors. Realization of deferred tax assets is dependent on our ability to generate future taxable income. In recent periods, our results of operations have benefitted from increases in the amount of deferred taxes we expect to realize, primarily from the levels of capital spending and increases in the amount of taxable income we expect to realize in Japan and Taiwan. Our income tax provision or benefit is dependent, in part, on our ability to forecast future taxable income in these and other jurisdictions. Such forecasts are inherently difficult and involve significant judgments including, among others, projecting future average selling prices and sales volumes, manufacturing and overhead costs, levels of capital spending, and other factors that significantly impact our analyses of the amount of net deferred tax assets that are more likely than not to be realized.

In connection with the Tax Act, we recognized a provision for income taxes of $131 million in the second quarter of 2018, of which $133 million was related to the impact of remeasuring our deferred tax assets and liabilities to reflect the lower tax rate and $2 million of income tax benefit was considered a provisional estimate. The provisional estimate included $1.34 billion associated with the Repatriation Tax, essentially offset by a benefit of $1.34 billion for the release of the valuation allowance on the net deferred tax assets of our U.S. operations. Based on the information available, we recorded a provisional amount;Recently Adopted Accounting Standards



No material items.
however, we are continuing to gather additional information and analyze authoritative guidance to finalize the computation of the Repatriation Tax as well as the impacts on the valuation allowance release as a result of the Tax Act.



Recently Issued Accounting Standards


See "Item 1. Financial Statements – Notes to Consolidated Financial Statements – Recently Issued Accounting Standards."No material items.




mu-20221201_g3.jpg 35

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


We are affected by changes in currency exchange and interest rates. See discussion regarding certain interest rate risks below. For further discussion about market risk and sensitivity analysis related to changes in currency exchange rates, see "Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk" of our Annual Report on Form 10-K for the year ended August 31, 2017.

Interest Rate Risk

We are exposed to interest rate risk related to our indebtedness and our investment portfolio.indebtedness. As of MarchDecember 1, 20182022 and August 31, 2017, theSeptember 1, 2022, we had fixed-rate debt with an aggregate carrying value of our debt with fixed interest rates was $4.0$4.77 billion and $5.7$4.03 billion, respectively, and as a result, the fair value of our debt fluctuates with changes in market interest rates. In the first quarter of 2023, we issued $750 million principal amount of new fixed-rate debt. We estimate that, as of MarchDecember 1, 20182022 and August 31, 2017,September 1, 2022, a hypothetical 1% decrease in market interest rates of 1% would increase the fair value of our fixed-rate debt by approximately $130$325 million and $273$275 million, respectively.



As of December 1, 2022 and September 1, 2022, we had floating-rate debt as well as fixed-rate debt that is swapped to floating-rate debt with an aggregate principal amount of $4.69 billion and $2.09 billion, respectively. In the first quarter of 2023, we borrowed $2.60 billion principal amount of new floating-rate debt. We estimate that, as of December 1, 2022 and September 1, 2022 a hypothetical 1% increase in the interest rates of this floating-rate debt would result in an increase in annual interest expense of approximately $47 million and $21 million, respectively.

For further discussion about market risk and sensitivity analysis related to changes in interest rates and currency exchange rates, see “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended September 1, 2022.


ITEM 4. CONTROLS AND PROCEDURES


An evaluation was carried out under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in RuleRules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934)1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, the principal executive officer and principal financial officer concluded that those disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the Commission'sSEC’s rules and forms and that such information is accumulated and communicated to our management, including the principal executive officer and principal financial officer, to allow timely decisiondecisions regarding disclosure.


During the secondfirst quarter of 2018,2023, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.




PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS


For a discussion of legal proceedings, see "Part“Part I – Item 3. Legal Proceedings"Proceedings” of our Annual Report on Form 10-K for the year ended August 31, 2017September 1, 2022 and "Partthe sections titled “Part I. Financial Information – Item 1. Financial Statements – Notes to Consolidated Financial Statements – Contingencies"Contingencies” and "Item“Item 1A. Risk Factors" herein.Factors” in this Quarterly Report on Form 10-Q.



SEC regulations require disclosure of certain proceedings related to environmental matters unless we reasonably believe that the related monetary sanctions, if any, will be less than a specified threshold. We use a threshold of $1 million for this purpose.

36 |2023 Q1 10-Q

ITEM 1A. RISK FACTORS


In addition to the factors discussed elsewhere in this Form 10-Q, the following arethis section discusses important factors the order of which is not necessarily indicative of the level of risk that each poses to us, which could cause actual results or events to differ materially from those contained in any forward-looking statements made by us. The order of presentation is not necessarily indicative of the level of risk that each factor poses to us. Any of these factors could have a material adverse effect on our business, results of operations, financial condition, or stock price. Our operations could also be affected by other factors that are presently unknown to us or not considered significant. Any

Risk Factor Summary

Risks Related to Our Business, Operations, and Industry
volatility in average selling prices of our products;
our ability to maintain or improve gross margins;
the highly competitive nature of our industry;
a downturn in the worldwide economy;
our ability to develop and produce new and competitive memory and storage technologies and products;
dependency on specific customers, concentration of revenue with a select number of customers, and customers who are located internationally;
our international operations, including geopolitical risks;
limited availability and quality of materials, supplies, and capital equipment and dependency on third-party service providers for ourselves and our customers;
the effects of the factors below could have a material adverse effect onCOVID-19 pandemic;
products that fail to meet specifications, are defective, or are incompatible with end uses;
disruptions to our manufacturing process from operational issues, natural disasters, or other events;
breaches of our security systems or products, or those of our customers, suppliers, or business resultspartners;
attracting, retaining, and motivating highly skilled employees;
realizing expected returns from capacity expansions;
achieving or maintaining certain performance obligations associated with incentives from various governments;
acquisitions and/or alliances;
restructure charges;
responsible sourcing requirements and related regulations; and
ESG considerations.

Risks Related to Intellectual Property and Litigation
protecting our intellectual property and retaining key employees who are knowledgeable of operations, financial condition,and develop our intellectual property;
legal proceedings and claims; and
claims that our products or manufacturing processes infringe or otherwise violate the intellectual property rights of others or failure to obtain or renew license agreements covering such intellectual property.

Risks Related to Laws and Regulations
compliance with tariffs, trade restrictions, and/or trade regulations;
tax expense and tax laws in key jurisdictions; and
compliance with laws, regulations, or industry standards, including ESG considerations.

Risks Related to Capitalization and Financial Markets
our ability to generate sufficient cash flows or obtain access to external financing;
our debt obligations;
changes in foreign currency exchange rates;
counterparty default risk;
volatility in the trading price of our common stock; and
fluctuations in the amount and timing of our common stock price.repurchases and payment of cash dividends and resulting impacts.



mu-20221201_g3.jpg 37


Risks Related to Our Business, Operations, and Industry
We have experienced volatility
Volatility in average selling prices for our semiconductor memory and storage products which may adversely affect our business.


We have experienced significant volatility in our average selling prices including dramatic declines, as noted in the table below, and may continue to experience such volatility in the future. For DRAM, annual percentage changes in average selling prices have ranged from approximately plus 35% to minus 35% since 2017. For NAND, annual percentage changes in average selling prices have ranged from nearly flat to approximately minus 50% since 2017. In some prior periods, average selling prices for our products have been below our manufacturing costs and we may experience such circumstances in the future. Decreases in averageAverage selling prices for our products that decline faster than our costs could have a material adverse effect on our business, results of operations, or financial condition.
 DRAM Trade NAND
    
 (percentage change in average selling prices)
2017 from 201619 % (9)%
2016 from 2015(35)% (20)%
2015 from 2014(11)% (17)%
2014 from 20136 % (23)%
2013 from 2012(11)% (18)%


We may be unable to maintain or improve gross margins.


Our gross margins are dependent, in part, upon continuing decreases in per gigabit manufacturing costs achieved through improvements in our manufacturing processes and product designs, including, but not limited to, process line-width, additional 3D memory layers, additional bits per cell (i.e., cell levels), architecture, number of mask layers, number of fabrication steps, and yield. In future periods, wedesigns. Factors that may be unablelimit our ability to reduce our per gigabit manufacturing costs at sufficient levels to maintain or improve gross margins. Factors that may limit our ability to reduce costsmargins include, but are not limited to, to:

strategic product diversification decisions affecting product mix, the mix;
increasing complexity of manufacturing processes, processes;
difficulties in transitioning to smaller line-width process technologies or additional 3D memory layers or NAND cell levels, levels;
process complexity including number of mask layers and fabrication steps, steps;
manufacturing yield, yield;
technological barriers, barriers;
changes in process technologies, and technologies;
new products that may require relatively larger die sizes. Persizes;
start-up or other costs associated with capacity expansions; and
higher costs of goods and services due to inflationary pressures or market conditions.

Many factors may result in a reduction of our output or a delay in ramping production, which could lead to underutilization of our production assets. These factors may include, among others, a weak demand environment, industry oversupply, inventory surpluses, difficulties in ramping emerging technologies, supply chain disruptions, and delays from equipment suppliers. A significant portion of our manufacturing costs are fixed and do not vary proportionally with changes in production output. As a result, lower utilization and corresponding increases in our per gigabit manufacturing costs may adversely affect our gross margins, business, results of operations, or financial condition.

We have a broad portfolio of products to address our customers’ needs, which span multiple market segments and are subject to rapid technological changes. Our manufacturing costs on a per gigabit basis vary across our portfolio as they are largely influenced by the technology node in which the solution was developed. We strive to balance our demand and supply for each technology node, but the dynamics of our markets and our customers can create periods of imbalance, which can lead us to carry elevated inventory levels. Consequently, we may incur charges in connection with obsolete or excess inventories or we may not fully recover our costs, which would reduce our gross margins. In addition, due to the customized nature of certain of the products we manufacture, we may be unable to sell certain finished goods inventories to alternative customers or manufacture in-process inventory to different specifications, which may result in excess and obsolescence charges in future periods.

In addition, if we are unable to supply products that meet customer design and performance specifications, we may be required to sell such products at lower average selling prices, which may reduce our gross margins. Our gross margins may also be affectedimpacted by a broadershifts in product mix, driven by our strategy to optimize our portfolio which may have smaller production quantities and shorter product lifecycles. to best respond to changing market dynamics.

Our inability to maintain or improve gross margins could have a material adverse effect on our business, results of operations, or financial condition.

38 |2023 Q1 10-Q


The semiconductor memory and storage markets are highly competitive.


We face intense competition in the semiconductor memory and storage markets from a number of companies, including Intel;Intel Corporation; Kioxia Holdings Corporation; Samsung Electronics Co., Ltd.; SK Hynixhynix Inc.; Toshiba Corporation; and Western Digital Corporation. Our competitors may use aggressive pricing to obtain market share. Some of our competitors are large corporations or conglomerates that may have greater resources to invest in technology, capitalize on growth opportunities, and withstand downturns in the semiconductor markets in which we compete. Consolidation of industry competitors could put us at a competitive disadvantage. disadvantage as our competitors may benefit from increased manufacturing scale and a stronger product portfolio.

In addition, some governments such as China,may provide, or have provided and may continue to provide, significant assistance, financial assistanceor otherwise, to some of our competitors or to new entrants. Ourentrants and may intervene in support of national industries and/or competitors. In particular, we face the threat of increasing competition as a result of significant investment in the semiconductor industry by the Chinese government and various state-owned or affiliated entities, such as Yangtze Memory Technologies Co., Ltd. (“YMTC”) and ChangXin Memory Technologies, Inc. (“CXMT”), that is intended to advance China’s stated national policy objectives. In addition, the Chinese government may restrict us from participating in the China market or may prevent us from competing effectively with Chinese companies.

We and our competitors generally seek to increase silicon capacity,wafer output, improve yields, and reduce die size, in their product designs which maycould result in significant increases in worldwide supply and downward pressure on prices. Increases in worldwide supply of semiconductor memory and storage also result from fabrication capacity expansions, either by way of new facilities, increased capacity utilization, or reallocation of other semiconductor production to semiconductor memory and storage production. Our competitors may increase capital expenditures resulting in future increases in worldwide supply. We, and some of our competitors, have plans to ramp, or are constructing or ramping, production at new fabrication facilities. Increases in worldwide supply of semiconductor memory and storage, if not accompanied by commensurate increases in demand, wouldcould lead to further declines in average selling prices for our products and wouldcould materially adversely affect our business, results of operations, or financial condition. If competitors are more successful at developing or implementing new product or process technology, their products could have cost or performance advantages.

The competitive nature of our industry could have a material adverse effect on our business, results of operations, or financial condition.


Debt obligations could adversely affectA downturn in the worldwide economy may harm our financial condition.business.


As of March 1, 2018, we had debt with a carrying value of $9.32 billion. In addition,Downturns in the conversion value in excess of principal ofworldwide economy, due to inflation, geopolitics, major central bank policy actions including interest rate increases, public health crises, or other factors, have harmed our convertible notes as of March 1, 2018 was $3.18 billion. In the first six months of 2018, and full years of 2017 and 2016, we paid $2.93 billion and 4 million shares of our treasury stock as non-cash settlement, $1.63 billion, and $94 million, respectively, to repurchase and settle notes with principal amounts of $2.42 billion, $1.55 billion, and $57 million,


respectively. As of March 1, 2018, we had an undrawn revolving credit facility that provided for additional borrowings of up to $750 million based on eligible receivables. Events and circumstances may occur which would cause us to not be able to satisfy applicable draw-down conditions and utilize this revolving credit facility. We have incurredbusiness in the past and expect to incur in thecurrent and future debt to financedownturns could also adversely affect our capital investments, business acquisitions,business. Adverse economic conditions affect demand for devices that incorporate our products, such as personal computers, smartphones, automobiles, and restructuring of our capital structure.

Our debt obligationsservers. Reduced demand for these or other products could adversely impact us. For example, these obligations could:

require us to use a large portion of our cash flow to pay principal and interest on debt, which will reduce the amount of cash flow available to fund working capital, capital expenditures, acquisitions, R&D expenditures, and other business activities;
require us to use cash and/or issue shares of our common stock to settle any conversion obligations of our convertible notes;
result in certainsignificant decreases in our average selling prices and product sales. In addition, to the extent our customers or distributors have elevated inventory levels, we may experience a decrease in short-term and/or long-term demand resulting in industry oversupply and declines in pricing for our products.

A deterioration of our debt instruments being accelerated to be immediately due and payable or being deemed to beconditions in default if certain terms of default are triggered, such as applicable cross payment default and/or cross-acceleration provisions;
result in all obligations owing under the 2021 MSTW Term Loan being accelerated to be immediately due and payable if MSTW fails to comply with certain covenants, including financial covenants;
increase the interest rate under the 2021 MSTW Term Loan if we or MSTW fails to maintain certain financial covenants;
adversely impact ourworldwide credit rating, whichmarkets could increase future borrowing costs;
limit our future ability to raise funds for capital expenditures, strategic acquisitions or business opportunities, R&D, and other general corporate requirements;
restrict our ability to incur specified indebtedness, create or incur certain liens,obtain external financing to fund our operations and enter into sale-leaseback financing transactions;
increasecapital expenditures. In addition, we may experience losses on our vulnerabilityholdings of cash and investments due to adversefailures of financial institutions and other parties. Difficult economic and semiconductor memory and storage industry conditions;
increaseconditions may also result in a higher rate of losses on our exposureaccounts receivable due to interest rate risk from variable rate indebtedness;
continue to dilute our earnings per share ascredit defaults. As a result, of the conversion provisions in our convertible notes; and
require us to continue to pay cash amounts substantially in excess of the principal amounts upon settlement of our convertible notes to minimize dilution of our earnings per share.

Our ability to meet our payment obligations under our debt instruments depends on our ability to generate significant cash flowsdownturns in the future. This, to some extent, is subject to market, economic, financial, competitive, legislative, and regulatory factors as well as other factors that are beyond our control. There can be no assurance that our business will generate cash flow from operations, or that additional capital will be available to us, in amounts sufficient to enable us to meet our debt payment obligations and to fund other liquidity needs. If we are unable to generate sufficient cash flows to service our debt payment obligations, we may need to refinance or restructure our debt, sell assets, reduce or delay capital investments, or seek to raise additional capital. If we are unable to implement one or more of these alternatives, we may be unable to meet our debt payment obligations, whichworldwide economy could have a material adverse effect on our business, results of operations, or financial condition.


We may be unable to generate sufficient cash flows or obtain access to external financing necessary to fund our operations, make scheduled debt payments, and make adequate capital investments.
mu-20221201_g3.jpg 39


Our cash flows from operations depend primarily on the volumeTable of semiconductor memory and storage products sold, average selling prices, and manufacturing costs. To develop new product and process technology, support future growth, achieve operating efficiencies, and maintain product quality, we must make significant capital investments in manufacturing technology, capital equipment, facilities, R&D, and product and process technology. We estimate that net cash expenditures in 2018 for property, plant, and equipment will be approximately $7.5 billion plus or minus 5 percent, which reflects the offset of amounts we expect to be funded by our partners. Investments in capital expenditures, offset by amounts funded by our partners, were $2.11 billion in the second quarter of 2018. As of March 1, 2018, we had cash and marketable investments of $8.56 billion. As of March 1, 2018, $3.18 billion of cash and marketable investments, including substantially all of the cash held by the MMJ Group, MSTW, and MTTW, was held by foreign subsidiaries whose earnings were considered to be indefinitely reinvested. As a result of the Tax Act, substantially all of our accumulated foreign earnings earned before December 31, 2017 were treated as taxable; however, the repatriation of all or a portion of these earnings would continue to be subject to foreign and state tax upon repatriation to the United States. In addition, cash of $317 million held by IMFT was generally not available to finance our other operations.Contents

The 2021 MSTW Term Loan contains covenants that limit or restrict MSTW's ability to create liens in or dispose of collateral securing obligations under the 2021 MSTW Term Loan, mergers involving MSTW and/or MTTW, loans or


guarantees to third parties by MTTW and/or MSTW, and MSTW's and/or MTTW's distribution of cash dividends. As a result, the assets of MSTW and/or MTTW are not available for use by us in our other operations.

As a result of the corporate reorganization proceedings of MMJ initiated in 2012, and for so long as such proceedings are continuing, MMJ is prohibited from paying dividends, including any cash dividends, to us and such proceedings require that excess earnings be used in MMJ's business or to fund the MMJ creditor payments. In addition, pursuant to an order of the Japan Court, MMJ cannot make loans or advances, other than certain ordinary course advances, to us without the consent of the Japan Court and may, under certain circumstances, be subject to approval of the legal trustee. As a result, the assets of MMJ are not available for use by us in our other operations. Furthermore, certain uses of the assets of MMJ, including certain capital expenditures of MMJ and MMT or further investments in MMT, may require consent of MMJ's trustees and/or the Japan Court.

In the past we have utilized external sources of financing when needed. As a result of our debt levels, expected debt amortization, and general economic conditions, it may be difficult for us to obtain financing on terms acceptable to us. There can be no assurance that we will be able to generate sufficient cash flows, use cash held by MMJ to fund its capital expenditures, access capital markets or find other sources of financing to fund our operations, make debt payments, and make adequate capital investments to remain competitive in terms of technology development and cost efficiency. Our inability to do any of the foregoing could have a material adverse effect on our business, results of operations, or financial condition.

Our future success depends on our ability to develop and produce new and competitive new memory and storage technologies.technologies and products.


Our key semiconductor memory and storage products and technologies face technological barriers to continue to meet long-term customer needs. These barriers include potential limitations on stacking additional 3D memory layers, increasing bits per cell (i.e., cell levels), shrinking products in order to reduce costs, meeting higher density requirements, and improving power consumption and reliability. To meet these requirements, wereliability, and delivering advanced features and higher performance. We may face technological barriers to continue to shrink our products at our current or historical rate, which has generally reduced per gigabit cost. We have invested and expect thatto continue to invest in R&D for new memoryand existing products and process technologies, willsuch as EUV lithography, to continue to deliver advanced product requirements. Such new technologies can add complexity and risk to our schedule and may affect our costs and production output. We may be developed byunable to recover our investment in R&D or otherwise realize the semiconductoreconomic benefits of reducing die size or increasing memory and storage industry.densities. Our competitors are working to develop new memory and storage technologies that may offer performance andand/or cost advantages to existing technologies and render existing technologies obsolete. Accordingly, our future success may depend on our ability to develop and produce viable and competitive new memory and storage technologies. There can be no assurance of the following:

that we will be successful in developing competitivenew semiconductor memory and storage technologies;
that we will be able to cost-effectively manufacture new products;
that we will be able to successfully market these technologies; and
that margins generated from sales of these products will allow us to recover costs of development efforts.

We develop and produce advanced memory technologies, including 3D XPoint memory, a new class of non-volatile technology. There is no assurance that our efforts to develop and market new product technologies will be successful. Unsuccessful efforts to develop new semiconductor memory and storage technologies could have a material adverse effect on our business, results of operations, or financial condition.

New product development may be unsuccessful.


We are developing new products, including system-level memory and storage products and solutions, which complement our traditional products or leverage their underlying design or process technology. We have made significant investmentsinvested and expect to continue to invest in product and process technology and anticipate expending significant resources for new semiconductor product and system-level solution development overdevelopment. We are increasingly differentiating our products and solutions to meet the next several years.specific demands of our customers, which increases our reliance on our customers’ ability to accurately forecast the needs and preferences of their customers. As a result, our product demand forecasts may be impacted significantly by the strategic actions of our customers. In addition, our ability to successfully introduce new products often requires us to make product specification decisions multiple years in advance of when new products enter the market.

It is important that we deliver products in a timely manner with increasingly advanced performance characteristics at the time our customers are designing and evaluating samples for their products. If we do not meet their product design schedules, our customers may exclude us from further consideration as a supplier for those products. The process to develop new products requires us to demonstrate advanced functionality, performance, and performance,reliability, often well in advance of a planned ramp of production, in order to secure design wins with our customers. Many factors may negatively impact our ability to meet anticipated timelines and/or expected or required quality standards with respect to the development of certain of our products. In addition, some of our components have long lead-times, requiring us to place orders up to a year in advance of anticipated demand. Such long lead-times increase the risk of excess inventory or loss of sales in the event our forecasts vary substantially from actual demand.

There can be no assurance of the following:


that our product development effortswe will be successful;successful in developing competitive new semiconductor memory and storage technologies and products;
that we will be able to cost-effectively manufacture new products;
that we will be able to successfully market these products;technologies;
that margins generated from sales of these products will allow us to recover costs of development efforts;
we will be able to establish or maintain key relationships with customers, or that we will not be prohibited from working with certain customers, for specific chip set or design requirements;
we will accurately predict and design products that meet our customers' specifications; or
we will be able to introduce new products into the market and qualify them with our customers on a timely basis; orbasis.
that margins generated from sales of these products will allow us to recover costs of development efforts.

Our unsuccessfulUnsuccessful efforts to develop new productsmemory and solutionsstorage technologies and products could have a material adverse effect on our business, results of operations, or financial condition.



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Our joint ventures and strategic relationships involve numerous risks.

We have entered into strategic relationships, including our IMFT joint venture with Intel, to manufacture products and develop new manufacturing process technologies and products. These joint ventures and strategic relationships are subject to various risks that could adversely affect the valueTable of our investments and our results of operations. These risks include the following:Contents

our interests could diverge from our partners' interests or we may not be able to agree with our partners on ongoing manufacturing and operational activities, or on the amount, timing, or nature of further investments in our joint ventures;
our joint venture partners' products may compete with our products;
we may experience difficulties in transferring technology to joint ventures;
we may experience difficulties and delays in ramping production at joint ventures;
our control over the operations of our joint ventures is limited;
due to financial constraints, our joint venture partners may be unable to meet their commitments to us or our joint ventures and may pose credit risks for our transactions with them;
due to differing business models or long-term business goals, we and our partners may not participate to the same extent on funding capital investments in our joint ventures;
cash flows may be inadequate to fund increased capital requirements of our joint ventures;
we may experience difficulties or delays in collecting amounts due to us from our joint ventures and partners;
the terms of our partnering arrangements may turn out to be unfavorable; and
changes in tax, legal, or regulatory requirements may necessitate changes in the agreements with our partners.

Our joint ventures and strategic relationships, if unsuccessful, could have a material adverse effect on our business, results of operations, or financial condition.

A significant concentrationportion of our net salesrevenue is toconcentrated with a select number of customers.


In each of the last three years, approximately one-half of our total net sales were torevenue was from our top ten customers. A disruption in our relationship with any of these customers could adversely affect our business. We could experience fluctuations in our customer base or the mix of revenue by customer as markets and strategies evolve. Our customers’ demand for our products may fluctuate due to factors beyond our control. In addition, any consolidation of our customers could reduce the number of customers to whom our products couldmay be sold. Our inability to meet our customers'customers’ requirements or to qualify our products with them could adversely impact our sales.revenue. A meaningful change in the inventory strategy of our customers could impact our industry bit demand growth outlook. The loss of, or restrictions on our ability to sell to, one or more of our major customers, or any significant reduction in orders from, or a shift in product mix by, these customers could have a material adverse effect on our business, results of operations, or financial condition.


We face geopolitical and other risks associated with our international operations that could materially adversely affect our business, results of operations, or financial condition.

In addition to our U.S. operations, a substantial portion of our operations are conducted in Taiwan, Singapore, Japan, Malaysia, China, and India, and many of our customers, suppliers, and vendors also operate internationally. In 2022, nearly half of our revenue was from sales to customers who have headquarters located outside the United States, while over 80% of our revenue in 2022 was from products shipped to customer locations outside the United States.

Our international operations are subject to a number of risks, including:

export and import duties, changes to import and export regulations, customs regulations and processes, and restrictions on the transfer of funds, including currency controls in China, which could negatively affect the amount and timing of payments from certain of our customers and, as a result, our cash flows;
imposition of bans on sales of goods or services to one or more of our significant foreign customers;
public health issues;
compliance with U.S. and international laws involving international operations, including the Foreign Corrupt Practices Act of 1977, as amended, sanctions and anti-corruption laws, export and import laws, and similar rules and regulations;
theft of intellectual property;
political and economic instability, including the effects of disputes between China and Taiwan and Russia’s invasion of Ukraine;
government actions or civil unrest preventing the flow of products and materials, including delays in shipping and obtaining products and materials, cancellation of orders, or loss or damage of products;
problems with the transportation or delivery of products and materials;
issues arising from cultural or language differences and labor unrest;
longer payment cycles and greater difficulty in collecting accounts receivable;
compliance with trade, technical standards, and other laws in a variety of jurisdictions;
contractual and regulatory limitations on the ability to maintain flexibility with staffing levels;
disruptions to manufacturing or R&D activities as a result of actions imposed by foreign governments;
changes in economic policies of foreign governments; and
difficulties in staffing and managing international operations.

If we or our customers, suppliers, or vendors are impacted by any of these risks, it could have a material adverse effect on our business, results of operations, or financial condition. For example, political, economic, or other actions may adversely affect our operations in Taiwan. A majority of our DRAM production output in 2022 was from our fabrication facilities in Taiwan and any loss of output could have a material adverse effect on us. Any political, economic, or other actions may also adversely affect our customers and the technology industry supply chain, for which Taiwan is a central hub, and as a result, could have a material adverse impact on us.

mu-20221201_g3.jpg 41

In addition, the U.S. government has in the past restricted American firms from selling products and software to certain of our customers and may in the future impose similar restrictions on one or more of our significant customers. These restrictions may not prohibit our competitors from selling similar products to our customers, which may result in our loss of sales and market share. Even when such restrictions are lifted, financial or other penalties or continuing export restrictions imposed with respect to our customers could have a continuing negative impact on our future revenue and results of operations, and we may not be able to recover any customers or market share we lose, or make such recoveries at acceptable average selling prices, while complying with such restrictions.

Our business, results of operations, or financial condition could be adversely affected by the limited availability and quality of materials, supplies, and capital equipment, or dependency on third-party service providers.

Our supply chain and operations are dependent on the availability of materials that meet exacting standards and the use of third parties to provide us with components and services. We generally have multiple sources of supply for our materials and services. However, only a limited number of suppliers are capable of delivering certain materials, components, and services that meet our standards and, in some cases, materials, components, or services are provided by a single or sole source, and we may be unable to qualify new suppliers on a timely basis. The availability of materials or components such as chemicals, silicon wafers, gases, photoresist, controllers, substrates, lead frames, printed circuit boards, targets, and reticle glass blanks is impacted by various factors. These factors could include a shortage of raw materials or a disruption in the processing or purification of those raw materials into finished goods. Shortages or increases in lead times have occurred in the past, are currently occurring with respect to some materials and components, and may occur from time to time in the future. Constraints within our supply chain for certain materials and integrated circuit components could limit our bit shipments, which could have a material adverse effect on our business, results of operations, or financial condition.

Our manufacturing processes are also dependent on our relationships with third-party manufacturers of controllers, analog integrated circuits, and other components used in some of our products and with outsourced semiconductor foundries, assembly and test providers, contract manufacturers, logistics carriers, and other service providers, including providers of electricity and other utilities. Although we have certain long-term contracts with some of our suppliers, many of these contracts do not provide for long-term capacity or pricing commitments. To the extent we do not have firm commitments from our third-party suppliers over a specific time period or for any specific capacity, quantity, and/or pricing, our suppliers may allocate capacity to their other customers and capacity and/or materials may not be available when needed or at reasonable prices. Inflationary pressures and shortages have increased, and may continue to increase, costs for materials, supplies, and services. Regardless of contract structure, large swings in demand may exceed our contracted supply and/or our suppliers’ capacity to meet those demand changes resulting in a shortage of parts, materials, or capacity needed to manufacture our products. In addition, if any of our suppliers was to cease operations or become insolvent, this could impact their ability to provide us with necessary supplies, and we may not be able to obtain the needed supply in a timely way or at all from other providers.

Certain materials are primarily available in a limited number of countries, including rare earth elements, minerals, and metals. Trade disputes, geopolitical tensions, economic circumstances, political conditions, or public health issues, such as COVID-19, may limit our ability to obtain such materials. Although these rare earth and other materials are generally available from multiple suppliers, China is the predominant producer of certain of these materials. If China were to restrict or stop exporting these materials, our suppliers’ ability to obtain such supply may be constrained and we may be unable to obtain sufficient quantities, or obtain supply in a timely manner, or at a commercially reasonable cost. Constrained supply of rare earth elements, minerals, and metals may restrict our ability to manufacture certain of our products and make it difficult or impossible to compete with other semiconductor memory manufacturers who are able to obtain sufficient quantities of these materials from China.

We and/or our suppliers and service providers could be affected by regional conflicts, sanctions, tariffs, embargoes, or other trade restrictions, as well as laws and regulations enacted in response to concerns regarding climate change, conflict minerals, responsible sourcing practices, public health crises, contagious disease outbreaks, or other matters, which could limit the supply of our materials and/or increase the cost. Environmental regulations could limit our ability to procure or use certain chemicals or materials in our operations or products. In addition, disruptions in transportation lines could delay our receipt of materials. Our ability to procure components to repair equipment essential for our manufacturing processes could also be negatively impacted by various restrictions or disruptions in supply chains, among other items. The disruption of our supply of materials, components, or services, or the extension of our lead times could have a material adverse effect on our business, results of operations, or financial condition.
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Our operations are dependent on our ability to procure advanced semiconductor manufacturing equipment that enables the transition to lower cost manufacturing processes. For certain key types of equipment, including photolithography tools, we are sometimes dependent on a single supplier. From time to time, we have experienced difficulties in obtaining some equipment on a timely basis due to suppliers’ limited capacity. Our inability to obtain equipment on a timely basis could adversely affect our ability to transition to next generation manufacturing processes and reduce our costs. Delays in obtaining equipment could also impede our ability to ramp production and could increase our overall costs of a ramp. Our inability to obtain advanced semiconductor manufacturing equipment in a timely manner could have a material adverse effect on our business, results of operations, or financial condition.

Our construction projects to expand production and R&D capacity are highly dependent on available sources of labor, materials, equipment, and services. Increasing demand, supply constraints, inflation, and other market conditions could result in increasing shortages and higher costs for these items. Difficulties in obtaining these resources could result in significant delays in completion of our construction projects and cost increases, which could have a material adverse effect on our business, results of operations, or financial condition.

Our inability to source materials, supplies, capital equipment, or third-party services could affect our overall production output and our ability to fulfill customer demand. Significant or prolonged shortages of our products could halt customer manufacturing and damage our relationships with these customers. Any damage to our customer relationships as a result of a shortage of our products could have a material adverse effect on our business, results of operations, or financial condition.

Similarly, if our customers experience disruptions to their supplies, materials, components, or services, or the extension of their lead times, they may reduce, cancel, or alter the timing of their purchases with us, which could have a material adverse effect on our business, results of operations, or financial condition.

The continued effects of the COVID-19 pandemic could adversely affect our business, results of operations, and financial condition.

The ongoing effects of the public health crisis caused by the COVID-19 pandemic and the measures being taken to limit COVID-19’s impact on our business, results of operations, and financial condition are uncertain and difficult to predict, but may include, and in some cases, have included and may continue to include:

Disruptions to our supply chain and our operations, or those of our suppliers, especially as a result of public health measures;
Impacts to customer demand, resulting in industry oversupply and declines in pricing for our products;
Adverse impacts to our business activities and increased costs from our efforts to mitigate the impact of COVID-19;
Increased costs for, or unavailability of, transportation, raw materials, components, electricity and/or other energy sources, or other inputs necessary for the operation of our business;
Reductions in, or cessation of, operations at one or more of our sites or those of our subcontractors or suppliers, resulting from government restrictions and/or our own measures to prevent and/or mitigate the spread of COVID-19; and
Adverse impacts to our construction projects, which could hamper our ability to introduce new technologies, reduce costs, or meet customer demand.

These effects and other impacts of the pandemic, alone or taken together, could have a material adverse effect on our business, results of operations, or financial condition.

mu-20221201_g3.jpg 43

Increases in sales of system solutions may increase our dependency upon specific customers and our costs to develop, qualify, and qualifymanufacture our system solutions.


Our development of system-level memory and storage products is dependent, in part, upon successfully identifying and meeting our customers'customers’ specifications offor those products. Developing and manufacturing system-level products with specifications unique to a customer increases our reliance upon that customer for purchasing our products inat sufficient volume, quantity,volumes and prices in a timely manner. If we fail to identify or develop products on a timely basis, or at all, that comply with our customers' specifications or achieve design wins with our customers, we may experience a significant adverse impact on our sales and margins. Even if our products meet customer specifications, our sales of system-level solutions are dependent upon our customers choosing our products over those of our competitors and purchasing our products at sufficient volumes and prices. Our competitors'competitors’ products may be less costly, provide better performance, or include additional features when compared to our products. Our long-term ability to sell system-level memory and storage products is reliant upon our customer'scustomers’ ability to create, market, and sell their products containing our system-level solutions at sufficient volumes and prices in a timely manner. If we fail to successfully develop and market system-level products, our business, results of operations, or financial condition may be materially adversely affected.


Manufacturing system-level solutions, such as SSDs and managed NAND, typically results in higher per-unit manufacturing costs as compared to other products. Even if we are successful in selling system-level solutions to our customers in sufficient volume, we may be unable to generate sufficient profit if our per-unit manufacturing costs exceed ourare not offset by higher per-unit selling prices. Manufacturing system-level solutions to customer specifications requires a longer development cycle, as compared to discrete products, to design, test, and qualify, which may increase our costs. Additionally, someSome of our system solutions are increasingly dependent on sophisticated firmware that may require significant customization to meet customer specifications, which increases our costs and time to market. Additionally, we may need to update our controller and hardware design as well as our firmware or develop new firmware as a result of new product introductions or changes


in customer specifications and/or industry standards, which increases our costs. System complexities and extended warranties for system-level products could also increase our warranty costs. Our failure to cost-effectively manufacture system-level solutions and/or controller, hardware design, and firmware in a timely manner may result in reduced demand for our system-level products and could have a material adverse effect on our business, results of operations, or financial condition.


Products that fail to meet specifications, are defective, or that are otherwise incompatible with end uses could impose significant costs on us.


Products that do not meet specifications or that contain, or are perceived by our customers to contain, defects or that are otherwise incompatible with end uses could impose significant costs on us or otherwise materially adversely affect our business, results of operations, or financial condition. From time to time, we experience problems with nonconforming, defective, or incompatible products after we have shipped such products. In recent periods, we have further diversified and expanded our product offerings, which could potentially increase the chance that one or more of our products could fail to meet specifications in a particular application. AsOur products and solutions may be deemed fully or partially responsible for functionality in our customers’ products and may result in sharing or shifting of product or financial liability from our customers to us for costs incurred by the end user as a result weof our customers’ products failing to perform as specified. In addition, if our products and solutions perform critical functions in our customers’ products or are used in high-risk consumer end products, such as autonomous driver assistance programs, home and enterprise security, smoke and noxious gas detectors, medical monitoring equipment, or wearables for child and elderly safety, our potential liability may increase. We could be adversely affected in several ways, including the following:


we may be required or agree to compensate customers for costs incurred or damages caused by defective or incompatible products and to replace products;
we could incur a decrease in revenue or adjustment to pricing commensurate with the reimbursement of such costs or alleged damages; and
we may encounter adverse publicity, which could cause a decrease in sales of our products or harm our reputation or relationships with existing or potential customers.


Any of the foregoing items could have a material adverse effect on our business, results of operations, or financial condition.


We may be unable to protect our intellectual property or retain key employees who are knowledgeable
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We maintain a system of controls over our intellectual property, including U.S. and foreign patents, trademarks, copyrights, trade secret laws, licensing arrangements, confidentiality procedures, non-disclosure agreements with employees, consultants, and vendors, and a general system of internal controls. Despite our system of controls over our intellectual property, it may be possible for our current or future competitors to obtain, copy, use, or disclose, illegally or otherwise, our product and process technology. The laws of some foreign countries may not protect our intellectual property to the same degree as do U.S. laws and our confidentiality, non-disclosure, and non-compete agreements may be unenforceable or difficult and costly to enforce.

Additionally, our ability to maintain and develop intellectual property is dependent upon our ability to attract, develop, and retain highly skilled employees. Global competition for such skilled employees in our industry is intense. Due to the volatile nature of our industry and our operating results, a decline in our operating results and/or stock price may adversely affect our ability to retain key employees whose compensation is dependent, in part, upon the market price of our common stock, achieving certain performance metrics, levels of company profitability, or other financial or company-wide performance. If our competitors or future entrants into our industry are successful in hiring our employees, they may directly benefit from the knowledge these employees gained while they were under our employment.

Our inability to protect our intellectual property or retain key employees who are knowledgeable of and develop our intellectual property could have a material adverse effect on our business, results of operations, or financial condition.

Claims that our products or manufacturing processes infringe or otherwise violate the intellectual property rights of others, or failure to obtain or renew license agreements covering such intellectual property, could materially adversely affect our business, results of operations, or financial condition.

As is typical in the semiconductor and other high technology industries, from time to time others have asserted, and may in the future assert, that our products or manufacturing processes infringe upon, misappropriate, misuse, or otherwise violate their intellectual property rights. We are unable to predict the outcome of these assertions made against us. Any of these types of claims, regardless of the merits, could subject us to significant costs to defend or resolve such claims and may consume a substantial portion of management's time and attention. As a result of these claims, we may be required to:

pay significant monetary damages, fines, royalties, or penalties;
enter into license or settlement agreements covering such intellectual property rights;


make material changes to or redesign our products and/or manufacturing processes; and/or
cease manufacturing, having made, selling, offering for sale, importing, marketing, or using products and/or manufacturing processes in certain jurisdictions.

We may not be able to take any of the actions described above on commercially reasonable terms and any of the foregoing results could have a material adverse effect on our business, results of operations, or financial condition. (See also "Part I. Financial Information – Item 1. Financial Statements – Notes to Consolidated Financial Statements – Contingencies.")

We have a number of intellectual property license agreements. Some of these license agreements require us to make one-time or periodic payments. We may need to obtain additional licenses or renew existing license agreements in the future. We are unable to predict whether these license agreements can be obtained or renewed on terms acceptable to us. The failure to obtain or renew licenses as necessary could have a material adverse effect on our business, results of operations, or financial condition.

If our manufacturing process is disrupted by operational issues, natural disasters, or other events, our business, results of operations, or financial condition could be materially adversely affected.


We and our subcontractors manufacture products using highly complex processes that require technologically advanced equipment and continuous modification to improve yields and performance. Difficulties in the manufacturing process or the effects from a shift in product mix can reduce yields or disrupt production and may increase our per gigabit manufacturing costs. We and our subcontractors maintain operations and continuously implement new product and process technology at our manufacturing operations,facilities, which are widely dispersed in multiple locations in several countries including the United States, Singapore, Taiwan, Japan, Malaysia, and China. Additionally,As a result of the necessary interdependence within our control over operationsnetwork of manufacturing facilities, an operational disruption at IMFT is limited byone of our agreements with Intel. or a subcontractor’s facilities may have a disproportionate impact on our ability to produce many of our products.

From time to time, wethere have experiencedbeen disruptions in our manufacturing processoperations as a result of power outages, improperly functioning equipment, disruptions in supply of raw materials or components, or equipment failures, earthquakes,failures. We have manufacturing and other operations in locations subject to natural occurrences and possible climate changes, such as severe and variable weather and geological events resulting in increased costs, or other environmental events. disruptions to our manufacturing operations or those of our suppliers or customers. In addition, climate change may pose physical risks to our manufacturing facilities or our suppliers’ facilities, including increased extreme weather events that could result in supply delays or disruptions. Other events, including political or public health crises, such as an outbreak of contagious diseases like COVID-19 may also affect our production capabilities or that of our suppliers, including as a result of quarantines, closures of production facilities, lack of supplies, or delays caused by restrictions on travel or shipping. Events of the types noted above have occurred from time to time and may occur in the future. As a result, in addition to disruptions to operations, our insurance premiums may increase or we may not be able to fully recover any sustained losses through insurance.

If production at a fabrication facility is disrupted for any reason, manufacturing yields may be adversely affected, or we may be unable to meet our customers'customers’ requirements and they may purchase products from other suppliers. This could result in a significant increase in manufacturing costs, loss of revenues,revenue, or damage to customer relationships, any of which could have a material adverse effect on our business, results of operations, or financial condition.

The acquisition of our ownership interest in Inotera from Qimonda has been challenged by the administrator of the insolvency proceedings for Qimonda.

On January 20, 2011, Dr. Michael Jaffé, administrator for Qimonda's insolvency proceedings, filed suit against Micron and Micron Semiconductor B.V., our Netherlands subsidiary ("Micron B.V."), in the District Court of Munich, Civil Chamber. The complaint seeks to void, under Section 133 of the German Insolvency Act, a share purchase agreement between Micron B.V. and Qimonda signed in fall 2008, pursuant to which Micron B.V. purchased substantially all of Qimonda's shares of Inotera (the "Inotera Shares"), representing approximately 18% of Inotera's outstanding shares as of March 1, 2018, and seeks an order requiring us to re-transfer those shares to the Qimonda estate. The complaint also seeks, among other things, to recover damages for the alleged value of the joint venture relationship with Inotera and to terminate, under Sections 103 or 133 of the German Insolvency Code, a patent cross-license between us and Qimonda entered into at the same time as the share purchase agreement.

Following a series of hearings with pleadings, arguments, and witnesses on behalf of the Qimonda estate, on March 13, 2014, the court issued judgments: (1) ordering Micron B.V. to pay approximately $1 million in respect of certain Inotera Shares sold in connection with the original share purchase; (2) ordering Micron B.V. to disclose certain information with respect to any Inotera Shares sold by it to third parties; (3) ordering Micron B.V. to disclose the benefits derived by it from ownership of the Inotera Shares, including in particular, any profits distributed on the Inotera Shares and all other benefits; (4) denying Qimonda’s claims against Micron for any damages relating to the joint venture relationship with Inotera; and (5) determining that Qimonda's obligations under the patent cross-license agreement are canceled. In addition, the Court issued interlocutory judgments ordering, among other things: (1) that Micron B.V. transfer to the Qimonda estate the Inotera Shares still owned by Micron B.V. and pay to the Qimonda estate compensation in an amount to be specified for any Inotera Shares sold to third parties; and (2) that Micron B.V. pay the Qimonda estate as compensation an amount to be specified for benefits derived by Micron B.V. from ownership of the Inotera Shares. The interlocutory judgments have no immediate, enforceable effect on us, and, accordingly, we expect to be able to continue to operate with full control of the Inotera Shares subject to further developments in the case. We have filed a notice of appeal, and the parties have submitted briefs to the appeals court.

We are unable to predict the outcome of the matter and, therefore, cannot estimate the range of possible loss. The final resolution of this lawsuit could result in the loss of the Inotera Shares or monetary damages, unspecified damages based on the


benefits derived by Micron B.V. from the ownership of the Inotera Shares, and/or the termination of the patent cross-license, which could have a material adverse effect on our business, results of operations, or financial condition.

We may incur additional restructuring charges in future periods.

In separate transactions in 2017, we sold our assembly and test facility located in Akita, Japan and our 40% ownership interest in Tera Probe; assets associated with our 200mm fabrication facility in Singapore; and assets related to our Lexar brand. In 2016, we initiated a restructure plan in response to business conditions and the need to accelerate focus on our key priorities. The plan included the elimination of certain projects and programs, the permanent closure of a number of open headcount requisitions, workforce reductions in certain areas of our business, and other non-headcount related spending reductions. As a result of these and other actions, we incurred charges of $18 million, $67 million, and $3 million for 2017, 2016, and 2015, respectively.

We may not realize expected savings or other benefits from our restructure activities and may incur additional restructure charges or other losses in future periods associated with other initiatives. In connection with any restructure initiatives, we could incur restructure charges, loss of production output, loss of key personnel, disruptions in our operations, and difficulties in the timely delivery of products, which could have a material adverse effect on our business, results of operations, or financial condition.


Breaches of our security systems or products, or those of our customers, suppliers, or business partners, could expose us to losses.


We maintain a system of controls over the physical security of our facilities. We also manage and store various proprietary information and sensitive or confidential data relating to our operations. In addition, we process, store, and transmit large amounts of data relating to our customers and employees, including sensitive personal information. Unauthorized persons, employees, former employees, or employeesother third parties may gain access to our facilities or networktechnology infrastructure and systems to steal trade secrets or other proprietary information, compromise confidential information, create system disruptions, or cause shutdowns. TheseThis risk is exacerbated as competitors for talent, particularly engineering talent, increasingly attempt to hire our employees. Through cyberattacks on technology infrastructure and systems, unauthorized parties may also be ableobtain access to developcomputer systems, networks, and deploy viruses,data, including cloud-based platforms. The technology infrastructure and systems of our suppliers, vendors, service providers, cloud solution providers, and partners have in the past experienced, and may in the future experience, such attacks, which could impact our operations. Cyberattacks can include ransomware, computer denial-of-service attacks, worms, supply chain attacks, social engineering, and other malicious software programs or other attacks, including those using techniques that disrupt our operationschange frequently or may be disguised or difficult to detect, or designed to remain dormant until a triggering event, impersonation of authorized users, and efforts to discover and exploit any design flaws, “bugs,” security vulnerabilities, as well as intentional or unintentional acts by employees or other insiders with access privileges. Globally, cyberattacks are increasing in number and the attackers are increasingly organized and well-financed, or supported by state actors, and are developing increasingly sophisticated systems to not only attack, but also to evade detection. In addition, geopolitical tensions or conflicts may create security vulnerabilities.a heightened risk of cyberattacks. Breaches of our physical security, and attacks on our networktechnology infrastructure and systems, or breaches or attacks on our customers, suppliers, or business partners who have confidential or sensitive information regarding us and our customers and suppliers, could result in significant losses and damage our reputation with customers and suppliers and may expose us to litigation if the confidential information of our customers, suppliers, or employees is compromised.

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Our products are also targets for cyberattacks, including those products utilized in cloud-based environments. While some of our products contain encryption or security algorithms to protect third-party content or user-generated data stored on our products, these products could still be hacked or the encryption schemes could be compromised, whichbreached, or circumvented by motivated and sophisticated attackers. Further, our products contain sophisticated hardware and firmware and applications that may contain security vulnerabilities or defects in design or manufacture, including “bugs” and other problems that could interfere with the intended operation of our products. To the extent our products are hacked, or the encryption schemes are compromised or breached, this could harm our business by requiring us to employ additional resources to fix the errors or defects, exposing us to litigation, claims, and harm to our reputation.

Any of the foregoing security risks could have a material adverse effect on our business, results of operations, or financial condition.


ChangesWe must attract, retain, and motivate highly skilled employees.

To remain competitive, we must attract, retain, and motivate executives and other highly skilled, diverse employees, as well as effectively manage succession for key employees. Competition for experienced employees in foreign currency exchange rates could materially adversely affect our business, results of operations, or financial condition.

Acrossindustry is intense. Hiring and retaining qualified executives and other employees is critical to our global operations, significant transactionsbusiness. If our total compensation programs, employment benefits, and balancesworkplace culture are denominated in currencies other than the U.S. dollar (our reporting currency), primarily the euro, Singapore dollar, New Taiwan dollar,not viewed as competitive and yen. We recorded net losses from changes in currency exchange rates of $36 million for the first six months of 2018, $74 million for 2017, and $24 million for 2016. Based on our foreign currency balances of monetary assets and liabilities, as of March 1, 2018, we estimate that a 10% adverse change in exchange rates versus the U.S. dollar would result in losses of approximately $414 million. Although we hedge our primary exposures to changes in currency exchange rates from our monetary assets and liabilities, the effectiveness of these hedges is dependent uponinclusive, our ability to accurately forecastattract, retain, and motivate employees could be compromised.

At times, we experience higher levels of attrition, increasing compensation costs, and more intense competition for talent across our monetary assetsindustry. To the extent we experience significant attrition and liabilities. In addition,are unable to timely replace employees, we could experience a significant portionloss of critical skills and reduced employee morale, potentially resulting in business disruptions or increased expenses to address any disruptions. Additionally, changes to immigration policies in the countries in which we operate, as well as restrictions on travel due to public health crises or other causes, may limit our manufacturing costsability to hire and/or retain talent in, or transfer talent to, specific locations.

Our inability to attract, retain, and motivate executives and other employees or effectively manage succession of key roles may inhibit our ability to maintain or expand our business operations.

We may not be able to achieve expected returns from capacity expansions.

We have announced our intent to expand our DRAM production capacity in the United States and we also make capital investments in projects outside the United States.

These expansions involve several risks including the following:

capital expenditure requirements for capacity expansions during periods of relatively low free cash flow generation, resulting from challenging memory and storage industry conditions;
availability of necessary funding, which may include external sources;
ability to realize expected grants, investment tax credits, and other government incentives, including through the CHIPS Act and foreign, state, and local grants;
potential changes in laws or provisions of grants, investment tax credits, and other government incentives;
potential restrictions on expanding in certain geographies;
availability of equipment and construction materials;
ability to complete construction as scheduled and within budget;
availability of the necessary workforce;
ability to timely ramp production in a cost-effective manner;
increases to our cost structure until new production is ramped to adequate scale; and
sufficient growth in customer demand to meet our increased output.

We invest our capital in areas that we believe best align with our business strategy and optimize future returns. Investments in capital expenditures may not generate expected returns or cash flows. Significant judgment is required to determine which capital investments will result in optimal returns, and we could invest in projects that are denominatedultimately less profitable than those projects we do not select. Delays in foreign currencies. Exchange rates for somecompletion and ramping of these currencies against the U.S. dollar, particularly the yen, have been volatile in recent periods. If these currencies strengthen against the U.S. dollar,new production facilities, or failure to optimize our manufacturing costsinvestment choices, could significantly increase. Exchange rates forimpact our ability to realize expected returns on our capital expenditures.
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Any of the U.S. dollar that adversely change against our foreign currency exposuresabove factors could have a material adverse effect on our business, results of operations, or financial condition.


Our incentives from various governments are conditional upon achieving or maintaining certain performance obligations and are subject to reduction, termination, or clawback.

We have received, and may makein the future acquisitionscontinue to receive, benefits and incentives from national, state, and local governments in various regions of the world designed to encourage us to establish, maintain, or increase investment, workforce, or production in those regions. These incentives may take various forms, including grants, loan subsidies, and tax arrangements, and typically require us to achieve or maintain certain levels of investment, capital spending, employment, technology deployment, or research and development activities to qualify for such incentives or could restrict us from undertaking certain activities. We may be unable to obtain significant future incentives to continue to fund a portion of our capital expenditures and operating costs, without which our cost structure would be adversely impacted. We also cannot guarantee that we will successfully achieve performance obligations required to qualify for these incentives or that the granting agencies will provide such funding. These incentive arrangements typically provide the granting agencies with rights to audit our compliance with their terms and obligations. Such audits could result in modifications to, or termination of, the applicable incentive program. The incentives we receive could be subject to reduction, termination, or clawback, and any decrease or clawback of government incentives could have a material adverse effect on our business, results of operations, or financial condition.

Acquisitions and/or alliances which involve numerous risks.


Acquisitions and the formation or operation of alliances, such as joint ventures and other partnering arrangements, involve numerous risks, including the following:


integrating the operations, technologies, and products of acquired or newly formed entities into our operations;
increasing capital expenditures to upgrade and maintain facilities;
increased debt levels;
the assumption of unknown or underestimated liabilities;
the use of cash to finance a transaction, which may reduce the availability of cash to fund working capital, capital expenditures, R&D expenditures, and other business activities;
diverting management'smanagement’s attention from daily operations;


managing larger or more complex operations and facilities and employees in separate and diverse geographic areas;
hiring and retaining key employees;
requirements imposed by governmentalgovernment authorities in connection with the regulatory review of a transaction, which may include, among other things, divestitures or restrictions on the conduct of our business or the acquired business;
inabilityunderestimating the costs or overestimating the benefits, including product, revenue, cost and other synergies and growth opportunities that we expect to realize, synergies or other expectedand we may not achieve those benefits;
failure to maintain customer, vendor, and other relationships;
inadequacy or ineffectiveness of an acquired company'scompany’s internal financial controls, disclosure controls and procedures, compliance programs, and/or environmental, health and safety, anti-corruption, human resource, or other policies or practices; and
impairment of acquired intangible assets, goodwill, or other assets as a result of changing business conditions or technological advancements, or worse-than-expected performance of the acquired business.advancements.


In previous years, supply of memory and storage products has significantly exceeded customer demand resulting in significant declines in average selling prices for DRAM and NAND. The global memory and storage industry has experienced consolidation and may continue to consolidate. We engage, from time to time, in discussions regarding potential acquisitions and similar opportunities. To the extent we are successful in completing any such transactions, we could be subject to some or all of the risks described above, including the risks pertaining to funding, assumption of liabilities, integration challenges, and increases in debt that may accompany such transactions. Acquisitions of, or alliances with, technology companies are inherently risky and may not be successful and could have a material adverse effect on our business, results of operations, or financial condition.


The limited availability
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We may incur restructure charges in future periods and may not realize expected savings or capital equipment could materially adversely affect our business, resultsother benefits from restructure activities.

In the second quarter of operations, or financial condition.

Our operations require raw materials, and in certain cases, third party services, that meet exacting standards. We generally have multiple sources of supply for our raw materials and services. However, only2023, we initiated a limited number of suppliers are capable of delivering certain raw materials and services that meet our standards. In some cases, materials, components, or services are provided by a single supplier. Various factors could reduce the availability of raw materials or components such as chemicals, silicon wafers, gases, photoresist, controllers, substrates, lead frames, printed circuit boards, sub-assemblies, targets, and reticle glass blanks. Shortages may occur, from time to time, in the future. We and/or our suppliers could be affected by laws and regulations enactedrestructure plan in response to concerns regarding climate change, which could increase the cost and limit the supply of our raw materials.current market conditions. See “Part I. Financial Information – Item 1. Financial Statements – Notes to Consolidated Financial Statements – Subsequent Events.” In addition, we may in the future, enter into other restructure initiatives in order to, among other items, streamline our operations, respond to changes in business conditions, our markets, or product offerings, or to centralize certain key functions.

We may not realize expected savings or other benefits from our current or future restructure activities and may incur additional restructure charges or other losses in future periods associated with other initiatives. In connection with any restructure initiatives, we could incur restructure charges, loss of production output, loss of key personnel, disruptions in transportation lines could delay our receipt of raw materials. Lead times for the supply of raw materials have been extendedoperations, and difficulties in the past. The disruptiontimely delivery of our supply of raw materials or services or the extension of our lead timesproducts, which could have a material adverse effect on our business, results of operations, or financial condition.


Our operations are dependentCompliance with responsible sourcing requirements and any related regulations could increase our operating costs, or limit the supply and increase the cost of certain materials, supplies, and services, and if we fail to comply, customers may reduce purchases from us or disqualify us as a supplier.

We and many of our customers have adopted responsible sourcing programs that require us to meet certain ESG criteria, and to periodically report on our abilityperformance against these requirements, including that we source the materials, supplies, and services we use and incorporate into the products we sell as prescribed by these programs. Many customer programs require us to procure advanced semiconductor manufacturing equipment that enables the transitionremove a supplier within a prescribed period if such supplier ceases to lower cost manufacturing processes. For certain key typescomply with prescribed criteria, and our supply chain may at any time contain suppliers at risk of equipment, including photolithography tools,being removed due to non-compliance with responsible sourcing requirements. Some of our customers may elect to disqualify us as a supplier (resulting in a permanent or temporary loss of sales to such customer) or reduce purchases from us if we are sometimes dependentunable to verify that our performance or products (including the underlying supply chain) meet the specifications of our customers’ responsible sourcing programs on a single supplier.continuous basis. Meeting responsible sourcing requirements may increase operating requirements and costs or limit the sourcing and availability of some of the materials, supplies, and services we use, particularly when the availability of such materials, supplies, and services is concentrated to a limited number of suppliers. From time to time, we have experienced difficultiesremove suppliers or require our suppliers to remove suppliers from their supply chains based on our responsible sourcing requirements or customer requirements, and we or our suppliers may be unable to replace such removed suppliers in obtaining some equipment on a timely basis dueor cost-effective manner. Any inability to suppliers' limited capacity.replace removed suppliers in a timely or cost effective manner may affect our ability and/or the cost to obtain sufficient quantities of materials, supplies, and services necessary for the manufacture of our products. Our inability to obtain equipment on a timely basis could adversely affect our ability to transition to next generation manufacturing processes and reduce our costs. Delays in obtaining equipment could also impede our ability to ramp production at new facilities and could increase our overall costs of a ramp. Our inability to obtain advanced semiconductor manufacturing equipmentreplace suppliers we have removed in a timely or cost-effective manner or comply with customers’ responsible sourcing requirements or with any related regulations could have a material adverse effect on our business, results of operations, or financial condition.


Increases
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Failure to meet ESG expectations or standards or achieve our ESG goals could adversely affect our business, results of operations, financial condition, or stock price.

In recent years, there has been an increased focus from stakeholders on ESG matters, including greenhouse gas emissions and climate-related risks, renewable energy, water stewardship, waste management, diversity, equality and inclusion, responsible sourcing and supply chain, human rights, and social responsibility. Given our commitment to ESG, we actively manage these issues and have established and publicly announced certain goals, commitments, and targets which we may refine or even expand further in tariffsthe future. These goals, commitments, and targets reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Evolving stakeholder expectations and our efforts to manage these issues, report on them, and accomplish our goals present numerous operational, regulatory, reputational, financial, legal, and other risks, any of which could have a material adverse impact, including on our reputation and stock price.

Such risks and uncertainties include:

reputational harm, including damage to our relationships with customers, suppliers, investors, governments, or other taxesstakeholders;
adverse impacts on our productsability to sell and manufacture products;
the success of our collaborations with third parties;
increased risk of litigation, investigations, or equipmentregulatory enforcement action;
unfavorable ESG ratings or investor sentiment;
diversion of resources and suppliesincreased costs to control, assess, and report on ESG metrics;
our ability to achieve our goals, commitments, and targets within timeframes announced;
increased costs to achieve our goals, commitments, and targets;
unforeseen operational and technological difficulties;
access to and increased cost of capital; and
adverse impacts on our stock price.

Any failure, or perceived failure, to meet evolving stakeholder expectations and industry standards or achieve our ESG goals, commitments, and targets could have an adverse impacteffect on our operations.business, results of operations, financial condition, or stock price.


Risks Related to Intellectual Property and Litigation

We sellmay be unable to protect our intellectual property or retain key employees who are knowledgeable of and develop our intellectual property.

We maintain a significant majoritysystem of controls over our intellectual property, including U.S. and foreign patents, trademarks, copyrights, trade secrets, licensing arrangements, confidentiality procedures, non-disclosure agreements with employees, consultants, and vendors, and a general system of internal controls. Despite our system of controls over our intellectual property, it may be possible for our current or future competitors to obtain, copy, use, or disclose, illegally or otherwise, our product and process technology or other proprietary information. The laws of some foreign countries may not protect our intellectual property to the same degree as do U.S. laws, and our confidentiality, non-disclosure, and non-compete agreements may be unenforceable or difficult and costly to enforce.

Additionally, our ability to maintain and develop intellectual property is dependent upon our ability to attract, develop, and retain highly skilled employees. If our competitors or future entrants into our industry are successful in hiring our employees, they may directly benefit from the knowledge these employees gained while they were under our employment, and this may also negatively impact our ability to maintain and develop intellectual property.

Our inability to protect our intellectual property or retain key employees who are knowledgeable of and develop our intellectual property could have a material adverse effect on our business, results of operations, or financial condition.

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Legal proceedings and claims could have a material adverse effect on our business, results of operations, or financial condition.

From time to time, we are subject to various legal proceedings and claims that arise out of the ordinary conduct of our business or otherwise, both domestically and internationally. Such claims include, but are not limited to, allegations of anticompetitive conduct and infringement of intellectual property. See “Part I. Financial Information – Item 1. Financial Statements – Notes to Consolidated Financial Statements – Contingencies.”

Any claim, with or without merit, could result in significant legal fees that could negatively impact our financial results, disrupt our operations, and require significant attention from our management. We may be associated with and subject to litigation, claims, or arbitration disputes arising from, or as a result of:

our relationships with vendors or customers, supply agreements, or contractual obligations with our subcontractors or business partners;
the actions of our vendors, subcontractors, or business partners;
our indemnification obligations, including obligations to defend our customers against third-party claims asserting infringement of certain intellectual property rights, which may include patents, trademarks, copyrights, or trade secrets; and
the terms of our product warranties or from product liability claims.

As we continue to focus on developing system solutions with manufacturers of consumer products, into countries outside the United Statesincluding autonomous driving, augmented reality, and others, we may be exposed to greater potential for personal liability claims against us as a result of consumers’ use of those products. We, our officers, or our directors could also be subject to claims of alleged violations of securities laws. There can be no assurance that we are adequately insured to protect against all claims and potential liabilities, and we purchasemay elect to self-insure with respect to certain matters. Exposures to various legal proceedings and claims could lead to significant costs and expenses as we defend claims, are required to pay damage awards, or enter into settlement agreements, any of which could have a material adverse effect on our business, results of operations, or financial condition.

Claims that our products or manufacturing processes infringe or otherwise violate the intellectual property rights of others, or failure to obtain or renew license agreements covering such intellectual property, could materially adversely affect our business, results of operations, or financial condition.

As is typical in the semiconductor and other high technology industries, from time to time others have asserted, and may in the future assert, that our products or manufacturing processes infringe upon, misappropriate, misuse, or otherwise violate their intellectual property rights. We are unable to predict the outcome of these assertions made against us. Any of these types of claims, regardless of the merits, could subject us to significant costs to defend or resolve such claims and may consume a substantial portion of equipmentmanagement’s time and supplies from suppliers outsideattention. As a result of these claims, we may be required to:

pay significant monetary damages, fines, royalties, or penalties;
enter into license or settlement agreements covering such intellectual property rights;
make material changes to or redesign our products and/or manufacturing processes; and/or
cease manufacturing, having made, selling, offering for sale, importing, marketing, or using products and/or manufacturing processes in certain jurisdictions.

We may not be able to take any of the United States.actions described above on commercially reasonable terms and any of the foregoing results could have a material adverse effect on our business, results of operations, or financial condition. See “Part I. Financial Information – Item 1. Financial Statements – Notes to Consolidated Financial Statements – Contingencies.”

We have a number of intellectual property license agreements. Some of these license agreements require us to make one-time or periodic payments. We may need to obtain additional licenses or renew existing license agreements in the future. We are unable to predict whether these license agreements can be obtained or renewed on terms acceptable to us. The failure to obtain or renew licenses as necessary could have a material adverse effect on our business, results of operations, or financial condition.

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Risks Related to Laws and Regulations

Government actions and regulations, such as export restrictions, tariffs, and trade protection measures, may limit our ability to sell our products to certain customers or markets, or could otherwise restrict our ability to conduct operations.

International trade disputes, geopolitical tensions, and military conflicts have led, and continue to lead, to new and increasing export restrictions, trade barriers, tariffs, and other trade measures that can increase our manufacturing costs, make our products less competitive, reduce demand for our products, limit our ability to sell to certain customers or markets, limit our ability to procure, or increase our costs for, components or raw materials, impede or slow the movement of our goods across borders, impede our ability to perform R&D activities, or otherwise restrict our ability to conduct operations. Increasing protectionism, economic nationalism, and national security concerns may lead to further changes in trade policy, domestic sourcing initiatives, or other formal and informal measures that could make it more difficult to sell our products in, or restrict our access to, some markets and/or customers.

We cannot predict what further actions may ultimately be taken with respect to export regulations, tariffs or other trade regulations between the United States and other countries, have leviedwhat products or companies may be subject to such actions, or what actions may be taken by other countries in retaliation. Further changes in trade policy, tariffs, and taxesrestrictions on certain goods. Further tariffs, additional taxesexports or other trade barriers, or restrictions on supplies, equipment, and raw materials including rare earth minerals, may limit our ability to produce products, increase our selling and/or manufacturing costs, decrease margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase necessary equipment and supplies, which could have a material adverse effect on our business, results of operations, or financial conditions.

A downturn in the worldwide economy may harm our business.

Downturns in the worldwide economy have harmed our business in the past and future downturns could also adversely affect our business. Adverse economic conditions affect demand for devices that incorporate our products, such as personal computers, mobile devices, SSDs, and servers. Reduced demand for these products could result in significant decreases in our average selling prices and product sales. A deterioration of current conditions in worldwide credit markets could limit our ability to obtain external financing to fund our operations and capital expenditures. In addition, we may experience losses on


our holdings of cash and investments due to failures of financial institutions and other parties. Difficult economic conditionssupplies. Such changes may also result in a higher ratereputational harm to us, the development or adoption of lossestechnologies that compete with our products, long-term changes in global trade and technology supply chains, or negative impacts on our accounts receivables due to credit defaults. As a result, a downturncustomers’ products which incorporate our solutions. Any of the effects described in the worldwide economythis risk factor could have a material adverse effect on our business, results of operations, or financial condition.


Our results of operations couldThe technology industry is subject to intense media, political, and regulatory scrutiny, which can increase our exposure to government investigations, legal actions, and penalties. Although we have policies, controls, and procedures designed to help ensure compliance with applicable laws, there can be affected by natural disasters and other events in the locations in which weno assurance that our employees, contractors, suppliers, or agents will not violate such laws or our customerspolicies. Violations of trade laws, restrictions, or suppliers operate.

We have manufacturingregulations can result in fines; criminal sanctions against us or our officers, directors, or employees; prohibitions on the conduct of our business; and other operations in locations subject to natural occurrences such as severe weather and geological events, such as earthquakes or tsunamis, that could disrupt operations. In addition, our suppliers and customers also have operations in such locations. A natural disaster, fire, explosion, or other event that results in a prolonged disruptiondamage to our operations, or the operations of our customers or suppliers,reputation.

Tax-related matters could have a material adverse effect on our business, results of operations, or financial condition.


Our incentives from various governments are conditional upon achieving or maintaining certain performance obligations andWe are subject to reduction, termination, or clawback.

We have received, and mayincome taxes in the future continue to receive, benefits and incentives from national, state, and local governments in various regions of the world designed to encourage us to establish, maintain, or increase investment, workforce, or production in those regions. These incentives may take various forms, including grants, loan subsidies, and tax arrangements, and typically require us to perform or maintain certain levels of investment, capital spending, employment, technology deployment, or research and development activities to qualify for such incentives. We cannot guarantee that we will successfully achieve performance obligations required to qualify for these incentives or that the granting agencies will provide such funding. These incentive arrangements typically provide the granting agencies with rights to audit our performance with the terms and obligations. Such audits could result in modifications to, or termination of, the applicable incentive program. The incentives we receive could be subject to reduction, termination, or clawback, and any decrease or clawback of government incentives could have a material adverse effect on our business, results of operations, or financial condition.

The operations of MMJ are subject to continued oversight by the Japan Court during the pendency of the corporate reorganization proceedings.

Because MMJ's plan of reorganization provides for ongoing payments to creditors following the closing of our acquisition of MMJ, the reorganization proceedings in Japan (the "Japan Proceedings") are continuing and MMJ remains subject to the oversight of the Japan Court and of the trustees (including a trustee designated by us, who we refer to as the business trustee, and a trustee designated by the Japan Court, who we refer to as the legal trustee), pending completion of the reorganization proceedings. The business trustee is responsible for overseeing the operation of the business of MMJ, other than oversight in relation to acts that need to be carried out in connection with the Japan Proceedings, which are the responsibility of the legal trustee. MMJ's reorganization proceedings in Japan, and oversight of the Japan Court, will continue until the final creditor payment is made under MMJ's plan of reorganization, which is scheduled to occur in December 2019, but may occur on a later date to the extent any claims of creditors remain unfixed on the final scheduled installment payment date. MMJ may petition the Japan Court for an early termination of the reorganization proceedings once two-thirds of all payments under the plan of reorganization are made. Although such early terminations are customarily granted, there can be no assurance that the Japan Court will grant any such petition in this particular case.

During the pendency of the reorganization proceedings in Japan, MMJ is obligated to provide periodic financial reports to the Japan Court and may be required to obtain the consent of the Japan Court prior to taking a number of significant actions relating to its businesses, including transferring or disposing of, or acquiring, certain material assets, incurring or guaranteeing material indebtedness, settling material disputes, or entering into certain material agreements. The consent of the legal trustee may also be required for matters that would likely have a material impact on the operations or assets of MMJ or for transfers of material assets, to the extent the matters or transfers would reasonably be expected to materially and adversely affect execution of MMJ's plan of reorganization. Accordingly, during the pendency of the reorganization proceedings in Japan, our ability to operate MMJ as part of our global business or to cause MMJ to take certain actions that we deem advisable for its business could be adversely affected if the Japan Court or the legal trustee is unwilling to consent to various actions that we may wish to take with respect to MMJ.

The operations of MMJ being subject to the continued oversight by the Japan Court during the pendency of the corporate reorganization proceedings could have a material adverse effect on our business, results of operations, or financial condition.



We may incur additional tax expense or become subject to additional tax exposure.

We operate in a number of locations outside the United States including Singapore, where we have tax incentive arrangements that are conditional, in part, upon meeting certain business operations and employment thresholds. Our domestic and international taxes are dependent upon the geographic mix of our earnings among thesemany foreign jurisdictions. Our provision for income taxes and cash tax liabilities in the future could be adversely affected by numerous factors, including changes in the geographic mix of our earnings among jurisdictions, mandatory capitalization of R&D expenses beginning in 2023, challenges by tax authorities to our tax positions and intercompany transfer pricing agreements, income before taxes being lower than anticipated in countries with lower statutory tax rates and higher than anticipated in countries with higher statutory tax rates, changes in the valuation of deferred tax assets and liabilities,arrangements, failure to meet performance obligations with respect to tax incentive agreements, and changesexpanding our operations in tax laws and regulations. We file income tax returns with the U.S. federal government, various U.S. states, and various other jurisdictions throughout the world. Our U.S. federal and state tax returns remain open to examination for 2013 through 2017. In addition, tax returns that remain open to examinationcountries, fluctuations in Japan and Taiwan range from the years 2012 to 2017, and in Singapore from 2013 to 2017. The resultsforeign currency exchange rates, adverse resolution of audits and examinations of previously filed tax returns, and continuing assessmentschanges in tax laws and regulations.

Changes to income tax laws and regulations, or the interpretation of such laws, in any of the jurisdictions in which we operate could significantly increase our effective tax exposures mayrate and ultimately reduce our cash flows from operating activities and otherwise have ana material adverse effect on our provisionfinancial condition. Beginning in 2024, the Inflation Reduction Act of 2022 imposes a 15% book minimum tax on corporations with three-year average annual adjusted financial statement income exceeding $1 billion. We are in the process of assessing whether the book minimum tax would impact our effective tax rate. Further changes in the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting project undertaken by the Organisation for income taxesEconomic Co-operation and cash tax liability. The foregoing itemsDevelopment. If implemented by taxing authorities in countries where we do business, such changes, could have a material adverse effect on our business, results of operations, or financial condition.


A change in tax laws in key jurisdictions could materially increase our tax expense.
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We may not utilize alland others are subject to a variety of our net deferred tax assets.

We have substantial deferred tax assets,laws, regulations, or industry standards, including with respect to ESG considerations, which include, among others, net operating loss and credit carryforwards. As of August 31, 2017, our U.S. federal and state net operating loss carryforwards, including uncertain tax benefits, were $3.88 billion and $1.95 billion, respectively, which, if not utilized, will expire at various dates from 2028 through 2037 and 2018 through 2037, respectively. As of August 31, 2017, our foreign net operating loss carryforwards were $6.30 billion, which will, if not utilized, substantially all expire at various dates from 2019 through 2026. As of August 31, 2017, we had gross deferred tax assets of $3.78 billion and valuation allowances of $2.32 billion against our deferred tax assets. As of March 1, 2018, after recording the provisional estimated impact of the Tax Act, which includes the utilization of a substantial portion of our U.S. deferred tax assets, we had net deferred tax assets of $1.95 billion and valuation allowances of $943 million against our deferred tax assets. Utilization of all of our net operating loss and credit carryforwards would increase the amount of our annual cash taxes reducing the overall amount of cash available to be used in other areas of the business and couldmay have a material adverse effect on our business, results of operations, or financial condition.

A change in ownership may limit our ability to utilize our net operating loss carryforwards.

On January 18, 2017, our shareholders approved a Section 382 Rights Agreement (the "Rights Agreement"), under which our shareholders of record as of the close of business on August 1, 2016 received one right for each share of common stock outstanding, which entitles certain shareholders to purchase additional shares of our common stock at a significant discount in the event of certain transactions that may result in an ownership change, as defined by Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"). In general, an ownership change will occur when the percentage of our ownership by one or more 5% shareholders has increased by more than 50% at any time during the prior three years. Rights will attach to all shares of the Company’s common stock issued prior to the earlier of the rights' distribution date or expiration date as set forth in the Rights Agreement. Pursuant to the Rights Agreement, if a shareholder (or group) acquires beneficial ownership of 4.99% or more of the outstanding shares of our common stock without prior approval of our Board or without meeting certain customary exceptions, the rights (other than rights held by the acquiring shareholder (or group) and certain related persons) would become exercisable. The Rights Agreement is intended to avoid an adverse ownership change, thereby preserving our current ability to utilize certain net operating loss and credit carryforwards; however, there is no assurance that the Rights Agreement will prevent all transfers that could result in such an ownership change.

If we experience a 50% or greater change in ownership involving shareholders owning 5% or more of our common stock, it could adversely impact our ability to utilize our existing net operating loss and credit carryforwards. The inability to utilize


existing net operating loss and credit carryforwards would significantly increase the amount of our annual cash taxes and reduce the overall amount of cash available to be used in other areas of the business which could have a material adverse effect on our business, results of operations, or financial condition.

Compliance with regulations regarding the use of conflict minerals could limit the supply and increase the cost of certain metals used in manufacturing our products.

Increased focus on environmental protection and social responsibility initiatives led to the passage of Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd-Frank Act") and its implementing SEC regulations. The Dodd-Frank Act imposes supply chain diligence and disclosure requirements for certain manufacturers of products containing specific minerals that may originate in or near the Democratic Republic of the Congo (the "DRC") and finance or benefit local armed groups. These "conflict minerals" are commonly found in materials used in the manufacture of semiconductors. The implementation of these new regulations may limit the sourcing and availability of some of these materials. This in turn may affect our ability to obtain materials necessary for the manufacture of our products in sufficient quantities and may affect related material pricing. Some of our customers may elect to disqualify us as a supplier or reduce purchases from us if we are unable to verify that our products are DRC conflict free. Our inability to comply with the regulations regarding the use of conflict minerals could have a material adverse effect on our business, results of operations, or financial condition.

We are subject to a variety of laws and regulations that may result in additional costs and liabilities.


The manufacturingmanufacture of our products requires the use of facilities, equipment, and materials that are subject to a broad array of laws and regulations in numerous jurisdictions in which we operate. Additionally, we are subject to a variety of other laws and regulations relative to the construction, maintenance, and operations of our facilities. Any of thesechanges in laws, regulations, or regulationsindustry standards could cause us to incur additional direct costs, as well as increased indirect costs related to our relationships with our customers and suppliers, and otherwise harm our operations and financial condition. Any failure to comply with these laws, regulations, or regulationsindustry standards could adversely impact our reputation and our financial results. Additionally, we partner with other companies inengage various third parties as sales channel partners or to represent us or otherwise act on our joint ventures, whichbehalf who are also subject to a broad array of laws, regulations, and regulations.industry standards. Our ownership inengagement with these joint venturesthird parties may also expose us to risks associated with their respective compliance with these laws and regulations.

New ESG considerations, including those related to climate change and the potential resulting environmental impact, may result in new laws, regulations, or industry standards that may affect us, our suppliers, and our customers. Such laws, regulations, or industry standards could cause us to incur additional direct costs for compliance, as well as increased indirect costs resulting from our customers, suppliers, or both incurring additional compliance costs that are passed on to us. These costs may adversely impact our results of operations and financial condition.

As a result of thesethe items detailed in this risk factor, we could experience the following:


suspension of production;production or sales of our products;
remediation costs;
increased compliance costs;
alteration of our manufacturing processes;
regulatory penalties, fines, and legal liabilities; and
reputational challenges.


OurCompliance with, or our failure, or the failure of our joint ventures,third-party sales channel partners or agents, to comply with, these laws, and regulations, or industry standards could have a material adverse effect on our business, results of operations, or financial condition.


52 |2023 Q1 10-Q

Risks Related to Capitalization and Financial Markets

We face risks associated withmay be unable to generate sufficient cash flows or obtain access to external financing necessary to fund our international salesoperations, make scheduled debt payments, pay our dividend, and make adequate capital investments.

Our cash flows from operations that could materially adversely affect our business, results of operations, or financial condition.

Sales to customers outside the United States approximated 86% of our consolidated net sales for 2017. In addition, a substantial portion of our manufacturing operations are located outside the United States. In particular, a significant portion of our manufacturing operations are concentrated in Singapore, Taiwan, Japan, and China. Our international sales and operations are subject to a variety of risks, including:

export and import duties, changes to import and export regulations, customs regulations and processes, and restrictionsdepend primarily on the transfervolume of funds;semiconductor memory and storage products sold, average selling prices, and manufacturing costs. To develop new product and process technology, support future growth, achieve operating efficiencies, and maintain product quality, we must make significant capital investments in manufacturing technology, capital equipment, facilities, R&D, and product and process technology. We estimate capital expenditures in 2023 for property, plant, and equipment, net of partner contributions, will be in the range of $7.0 billion to $7.5 billion.
compliance with U.S. and international laws involving international operations, including
In the Foreign Corrupt Practices Actpast we have utilized external sources of 1977, as amended, export and import laws, and similar rules and regulations;
theft of intellectual property;
political and economic instability;
problems with the transportation or delivery of our products;
issues arising from cultural or language differences and labor unrest;
longer payment cycles and greater difficulty in collecting accounts receivable;
compliance with trade, technical standards, and other laws in a variety of jurisdictions;
contractual and regulatory limitations on our ability to maintain flexibility with our staffing levels;


disruptions to our manufacturing operations asfinancing when needed. As a result of actions imposedour debt levels, expected debt amortization, and general capital market and other economic conditions, it may be difficult for us to obtain financing on terms acceptable to us or at all. We have experienced volatility in our cash flows and operating results and may continue to experience such volatility in the future, which may negatively affect our credit rating. Our credit rating may also be affected by foreign governments;
changesour liquidity, financial results, economic risk, or other factors, which may increase the cost of future borrowings and make it difficult for us to obtain financing on terms acceptable to us or at all. There can be no assurance that we will be able to generate sufficient cash flows, access capital or credit markets, or find other sources of financing to fund our operations, make debt payments, pay our quarterly dividend, and make adequate capital investments to remain competitive in economic policiesterms of foreign governments;technology development and
difficulties in staffing and managing international operations.

These factors cost efficiency. Our inability to do any of the foregoing could have a material adverse effect on our business, results of operations, or financial condition.


Debt obligations could adversely affect our financial condition.

We have incurred in the past, and expect to incur in the future, debt to finance our capital investments, business acquisitions, and to realign our capital structure. As of December 1, 2022, we had debt with a carrying value of $10.27 billion and may incur additional debt, including under our $2.50 billion Revolving Credit Facility. Our debt obligations could adversely impact us as follows:

require us to use a large portion of our cash flow to pay principal and interest on debt, which will reduce the amount of cash flow available to fund our business activities;
adversely impact our credit rating, which could increase future borrowing costs;
limit our future ability to raise funds for capital expenditures, strategic acquisitions or business opportunities, R&D, and other general corporate requirements;
restrict our ability to incur specified indebtedness, create or incur certain liens, and enter into sale-leaseback financing transactions;
increase our vulnerability to adverse economic and industry conditions;
increase our exposure to rising interest rates from variable rate indebtedness; and
result in certain of our debt instruments becoming immediately due and payable or being deemed to be in default if applicable cross default, cross-acceleration and/or similar provisions are triggered.

Our ability to meet our payment obligations under our debt instruments depends on our ability to generate significant cash flows or obtain external financing in the future. This, to some extent, is subject to market, economic, financial, competitive, legislative, and regulatory factors as well as other factors that are beyond our control. There can be no assurance that our business will generate cash flow from operations, or that additional capital will be available to us, in amounts sufficient to enable us to meet our debt payment obligations and to fund other liquidity needs. Additionally, events and circumstances may occur which would cause us to not be able to satisfy applicable draw-down conditions and utilize our Revolving Credit Facility. If we are unable to generate sufficient cash flows to service our debt payment obligations, we may need to refinance or restructure our debt, sell assets, reduce or delay capital investments, or seek to raise additional capital. If we are unable to implement one or more of these alternatives, we may be unable to meet our debt payment obligations, which could have a material adverse effect on our business, results of operations, or financial condition.

mu-20221201_g3.jpg 53

Changes in foreign currency exchange rates could materially adversely affect our business, results of operations, or financial condition.

Across our global operations, significant transactions and balances are denominated in currencies other than the U.S. dollar (our reporting currency), primarily the euro, Malaysian ringgit, Singapore dollar, New Taiwan dollar, and yen. In addition, a significant portion of our manufacturing costs are denominated in foreign currencies. Exchange rates for some of these currencies against the U.S. dollar have been volatile and may be volatile in future periods. If these currencies strengthen against the U.S. dollar, our manufacturing costs could significantly increase. Exchange rates for the U.S. dollar that adversely change against our foreign currency exposures could have a material adverse effect on our business, results of operations, or financial condition.

We are subject to counterparty default risks.


We have numerous arrangements with financial institutions that subject us to counterparty default risks, including cash deposits, investments, capped call contracts on our common stock, and derivative instruments. Additionally, we are subject to counterparty default risk from our customers for amounts receivable from them. As a result, we are subject to the risk that the counterparty to one or more of these arrangements will default on its performance obligations. A counterparty may not comply with theirits contractual commitments which could then lead to theirits defaulting on theirits obligations with little or no notice to us, which could limit our ability to take action to mitigate our exposure. Additionally, our ability to mitigate our exposures may be constrained by the terms of our contractual arrangements or because market conditions prevent us from taking effective action. If one of our counterparties becomes insolvent or files for bankruptcy, our ability to recover any losses suffered as a result of that counterparty'scounterparty’s default may be limited by the liquidity of the counterparty or the applicable laws governing the bankruptcy proceedings. In the event of such default, we could incur significant losses, which could have a material adverse effect on our business, results of operations, or financial condition.



The trading price of our common stock has been and may continue to be volatile.

Our common stock has experienced substantial price volatility in the past and may continue to do so in the future. Additionally, we, the technology industry, and the stock market as a whole have on occasion experienced extreme stock price and volume fluctuations that have affected stock prices in ways that may have been unrelated to the specific operating performance of individual companies. The trading price of our common stock may fluctuate widely due to various factors, including, but not limited to, actual or anticipated fluctuations in our financial condition and operating results, changes in financial forecasts or estimates by us or financial or other market estimates and ratings by securities and other analysts, changes in our capital structure, including issuance of additional debt or equity to the public, interest rate changes, regulatory changes, news regarding our products or products of our competitors, and broad market and industry fluctuations.

For these reasons, investors should not rely on recent or historical trends to predict future trading prices of our common stock, financial condition, results of operations, or cash flows. Investors in our common stock may not realize any return on their investment in us and may lose some or all of their investment. Volatility in the trading price of our common stock could also result in the filing of securities class action litigation matters, which could result in substantial costs and the diversion of management time and resources.

54 |2023 Q1 10-Q

The amount and frequency of our share repurchases may fluctuate, and we cannot guarantee that we will fully consummate our share repurchase authorization, or that it will enhance long-term shareholder value. Share repurchases could also increase the volatility of the trading price of our stock and will diminish our cash reserves.

The amount, timing, and execution of our share repurchases pursuant to our share repurchase authorization may fluctuate based on our operating results, cash flows, and priorities for the use of cash for other purposes. Our expenditures for share repurchases were $2.43 billion in 2022, $1.20 billion in 2021, $176 million in 2020, and $2.66 billion in 2019. These other purposes include, but are not limited to, operational spending, capital spending, acquisitions, and repayment of debt. Other factors, including changes in tax laws, could also impact our share repurchases. Although our Board of Directors has authorized share repurchases of up to $10 billion of our outstanding common stock, the authorization does not obligate us to repurchase any common stock.

We cannot guarantee that our share repurchase authorization will be fully consummated or that it will enhance long-term shareholder value. The repurchase authorization could affect the trading price of our stock and increase volatility, and any announcement of a pause in, or termination of, this program may result in a decrease in the trading price of our stock. In addition, this program will diminish our cash reserves.

There can be no assurance that we will continue to declare cash dividends in any particular amounts or at all.

Our Board of Directors has adopted a dividend policy pursuant to which we currently pay a cash dividend on our common shares on a quarterly basis. The declaration and payment of any dividend is subject to the approval of our Board of Directors and our dividend may be discontinued or reduced at any time. There can be no assurance that we will declare cash dividends in the future in any particular amounts, or at all.

Future dividends, if any, and their timing and amount, may be affected by, among other factors: our financial condition, results of operations, capital requirements, business conditions, debt service obligations, contractual restrictions, industry practice, legal requirements, regulatory constraints, and other factors that our Board of Directors may deem relevant. A reduction in or elimination of our dividend payments could have a negative effect on the trading price of our stock.


mu-20221201_g3.jpg 55

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


During the second quarter ofIn May 2018, we share-settled allannounced that our Board of Directors authorized the discretionary repurchase of up to $10 billion of our remaining 2032Coutstanding common stock through open-market purchases, block trades, privately-negotiated transactions, derivative transactions, and/or pursuant to Rule 10b5-1 trading plans. The repurchase authorization has no expiration date, does not obligate us to acquire any common stock, and 2033E Capped Callsis subject to market conditions and a portionour ongoing determination of our 2032D Capped Calls and received 7,022,506 sharesthe best use of our common stock.available cash.

PeriodTotal number of shares purchasedAverage price paid per shareTotal number of shares purchased as part of publicly announced plans or programs
Approximate dollar value of shares that may yet be purchased under publicly announced plans or programs (in millions)
September 2, 2022— October 6, 20228,577,145 $49.58 8,577,145 
October 7, 2022November 3, 2022— — — 
November 4, 2022December 1, 2022— — — 
8,577,145 $49.58 8,577,145 $3,106
Period (a) Total number of shares purchased (b) Average price paid per share (c) Total number of shares (or units) purchased as part of publicly announced plans or programs (d) Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under publicly announced plans or programs
December 1, 2017January 4, 2018 4,710,314
 $45.68
    
January 5, 2018February 1, 2018 
 
    
February 2, 2018March 1, 2018 2,312,192
 42.47
    
    7,022,506
 44.62
 
  

Shares of common stock withheld as payment of withholding taxes and exercise prices in connection with the vesting or exercise of equity awards are also treated as common stock repurchases. Those withheld shares of common stock are not considered common stock repurchasesrequired to be disclosed under an authorized common stock repurchase planItem 703 of Regulation S-K and accordingly are excluded from the amounts in the table above.




56 |2023 Q1 10-Q

ITEM 6. ExhibitsEXHIBITS

Exhibit NumberDescription of ExhibitFiled HerewithFormPeriod EndingExhibit/ AppendixFiling Date
4.18-K10/31/224.210/31/22
4.28-K10/31/224.310/31/22
10.1*X
10.2*X
10.3*X
10.4X
31.1X
31.2X
32.1X
32.2X
101.INSInline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL documentX
101.SCHInline XBRL Taxonomy Extension Schema DocumentX
101.CALInline XBRL Taxonomy Extension Calculation Linkbase DocumentX
101.DEFInline XBRL Taxonomy Extension Definition Linkbase DocumentX
101.LABInline XBRL Taxonomy Extension Label Linkbase DocumentX
101.PREInline XBRL Taxonomy Extension Presentation Linkbase DocumentX
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)X
* Indicates management contract or compensatory plan or arrangement.


mu-20221201_g3.jpg 57
Exhibit NumberDescription of ExhibitFiled HerewithFormPeriod EndingExhibit/ AppendixFiling Date
3.1 8-K 99.21/26/15
3.2 8-K 99.14/15/14
10.1 DEF 14A B12/7/2017
10.75 DEF 14A A12/7/2017
10.76ü    
31.1ü    
31.2ü    
32.1ü    
32.2ü    
101.INSXBRL Instance Documentü    
101.SCHXBRL Taxonomy Extension Schema Documentü    
101.CALXBRL Taxonomy Extension Calculation Linkbase Documentü    
101.DEFXBRL Taxonomy Extension Definition Linkbase Documentü    
101.LABXBRL Taxonomy Extension Label Linkbase Documentü    
101.PREXBRL Taxonomy Extension Presentation Linkbase Documentü    


SIGNATURES



SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrantRegistrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Micron Technology, Inc.
(Registrant)
Date:March 23, 2018December 22, 2022By:/s/ David A. ZinsnerMark Murphy
David A. Zinsner
Senior
Mark Murphy
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Scott Allen
Scott Allen
Corporate Vice President and Chief Accounting Officer
(Principal Accounting Officer)


48
58 |2023 Q1 10-Q