MU - Earnings call transcript Q1 2020 | Micron Technology, Inc.

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Operator

Thank you, ladies and gentlemen, and thank you for standing by. Welcome to Micron Technology's First Quarter 2020 Financial Conference Call. [Operator Instructions]

I would now like to hand the conference over to your host, Head of Investor Relations, Farhan Ahmad. Sir, please go ahead.

Farhan Ahmad

to first welcome financial quarter and call. conference you Micron fiscal Technology's XXXX Thank

with are me and call the On today Dave Chief CEO; Sanjay Zinsner, Financial Officer. and President Mehrotra,

length. be XX and will is webcast at Relations being our also including investors.micron.com. call Today's slides, minutes in the This approximately audio Investor website from call

In prepared short a remarks website while the press earnings contains our filed addition, release the and ago.

reconciliation unless of will be to presented a otherwise of specified. may discussion basis A a convertible measures our financial results financial call debt Today's on and website, GAAP with non-GAAP non-GAAP on found capped financial be table. dilution along

As later a will be a replay today. available on webcast our website reminder,

current to We including monitor various conferences on company, our financial encourage the the information the we you most attending. on will information be that micron.com the at throughout website quarter for

MicronTech. on follow us You Twitter can at

uncertainties forward-looking results statements. As subject to a include results. today reminder, refer forward-looking most and you may the discussing our file the may we with matters statements from to risks statements are be for differ materially our will that cause documents discussion the specifically These that we risks to affect future We and of Form SEC, a XX-K recent today. XX-Q, made actual

that we expectations Although cannot we of believe forward-looking performance, reasonable, the achievements. or the guarantee reflected levels statements are in activity, future results,

duty conform no any statements of update under to to these statements to are actual today's We the date forward-looking after results.

turn now I'll call over the Sanjay. to

Sanjay Mehrotra

Good Farhan. afternoon. you. Thank

free and our fiscal we good challenging environment, to off delivered flow, XXXX. in a strengthened positive Despite maintained is solid a portfolio. our Micron start product profitability, industry cash

both our calendar will give which the we balance that second of fiscal fiscal us business trends NAND. in half quarter expect with for continues Recent our and recovery third demand performance, DRAM XXXX. supply second improving continued financial start to to quarter, in bottom optimism our improve the our mark in Industry in

customer enhance results. solutions, increase structure to engagement, Our strategy cost is producing and our high-value improve

poised We long structurally shareholder improved as position, value are drive to our and improve. profitability, have term materially conditions competitive strengthened our industry

fiscal in bits. solutions approximately of NAND High-value XX% accounted XXXX for

figure to remain grow of NAND fiscal it XX% profitability fiscal our of bits our for track in for we on improvement XXXX, tailwind the in high-value volatility margins. NAND We to as This over to our drive us and bits XXXX. an solutions is expect this two-thirds mix and reduces improves important our sold into

these economy. products website, we greater our a At new the our transformation data in Insight keynote, October, for Micron's for Micron Insight I vision Sumit you and integration highlight articulated will detail. two on event differentiated through available to vertical of view more Sadana's encourage for and

any better from an technology the will needs unique FWDNXT's framework and customers' called to First, combined possible Micron technology, the company help advanced we The AI inference. ecosystem. address and FWDNXT evolving acquisition learn network small is with that in into announced FWDNXT. hardware when our Accelerator, in important neural deploy us for portfolio software of Learning it edge makes devices memory, models Deep a capability

conference was we XPoint fastest including SSD, our any team. also the built launched Microsoft's The are is it XD their storage NAND those which XXXX, at XPoint world's with Insight, showcased than and by other SSD At XXXX first or the faster Azure dramatically that Micron proud we XD is device. Ignite product, technology,

CapEx. right-size as the acquisition optimize Redeploying relocating stake of our joint in other Micron Micron's equipment on will the manufacturing help IMFT We front-end sites Intel's closed we we plan and also fab. Lehi employees to October, us certain In equipment venture. equipment

any with As

applications. XPoint product scale excited to XD and and for and about the potential it we up will portfolio, storage our revenues, XPoint long-term technology, are margins, of XD ramp achieve both innovative time memory take healthy

customers. world As a DRAM, differentiated and unique for company a to position XD are our we the develop of in products in with XPoint only the technologies, NAND, portfolio

and I business. the fastest of will any technology now ramp to XZ product LPX In uMCP revenue mobile DRAM-based history manufacturing turn of our operations. DRAM, in industry-leading had the our

production mix XXXX, second be XZ cost Our throughout of the on and will half DRAM toward skewed increase will reductions FYXXXX.

announced Taiwan cleanroom XXXX. Our is previously we is expansion cleanroom on in and track, output expansion This calendar in expect EUVcapable.

immersion shows continue for proprietary technologies. with Micron's to technology our economics assessment node evaluate production, utilizing EUV current X superior While multi-patterning deployment advanced DRAM in technology gamma through we along

We so. on and do becomes EUV productivity it deploy cost be when are encouraged effective progress industry recent EUV to by will prepared to

In and to production XXXX. on RG gate on fiscal second node of half our first-generation XXX-layer, begin make NAND, the progress are our transition replacement we continuing expect to in

a limited in this cost XXXX. deployed node expect be for As NAND products, a of and minimal fiscal set we reminder, will reduction

cost of as It will targeted under provide XXXX will NAND reduction second-generation well ramps. it leverage an fiscal broader in for as which will RG be RG followed node in higher-layer-count, robust begin to by introduction array, a QLC. as our technology node CMOS leadership second-generation This implementation, the more a

and across customers. SSDs turning was first rates pricing trends and Attach fiscal from and shortages In by continued SSDs quarter. have for industry, consumer capacities products demand increase across the There in improving. to markets. SSDs, strong for and Now highlights are to client our are customers data supply center

progress on strong our transition We to NVMe. making are

XXXX. will have us second SSD bit almost positions we fiscal represented fiscal of gain bits three-quarters client fiscal NVMe our in shipments to of SSDs As in none year market virtually for NVMe all which QX, versus client SSD ago. share quarter, segments, a

NVMe previously our market, announced SSD quarter-over-quarter, XX-layer we center center data nearly SSD. the NVMe In mainstream a of tripled and data announced high-performance sales

SATA maximize While by proposition in ramping qualifications our SATA value NAND XX-layer We center the growing our on multiple data market SSD. NVMe, achieved for continue presence our we to XX-layer OEMs products. with

to Our gain continues QLC technology traction.

market. have We SSD. consumer second-generation ship consumer SSDs SATA the became the in markets, production to SATA as XX-layer, center QLC SSDs first in SSDs volume NVME as company the QLC consumer We for data well for a and

DRAM our DRAM-based LPX XX% MCP market the bits revenue In uMCP increased grew mobile at approximately achieved earlier. our MCP I qualification FXQ share driving XZ mobile, fiscal and approximately leading-edge fastest and NAND multiple product ramp, year-over-year. OEMs, XX% quarter-over-quarter, In mentioned QX,

that and We and unit will feature are date significantly of a $XXX well as to encouraged X be content The that higher price gigabyte of DRAM. smartphone to today. see phones NAND, than XXX memory XG in launched are points the as minimum sales, as storage for launch positive X affordable growth, and both gigabyte of of average DRAM gigabyte with as XG content average phones low confident XG the of smartphones

DRAM to drive for positioned well preference efficiency this continues customer we and our in products, on Our power leadership remain market.

become important We LPX which XG in volume and as begins highest-bandwidth that XXXX more have accelerates. adoption the this quarter, expect product will we lowest-power production

which data high-quality, strong industrywide for In high-density an modules, creating incremental our shortage in are server demand DRAM the center, half demand of customers. from is seeing XXXX second calendar we of

New CPU architectures are enterprise we content supporting number higher-density saw fiscal customers. strong in and cloud channels increased strong In chips servers. QX, of driving growth demand and DRAM growth from

calendar XX well strong bit and gaming shipments we graphics benefit shipments next-generation seasonal QX, cards from showing In to positioned weakness growth, consoles. gaming graphics, GDDRX by XXXX. our GDDRX are offset began gigabit of with fiscal the new PC of in remained consoles In second in launch per stable

demand in will of applications. graphics in The these robust of first drive new SSDs across the deploy these of for continues hard will high-volume consoles launch multi-year replacing hard and time. a memory, consoles drives place This trend gaming drives SSDs more

for growth XXXX. continued shipments PC cautious seem shortages, fiscal market, bit the at PC quarter the to In in which trend calendar near-term due first continue Nevertheless, outlook reported are likely we our to early segment into the last quarter. from least CPU on

sluggish revenue by growth auto storage and growth. quarter-over-quarter saw sales, In we driven secular worldwide automotive, memory content despite

Our growth is leadership DRAM in market. this in also us low-power for driving

first shipped BGA needs industry-leading we which increasing form quarter, automotive in SSD factor storage features. well-suited and first the is NVMe applications, and to performance autonomous fiscal offers service qualified small of for In a industry's capacity and the

Now our outlook. turning to market

the that macroeconomic environment no on our are conditions demand assumption base-case trade-related to assumes due or all Our based, are perturbations developments. which there to projections

XXXX, has shortages bit DRAM, been strong has than in the XX%. stronger us. This resulted of calendar recovery In our XXXX there growth approximately has for calendar and half of pockets to second of demand industry demand increased expected a in view

continue meet our We not price to objectives. do exercise discipline away from and that requests price walk

these actions business While revenue, impact improving mix our short-term long-term our may will profitability. enhance

by recent DRAM demand trends encouraged are improving We balance about are calendar optimistic throughout supply pricing XXXX. and

demand calendar a of of expect to portion China, discussed strength calendar in this normalize the of in on the be sometime attributable last XXXX second we some to and we may XXXX. in inventory half in builds inventory call, customer our As

outlook, be to is we in lower year-over-year, mid-teens expect due demand somewhat XXXX calendar our calendar a than in bit result, DRAM to percent industry XXXX. growth demand prior stronger range which the As

supply XXXX CapEx calendar We to to growth than somewhat growth expect for industry bit be bit demand industry due the as reductions. decelerates supply industry less

target bit XXXX, will mid-teens, the supply CAGR above calendar our bit long-term growth close teens. expected our growth than supply demand to supply growth mid-to-high industry bit continue industry supply industry's to and in supply bit our be CAGR We the growth XXXX of to to long-term be growth. is In be of growth bit slightly less

XXs XXs calendar industry XXXX, percent in range demand low our bit XXXX. in growth expectation range in NAND, to is calendar Turning the high mid-XX% and to

industry XXXX as to to supply reductions, than the bit we demand environment calendar XXXX. a industry be calendar lower expect and bit of We result through consequently, expect CapEx industry industry improve

supply and be XXXX meaningfully calendar is the industry. growth Micron's growth bit will below bit in below in to likely XXXX of industry that NAND demand calendar slightly be

to during However, generation growth our as first in demand RG we ship XXXX industry bit we transition. growth our our shipment close be inventory bit NAND to of expect the calendar

with demand go of multi-year XX%. we we through transition industry's expect the CAGR approximately gate, our replacement line in supply the to to As be growth CAGR

it provide on wanted turn I update an over Huawei. our I with to to business Dave, Before

to disclosed, Regulations products, recently previously server to Huawei subject to that are applied for Huawei's us ship requested and products provide are to and restrictions. mobile we As We that for, new not some well for these List licenses businesses. enable all as as support Entity and Administration continuing Export qualify received, products

products the United States, small which licenses ship to manufacture restricted in we sales. a previously represent these our of portion Additionally, that us very allow

markets server to of sell there and that outside mobile we However, the still some Huawei. to unable are are products

the thankful Prior these new is at and restrictions List to licenses, Receiving Huawei. for administration are ability our these limited a Entity to severely receiving we U.S. the qualify licenses positive to approving licenses. development, products

couple with Although, we on these of expect quarters. not mobile licenses contribute to server next time are it new to material impact will completed qualify are have we before the to take and do revenue able some and Huawei's qualifications products Consequently, now businesses, in revenue. our the a

Dave I'll now to results financial turn over and it guidance. provide to our

David Zinsner

Sanjay. Thanks

results market were expectations consistent stabilize. our to largely FQX Micron's with as conditions continued

saw DRAM the from NAND. in price declines During quarter, and decelerated pricing quarters, we improvements recent

revenues company quarter, in and program, total cash strengthened inventory terms. declined and absolute made share sequentially, sheet. our We balance grew the generated our progress further on during our positive flow repurchase Total free

call today's these classified years all to revenues DRAM on in revenues and MCP results reporting SSD NAND NAND that change life the five previous and in depreciable previously The from to announced now disaggregates as which reflect from a seven view our NAND. years, and revenue, into our changes disclosures,

DRAM billion, growth comparison. up revenue. revenue FQX $X.X an figures for apples-to-apples X% approximately NAND historical use sequentially and DRAM was XX% $X.X following of was revenues revenue total restated and XX% Revenue FQX year-over-year. representing down billion. was Total The

shipments sequentially declined the in $XXX the DRAM year-on-year and included approximately basis and revenues revenue and mid-XX% on were sequentially upper-single-digit million DRAM SSDs. Bit of XX% grew X% percent a in range. year-on-year. revenues declined MCPs from up increased sequentially. ASP range XX%

FQX percent Revenue mid-teen NAND in the declined billion, sequentially. revenue grew and year-on-year. range total XX% was of or sequentially XX% XX% in low-single year-on-year. in approximately sequentially the was up mid-XX% Bit range $X.X shipments and digits revenue. increased ASPs the

sequential by $X Business and X% Now increase higher increase down ASP turning The was was our moderating XX% and and billion, approximately of to Networking revenue declines. the Compute for unit. driven Unit trends sequentially an Revenue business by volumes year-over-year.

the approximately XX% $X.X year-over-year. MCP billion, revenues Business Revenue in driven sequential bits. Mobile and for by Unit up growth X% DRAM grew was and strongly sequentially during XX% down quarter NAND the

revenue Revenue from Sequential driven of Unit growth and was in and increases. an XX% for volume FQX FQX increase year-over-year. million, by the Storage $XXX down was SSD XX% growth Business ASP

million, driven $XXX the FQX was Unit Business growth. Embedded prior from the for revenue Sequential from Finally, and XX% market X% by growth automotive due year. revenue was up the content to down mostly

but gross in last slightly FQX XX.X%, slightly for consolidated our included point This are volumes charges quarter's production Lehi margins negative $XXX of on The ramp million we expected midpoint to or FQX FQX guided above higher to due decline. charges was margin the Fab. the to underutilization as call, impact approximately better gross guidance. XXX-basis a than in at came underutilization approximately

expect half first to in We average of the underutilization $XXX still the charges XXXX. per quarter million fiscal

reduce XXXX implemented. coming charges We reduce Fab, are as as to have should ramp action products XPoint production fiscal begin Lehi our XD the mitigated spending these over taken to own in Ultimately, our underutilization will charges actions which be these the in years. into

we incurred expenses than to products. higher Operating R&D expenses were qualify $XXX usual million as new

of for our We qualification to product of to operate fiscal as expect expand the portfolio. expenses remainder XXXX continue at we higher levels

for the year. a we As operating now to expenses billion expect $X.X fiscal approximately result, be

remain business expenses prudently We continue operating and other should flexible, warrant. control to conditions all

million, was XX% down points from of income representing percentage percentage revenue. was points Operating and margin FQX. operating $XXX year-over-year XX X FQX down

rate Our tax FQX was effective X.X%.

tax to $X.XX quarter. fiscal Non-GAAP the We of earnings FQX be the and down year. in in X% $X.XX approximately expect $X.XX FQX remainder our for from were share rate year-ago in the per

spending, representing XX% flows in from we of revenue. billion cash capital and in to $X cash Turning FQX, generated operations

down the from net spending During billion, was capital quarter, prior the $X in $X.X billion approximately quarter. approximately

$X FY range to billion are target of continuing $X 'XX the billion. in CapEx We to

free FQX billion of $XXX compared $XX last $X.X We cash approximately adjusted generated the million and quarter, year-ago flow quarter. million to in in approximately

shares we FQX, million. for In million X.X $XX repurchased

convertible $XXX million share cash diluted from to million count. note removing shares In fully redemptions in the quarter of settle X deployed approximately approximately addition, our we

We will deploying of XX% annual continue our least to target toward cash flow at repurchases. free

the Inventory inventory slightly $X.X billion, XXX, at ended $X.X FQX. at billion of of was Days end down XXX down FQX. in from days the quarter from

approximately Over our have by declined two inventory the quarters, days last XX%.

fiscal for then We days QX reduce to to of in increase begin and due expect remainder seasonality inventory to the again year. the

total closing the was of total nearly slightly FQX venture. $X.X acquisition quarter down approximately with FQX We joint of quarter. We ending billion, cash $XX Intel's prior in debt and from IMFT $X.X billion $X.X in the ended stake the total liquidity deployed of the billion. fund liquidity of billion our to of

of member offset In addition was cash to our debt, principal loan by the approximately retire the IMFT's hand fund we the term million used $XXX retirement high-yield of facility in partially on This of to acquisition. debt. draw-down to IMFT

we net all is rating S&P sheet remain of to as balance to investment cash strong grade. Our cash rating billion, credit a committed net now and and very Last maintaining with $X.X agencies rate position. month, Micron's three credit upgraded grade, investment Micron's

to turning financial our outlook. Now

mentioned, quarter environment not our throughout is demand. industry. trade-related will seasonally that outlook the for quarter the the macroeconomic earnings second our impact commentary issues Sanjay As weakest and Micron's fiscal assumes

and opportunity our reduce continue where We business discipline pricing not exercise business meet our to does quarter. limits customers and within at pricing this the objectives,

are modest. and our going reductions Lehi to likely our costs remain underutilization are Additionally, tightness limiting step shipments, to cost in are supply of FQX pockets bit up,

recent are as reductions mix our will pricing, and market FQX better bottom and XXXX. of of the encouraged rest gross cost increasing gross trends and expect throughout by margins, However, margins be drive that fiscal high-value of we calendar the solutions,

We expect to in a half year. to of gradual the and seasonally recovery stronger into continue calendar second FQX, start

in QX as that for fiscal is non-GAAP mind, follows. With our guidance

the or of range XXX diluted $X.XX. expect zero. expenses be $X.X of is be Interest expected operating and minus to billion, other shares, be or be a of be plus billion revenue EPS plus gross count billion approximately in basis the to minus Based expect we range approximately $X.X approximately $X.XX, margin to million, on points, $XX We fully minus $XXX in to share to million. and to plus income XX% X.XX or

financial cross-cycle solid indeed that sheet will XXXX. As New better higher cycle, quarter and of profitability. the is and prior the third the revenue with higher percentage we our fiscal growth Micron points XX% lows approach at structurally stronger, in X guidance, of trough and revenue in midpoint in investment-grade occurred this which QX higher the than balance Micron's gross the performance fiscal trough, margins demonstrate be and

over I'll now the remarks. Sanjay closing turn for call to

Sanjay Mehrotra

Thank Dave. you,

fundamentally before, and ever to value provide industry that intensity in more variety than to solutions. to entering growth Micron and Micron a and both transformed. are is diversified Supply stronger drivers structurally end of slowing innovate rising capital is as XXXX in markets due the in customers. new Demand is an This moderating industry Moore's of storage change for company, the and in memory creates differentiated opportunities dynamics Law.

driven accelerate cases, diversification. proliferate pace, communication an at use connected Nascent will new of usher brisk beginning applications in to of are age billions this Cloud and and networks growth devices. by to machine-to-machine with further continues a promise XG just true

learning, trends further expand aspect AI, autonomous in and of machine And technologies just a memory are over driving even horizon, every potential this the and will storage. growth little secular These and more. human life transforming

outstanding product and portfolio, put structure, us team talented on value. in opportunities position shareholder an capitalize of cost long-term create enhanced and wealth the ahead to improved Micron's

now will questions. for open We

Operator

[Operator question from line comes Srini Instructions] first the Pajjuri Our SMBC of of Nikko.

line is open. Your

Srini Pajjuri

just up quarter. please I'm talked follow-up. have guess Sanjay, one the supply I could the shortages, hand, on as other shortages on going questions. that were first some talking elaborate we you a you because inventories into of about couple you about, head to are on going the the hand, a next

Sanjay Mehrotra

as high-density high-quality, solid. modules to fast demand Dave trends have for leading-edge we DRAM strong here, we said earnings servers, down call in we seen as out. we pointed fairly inventory well last on brought as shortages And continued DRAM this our certain pretty as well as in have on nodes. in inventory you the have demand down overall be time that So in have as growth And

are DRAM by leading-edge qualified on on on NAND we products, the XX-layer expand and we have shortages nodes SSD customers. And demand growing side, portfolio as up substantially. the So the our being

on seeing mentioned, node, seeing some shortages experienced constraints strong XX-layer of course, and as are back-end some demand are our we we actually as We where we well.

assembly as by capacity Mobile have test SSD assembly largely eliminated, our - and on as fiscal expansion. second test and - We constraints in of impacting multi-die back-end and of solutions. test invested capacity, The solutions that's issues the be stack some end we'll quarter. And will the well assembly

of the again things some of these trends the the be both on some side. to So demand continue solid. the in and that NAND And are impacting, are DRAM shortages,

Of see may go our some course in fiscal of QX. at CQX, we yes, inventory end And seasonality. the of up

well. But that's normal as, know more around days and coming take well is inventory from increasing toward days, shift we high overall packages, - as assembly is really look of value solutions, multi-chip times more SSDs, XXX technology our as around, as nodes, function a we you as and ahead test longer complexity the they

So future, approximately the when some ones that days those of foresee in inventory of are that are we to XXX days. of at the look it as we contributing aspects the

terms we pockets industry certainly across ahead all we environment the XXXX, well. demand experiencing are is are the trends in improving industry, industry, about industry of be optimistic as pricing building look to you So shortage pricing as of in trends the overall continues solid, in that. And the at

Operator

question the line next comes Our from Pitzer of John of Credit Instructions] Suisse. [Operator

line is Your open.

John Pitzer

results. Congratulations the on solid

year. this about a wanted the fiscal So, for CapEx bit Sanjay, guidance to I little talk

my demand have get of gate, the this double-digit generation NAND way some strategy to especially I kind here DRAM of about how and your replacement to leeway around curious we a industry of DRAM you the that growth. rather are weight in and But than more cost moving I node I'm of stronger expected, of ability think de in were at guess XX%, as the as thought mix we'd to on just beginning that us than to I is, where think kind downs X.X. strategy, lucky grow the think year, came with you year, be specifically of given much, minimis DRAM spending to much toward And growth? low kind do the there How and keep first do about leading-edge the kind of bits Version understand question shrinking? up to from bit your CapEx of constrained

Sanjay Mehrotra

our move example, ramping that we DRAM node the our mobile quarter. where leading-edge as during Certainly mentioned nodes, we products with through XZ, to did we XZ for well very production DRAM in

us those and It growth. capability So of the way comes give course bit the technology best with ROI achieve shrink transitions to well. a are as

that with CAGR. to terms supply we as aligned our prudent growth are disciplined our long-term bit CAGR growth that is, well bit have make and to managing want growth of industry What's of we sure demand with and supply bit to is aligned it's our extremely important being as our demand objective the growth in be

we that our growth in have growth DRAM supply growth But growth. be industry supply the fiscal year with all industry somewhat the We in we year be growth in to below somewhat our our and is above supply - XXXX, calendar CAGR the demand supply in see mentioned to supply CAGR. all, aligned XXXX, industry our strategy XXXX, growth to

We some position, terms look good at for terms revenue the business we yes, these believe well to manage mean will when best leading-nodes, at we of and running on helps supply, XXXX of continue as that experiencing in I of that's the as the a it frankly ahead us shortages profitability. and overall you in - as very good And are certain be about, our shortages well industry, because calendar feel XXXX, we timeframe. of in year place business, the in and mix

Operator

Muse Our from Evercore. comes C.J. of question next

Your is open. line

C.J. Muse

on question a DRAM guess demand the side. I

you you cloud You're kind think much and conservatism I sorry, are part? in assumptions continued XXXX? I am that potential what to handsets Thank your that, pulling of for through outlining China an on within about potential relates guess, of as you. spending that, - outlook demand, how And mid-teens number, around growth of XXXX. XX making curious XG

Sanjay Mehrotra

a be will XG certainly driver. growth So

as cloud more of providers, be half a memory above continues Cloud into to handset cloud meaningful toward from the average the seen various CapEx percentage, weighted a major to the to smartphones have portion you cloud CapEx above calendar drive and goes of continues total DRAM the industry the healthy, industry. We that which average average reports be demand - as CapEx the year. is expect and of storage, second XG

the And I XG continues our note to phones important mentioned it's XG content as in think a content is step-level XG course, of on I NAND. And driving XXXX, to content phones, you XXX function increase that grow estimation grow, in continues of average but to to both approximately be are DRAM mean script. as our we calendar of basis. phones well smartphones a in million year XG sold as that global

at estimate we growth XXXX, keep industry came - our overall, the is mid-teens we that fact the that So where calendar demand industry in second look in have XXXX. demand XXXX, upped and upon approximately in to mind strong of building year demand of projected quite industry we in year for XX% calendar demand for when half

off you So the percentage shipments larger we working in large demand, are bit look on for XXXX, impact expected obviously has and at that total a an that XXXX. than previously

as and and and for terms in And in the balance demand, tailwind a continues pretty But said, that supply look XXXX of a of industry. industry was the terms headwind well. solid demand for supply aggregate we demand of be at XXXX, to we bit as XXXX in as

Operator

of Securities. Rakers Aaron Wells from comes question Fargo next Our

open. Your is line

Aaron Rakers

Have as in that Thank this you're how have you're you're but to looking just you. you that the also fab expenditure evaluating. years? but year think but about, I front, noting on you potentially of you've CapEx, And obviously at - that it EUV? of X through guys of not the reiterated guess the out it, I talked thoughts Taiwan do kind capable is talked you that pulled necessarily about all about node, you EUV. into know gamma suggests EUV capital the are context fab, that the looking CapEx, on don't something your we need subsequent that on

Sanjay Mehrotra

we So technology. point evaluating year frame been beyond not at said, time for our But guidance have CapEx. this have terms providing we're EUV we XXXX any of as in always fiscal

And we technology starting node. in in gamma roadmap node, evaluated production course you have with that XZ DRAM. noted, XY have we are said carefully We production for and X now with EUV volume as determining our through also through today production of - XZ terms of of node,

So roadmap to highly at and cost in X XZ, technology a next objectives will generations of from with our we having and X the along us. well see few X as multi-patterning achieving us beta generations, through terms immersion ahead look XY techniques of gamma we for serve cost alpha, that competitive

So we and deployment said for also in we appropriate to have production. that it continue then see we evaluate DRAM EUV, our

be technology it In of a seeing in be production, to we deploying improvement X terms while position, of our strong node encouraged roadmap see certainly productivity tool EUV we in as at gamma future cost remain and efficiency will at through in time that, the but this we well. point,

growth, that's And CapEx we'll keeping future. competitiveness we as our with you But growth it. aligned I for function supply of time said as obviously a always future we'll a manage as demand how manage CAGR, supply those cost previously, our technology function years, in of well and the share regarding and it details as with will at expectations appropriate

Operator

Our Mark next from of Delaney Goldman question comes Sachs.

open. is line Your

Mark Delaney

which nice in quarter. days that in So its understand - own and just completed come better on the to see the commentary to inventory, dollars down company's

gets some commentary, can you, inventory DRAM I - that some more used of the as think older you bit nodes, carrying I aggregate year, of but these as think understood of when a the because inventory, specific, about extra you the your you company through move think, do up? You has been

that? XXX the be we for and is Sanjay, more thinking Thanks. inventory be given above gate Should the for And normal comment a inventory? the replacement when inventory, longer inventory that company to about carrying this gate term extra carry year XXX, replacement days, the node. running it's being that NAND year, you of going this level you as is something than because talk is to allow some a of extra XXX lower or about is Just that really

David Zinsner

question. Yes, that's good a

So, a first. at and I'll that try take crack

So yeah, of optimal excess the we comment as level normalize. and gate kind of around all XXX worked the inventories off have of inventory when transition is an days with associated the replacement inventory

inventory days Obviously, DRAM it below than virtue strategy robust transition today, that, replacement bit inventory the growth bit is will are that higher augment first of that from a as that, hold what quite be in to of is go XXX we really a our a to this to we have bit gate is up a pulls the lot fact on what that that NAND executing XXX by we node. of into a

gate bit challenges as to mentioned, and a we of forth trending this utilize NAND do the start transition few created - we of front. we second because seasonality. and expect inventory on mix Sanjay of success a so for bit also start administer would down replacement inventory excess quarters, little partly in start to expect the But on of quarter, to the - then it next up As this have DRAM digest spill and mix we days that based over as go the the to

couple healthy a pretty of within we So, be in place should DRAM quarters. on

Operator

Our Srivastava of comes Capital Markets. from question next BMO Ambrish

open. line is Your

Ambrish Srivastava

for to marking about you you're be power bit second is loaded, back to downturn fundamentals. well? positive front-end flow. And so second to see fiscal the quarter going making get as flow the quarter that little Good just in a be I to cash with comment bottom free through the positive to CapEx this fiscal wanted the seems Sanjay, cash free

David Zinsner

of bit our too. is take why little have is want priority because coming a terms which that value new R&D be I'll factor the investments, one increase the big appropriate terms put products, So an operating the start performance of the expenses, will company with, in in years. of to products right make that of would we of the and a investment the in to both crack level first ultimately level maybe high I particularly had say, we do that in to solution over at

of make terms that the investments make are, growth right CapEx the level obviously mentioned, node make we sure to supply appropriate addition, And to to we to in in investing and manage transitions. these as Sanjay level want

our is from every over multiple it ideally be to flow cash confident be to strong. or consistent in operations second quarter really is what cash very would flow generate quarter. cash we - was Secondarily, free good of say I - goal free that, is and course, generate the over would going about to flow it feel pretty

goes. even a drive And bit flow negative again we're positive, capital or roughly going cash that investment investment be go level but more be the slightly the around appropriate of we it to make free will little appropriate flow CapEx potentially to where and could free make cash or zero let what's

though, just of terms perspective, was flow to I billion, in put in cash this free would trough negative $X.X XXXX, say, the of quarter believe. I

indication of, of if that's course how flow whatever for cost massively this so, a have you And cash of from business perspective flow an be that a the quarter, perspective. from and competitive structurally cash to second end of the an in we or and generation compare improved we will doing example up better terms

trade this remainder year into if track we event fiscal into is our turn to and cash any flow Sanjay the the free the next positively sort to the or out as indeed, be would and macro event, does expect bottom, And - more of the year. of through expectation barring fiscal indicated

positive free this years for in the significantly Micron's good flow pretty course consecutive So cash done actually been positive, company, never terms free will year has of be be history. which year four That'll flow. a in cash of of

ideally, positive in of we're clearly, the right to every not free terms cash positive, that for on to the but or quarter track again, like have, may quarter, we'd flow happen be generating may company. this So

Operator

next Sur Our question of comes from Harlan JPMorgan.

Your line is open.

Harlan Sur

your seen views channel And some to this but typically quarters. near-term strong here. reacceleration a the that cloud OEMs. the on, And duration by excess in get DRAM We've four it seeing cloud worked and three about up wanted segment strong hyperscale server is builds been appears the to spending spending, Asia cycle in also inventories have

data So, the smartphones first remaining the server period fairly and and weaker even do PCs next for you in a year, part strong? center seasonally see demand in of

Sanjay Mehrotra

Yes.

see center cloud data we ahead, we particularly to within demand As do server and strong. be look

from well strong growth and certainly cloud We have that as. our had, FQX, through in XXXX we see mentioned as we as happening

in are in shortage actually mentioned, we high-densities the industry. As

content for that increasing trend channels, and is And attach it more which as more of density it. the introduced CPUs increasing the more need get workloads, storage really rate about server memory is with higher as all for and AI of memory can work have DRAM as well

actually DRAMs than growth the level average continuing for server. all are the higher that of So these point to industry and cloud in trend

average memory in memory strong the and is And said, seeing we in terms storage you industry. of and SSD these in always the long-term have NAND, thing demand as these well clouds and driving And data on enterprise in for are center as of front, applications, these applications average applications increase. this greater hence usage is critical and driver the in continues growth that same value And continuing end-market to storage segments. cloud flash and the on density

challenging out, just weaker the demand space I'd because like was this And the that inventory important to in to of end even DRAM to point to half to the meet the the were first the particularly and of even while XXXX, consumption up be suppliers had but it's using periods in the year, customers, in consumption, end NAND that in they healthy. XXXX understand continued that

DRAM consoles, out greater driving driver growth smartphones, in of look but ahead, discussed, applications. those growth industry, new to drive that, automotive strong also greater we a as in well as content, HDD be are gaming consoles graphics, I we gaming want to content as just will continuing previously content replacement SSDs as point this with And there, applications, the

has and the always there, think environment intact. that look industry in has the industry pieces that demand strong I So, to has forward our for XXXX. been drivers our been demand good much And we very drivers

Operator

from Our David Wong of Instinet. next comes question

is line open. Your

David Wong

proportion be bit you will do technology? XXXX? expect Could XZ And what are bits cost And XZ calendar compared per of between the differences the what's XY? you to currently end on tell on DRAM us of what on XZ by technology

Sanjay Mehrotra

or cross provide plus the we from XY over to before, bit we by bit said XZ with have node. expect one don't respect means, we XXXX. production and combined That that other combined node versus details by to of our XZ summer XZ as XXXX. our So But summer bit XY to XY production total cost of crossover with

fastest XZ mobile And mentioned, we of the of prepared in my our saw in mobile as history node presence. as well fact ramp doing in remarks, I we we in XZ, with and mentioned products, the our are

Operator

next Our Joe comes Moore from question Stanley. of Morgan

please. question, Your

Joe Moore

Is related? of be wanted help about Can of talked to about. about anyway would that reasons, kind ability a pull-in? the it concern the And is build you. more ask the the tariff us Thank you procure? I reason for talk bit you kind about you it the China helpful. inventory understand magnitude What's can to

Sanjay Mehrotra

that deal the trade have and we before, of lack compared to buying a some perhaps X longer-term normal terms But encouraging above the to customers China is strategy attribute U.S./China clarity. And longer-term is definitely some we mentioned still the the is procuring was China of of inventory, ongoing Phase we and U.S./China pattern in As shifting past to, happening. that some have because carrying we tensions, there trade saw that seen. to that of more aspects, for see, of while perhaps in

question that course China are important Year can higher is the most is the is that role play I typical years, the strategy toward levels would of inventory. well, So Chinese reason. this Year thing that, no is the but Chinese demand underlying year in earlier New compared demand, a their China to there strong. drivers perhaps, New have shifted an that important as carrying some customers of There say perhaps of that, is

is across continues and smartphone and to to growth, the we in and DRAM perhaps look happening smartphones contents certainly XG talked that's NAND significant And the increase, quantities driver when both China in at by XG all be ones have about, largest globe, including planned the sold, the in side sold certainly on manufacturers, you first. as China phones - a are content

as I the important think So all most demand underlying well. are of these trends, here thing

Operator

Our next Blayne Curtis from question of comes Barclays.

question, Your please.

Blayne Curtis

just of said kind get on question, a in anything I'm it'll moderation back follow 'XX numbers. the Maybe of you take expecting that you for curious, to Joe's Huawei just embedding you following terms to any just I'm curious, signs have China, Are of couple Sanjay, some And kind from calendar quarters the of on yet? point, of in that you're have? seen outlook you

Sanjay Mehrotra

the quite expecting... of didn't last I sorry, I'm question, part get the

Blayne Curtis

some moderation just expecting an question, Joe's will that point? at inventory Following expect Or after have you're build, you it you yet? on seen happen is something some

Sanjay Mehrotra

year be What customers of growth some China we demand year thinking than in consumed the in baked what that of we said build, calendar inventory our in that that terms XXXX. of those is be with calendar have course have the seen at baked industry will be this XXXX, over inventory in of some lower levels will that point may and that we in estimation customers we may we the have of

platforms qualified look with And qualifications. new new resume is couple new take received product we to that qualifications work you now months, mobile this product work as as the with to your they a respect can able get that, at opportunities, them we product at question into are of well, to first you but mentioned few as piece And quarters know have the we on licenses, focus potentially I Huawei, on we of do applications. both additional point, mean, that qualification server, before for well then and our know

Operator

of comes Raji question & Please next go ahead. Needham Our from Gill Company.

Raji Gill

will how NAND you the at and had as overall those as UFS mix well market. NVMe shift you that Could Thank China as next mix about be question mentioned added a Sanjay, ramping that handset congrats affect well products the rate for trajectory potentially bit will A on of and SSDs, year, a in as in this higher margins? to you cycle. shift thanks controllers NAND, you talk little specifically, positive Yes, you.

Sanjay Mehrotra

data of piece Dave of side consumer you expand comment portfolio calendar for portfolio it. capitalizing FQX terms our on have margin of the from But we reported sales throughout certainly of for gaining of look as increased we as as in XXXX our well expanding certainly expand well, and on done we solutions I'll portfolio center the course on certainly we clients as NVMe know, to And there. we at have SSDs. and the share

think what's is important that there today note is I to our share under-represented.

portfolio, value future. our part that terms in terms the value high at we trying we share line the given of as the with bits with in of mix of in which the our about be number bits. are the bring about is And higher these of talked to toward expanded mean this of shift solutions share I toward are higher shifting our solutions, it should we NAND So basically XX% total what strategy in now

our out of toward share for part discrete multi-chip opportunity underrepresented managed on us that, we of NAND we have increased increasing And applications, Yet is further shift ongoing packages we share for in there our year-over-year pointed course, as that by be solutions a remain and to as well XX%. mobile therein these markets. basis, lies

with part very strategy. respect customer. that understanding I'm executing is to achieving pleased the the important enables quite as with gain very us in objective a this greater to stability, cycles, is solutions us brings the application It well And our to value margin Micron high closer well our So, opportunity area. as through greater of landscape

David Zinsner

high shifting fiscal the higher data higher. margins. consumer for So a solutions give value reasons major were points XX the look 'XX because one these obviously, - margins look you back at you about components, - find they high the value carry solutions, the solutions I'll is to reason high and if XX one just strategy to at points point, percentage value relative you'll of

and, higher company. - the margins higher the helps margins overall course, of obviously get of significantly opportunity to that So

Operator

from Securities. Hans of Mosesmann line Rosenblatt Last of question the comes

open. is line Your

Hans Mosesmann

on a Is how data get gains? year density team a driving seeing and market and would center what be is the to higher a share a reference architecture? for module what mix And Thanks. you're or just higher server this move? that has That where the ago, to Congratulations was Sanjay, the processor exactly the Or average it it quality is dynamic helpful. of improved? new on execution. density,

Sanjay Mehrotra

for to expected server, you consumption gigabyte CAGR as years, anywhere at per cloud of well as servers in average XXX when content over in cloud to And the around range you CAGR enterprise in at this the of servers, DRAM. when Yes, in digit look the average around trend 'XX growth server CAGR, is look to applications. few average XX% kind next double density and expected continue enterprise grow 'XX is

a the So growth this for is area definitely high market.

And mentioned the new starting earlier CPUs means higher density chips, gigabyte the more ability the Lake when in support you usage XXXX, in is of new greater use driving usage I to like look CPUs XX as that definitely Cascade for channels and as per support at other and as new chips, DRAM. CPUs, more they of the that well server content

that and that's those and - for data of the - into course, and cloud and speed are kind analytics requirement applications at are for more memory of applications enterprise done and data requirement running, end the day, are about And applications being being in AI are more increasing requiring translating real-time as and applications. workloads center the it's applications workloads increasing of

Hans Mosesmann

used main there if this XPoint roadmap that a as XD Can give us year memory, And this in is commentary you follow-up. for regarding quick a a - coming year?

Sanjay Mehrotra

XD NAND, It differentiated DRAM certainly XD we exciting us company So XPoint. opportunity longer for as the - having opportunity definitely with XPoint, gives said, in term. world us only the as and

world's mean well. just you I We And XPoint introduced has XPoint, as noted, the on have XD business side certainly XD with of first storage memory as SSD. the opportunities fastest the product our

expand we as the years well the as memory both products, semantic as as look this we of the portfolio our the ecosystem, developing at our storage applications, side be engaging the at of look next in kind are on with opportunities of few these area. applications over we'll addressing course we as And product

are watched it gives of of of the technologies future the work me kind the our use require and certainly, XPoint these things, on please And XPoint, ecosystem to have get way we vision not But let at take Micron good with years and if of presentation, a put technology. discussed it. as our multiple Sumit's do XD Insight, capabilities of and well we on breakthrough think full a perspective XD lot I - the that plug you pretty here watch again, it, technology you again

Operator

this and conference participating. gentlemen, Thank Thank you. call. you concludes for today’s Ladies

You may disconnect. now

Micron Technology (MU) 18 Dec 192020 Q1 Earnings call transcript