Earnings call transcript Q2 2023

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Operator

Thank you for standing by, and welcome to Micron's Second Quarter 2023 Financial Call. [Operator Instructions].

I would now like to introduce your host for today's program, Farhan Ahmad, Vice President, Investor Relations. Please go ahead, sir.

Farhan Ahmad

Thank you, and welcome to Micron Technology's Fiscal Second Quarter 2023 Financial Conference Call.

me Mark Sanjay Murphy, with and our call and CEO, our the today Mehrotra, are President On CFO. and Today's our call audio Investor from slides. Relations site is at investors.micron.com, being webcast including

website, our the addition, has on prepared call. press for detailing along In quarterly the with release been results posted this remarks the

We A visit is be to attending. GAAP non-GAAP information website measures may Today's we results a that throughout for financial of presented discussion the of may to basis, financial on information the reconciliation non-GAAP on encourage our at micron.com most website. found be conferences on including our on financial unless you otherwise specified. quarter company, the financial current

us Twitter, also follow can You on @MicronTech.

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

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

statements We to any these conform to forward-looking to are statements duty results. the no under of actual update

Sanjay. I'll to now turn call the over

Sanjay Mehrotra

its is in storage The delivered afternoon, also with and weak XX margins financial fiscal were and within an Micron performance. and last that quarter industry memory significantly write-downs, range. environment is downturn Good the semiconductor the guidance Farhan. inventory the impacting excluding our everyone. guidance within you, pricing years of Thank range, second worst exceptionally our impact facing revenue EPS

substantial supply measures, including taken austerity reduction a company-wide in reduction and force. We executing have

reduced balance customer inventories the months now that markets, supply-demand improving have ahead. in we see in gradually end We several believe and

transition revenue write-downs, quarterly fiscal inventory DIO in are sequential to sheet has we believe our our of peaked the in our we growth and to QX, Excluding impact balance results. close

the technology expertise, difficult balance incredibly navigating strengthening team. solid are talented near-term sheet with We deep position, and our product manufacturing environment portfolio, strong

we in our normalized model. return to downturn, line this anticipate with profitability long-term and growth Beyond financial a

lead in Micron industry continues DRAM to NAND the and technology. both

technology our are maintain In We it of and investing we NAND, align now great bit X-alpha managing DRAM X-beta. ramps XXX-layer and production, production. demand. than make DRAM, prudently our our transition In to to bit to while more our NAND reduce continue node competitiveness most to in and initiating with XXX-layer of bit progress XX% represents supply represent

execution industry bit NAND lead for We node Yields driven implementation solid manufacturing than also in our QX. higher that production and over has in now The to and fiscal Micron continue XX% QLC on team's and across smart X-alpha history. the of have levels accounted any reached yield are superb of nodes. enhancement in leading-edge XXX-layer shipments NAND QLC. our our DRAM

schedule of and addition, have our nodes. reached any prior In XXX-layer X-beta ahead yields faster and our NAND DRAM both than targeted of

qualify are our will across on these We positioned to ramp customer them well portfolio leading-edge based demand. product and nodes

performance, node Similar progress in good X-alpha EUV-based to node improvements. towards this density cost we introduction to of nodes, X-gamma the expect us power, making X-beta provide also are our XXXX. and competitive and We our with

our to turning end Now markets.

all our of down end demand year-over-year an across end result in revenue inventory growth challenging adjustments a As and environment, markets. pricing extremely slowing was markets,

significant amounts LLMs, industry growth continue the XXXX semiconductor outpace prelude faces transformational that industry language to we or our memory storage which and will of the to of capabilities a memory models, TAM and such significant calendar and to record challenges, new exciting an While of the to large requires near-term provides grow storage developments thereafter. Recent the as believe in operate. will AI ChatGPT, in

the very the commercial deployment exponential only of cases. are use We potential early in void AI stages in growth split their technologies of and these

more data center the consumption. capabilities in center drive spread user and applications we training this technology growth which influence will of proliferate, workloads well the of as see As as voice all supplemented devices, in in significant with memory end in data storage will

Data we center, believe reach healthy inventories should QX, fiscal to revenue in the and In fiscal our XXXX. we revenue of end expect by bottomed relatively in levels QX. data center growth see calendar that customer

center. NAND DRAM of content. content data up as We An continue regular demand of AI driver to secular can a in today to as growth server the a Xx AI server the much have the see as Xx and

are well memory provide. AI computing the storage and will that to and opportunities architectures We capture data-centric positioned

DRAM enterprise, Our service forward solutions HBMX shipments these the HPC about workloads. samples customers sharing OEM product roadmap CXL includes and exciting in and In I innovations, cloud CXL details more look fiscal that QX, to expanded to we and of future.

is Micron the world-class DDRX, industry or leading technology. DX with

first achieved DX our shipping are customer customers data to volume We X-alpha in XX-gigabit for our qualification DX center high and product.

half processors, Sapphire mix higher with Rapids, Servers DX calendar The will require in DRAM. processes Genoa these using latest XXXX, XXXX. and industry generation towards in demand DX drive bit Intel's DX of of new crossover second mid-calendar AMD's server

the data market, fastest we the computing shipments workloads. in of production NVMe which XXX-layer and high-performance XXXX SSD, PCIe AI fiscal center in QX, our excels SSD performance GenXxX also In and began volume NVMe

by calendar PC volume forecast XXXX in now mid-single-digit seen pre-COVID we to returning PCs, decline unit percentage, levels last unit PC to volume In XXXX.

DX. demand to expect the year. lineup, we improved strong of the early product to crossover DX our XXXX. have client to With in Although fiscal expected are for meaningfully, still increase with positioned well mid-calendar Client's DX mix industry ongoing half transition we XXXX, elevated, bit customer through second and adoption is calendar to in the increased DX inventories gradually

XXXX SSDs. by only world's quarter, SSD client XXX-layer in fiscal consecutive consumer In our client OEMs, mix for NAND SSD, the across reached Micron both qualified shipment the driven QX, growth QLC QLC customer base. and record the our qualified at bit new second a We

outpace TAM applications analysts the industry to broader graphics, calendar in are to stronger be well, demand supported the XXXX half. across adjustments than second In Customers' the market to expect center. client continue expect of by half data CAGR we first inventory progressing and and growth graphics

the As we performance to featured see our leader in graphics, NVIDIA the GXX launched are XX-gigabit XXXX proprietary recently Ti. excited in RTX

XXXX volume In we now slightly be expect to unit mobile, calendar year-over-year. down smartphone

DRAM to aggregate, the XXXX, customer remain inventory and half back in of NAND second shipments bit half. While remainder calendar levels, some other through the expect our mobile expect growth year improve of versus are customer elevated. mobile we the we inventories OEMs' normal inventories In fiscal to first and in

positive and In fiscal feedback continued XX-gigabit QX, sampling quality on we our its and customers. LPXX, performance power, receiving industry-leading very from X-beta qualifying

Congress, We month expect products World generate at leading Mobile our X customer earlier revenue we to flagship this We year. X-beta on this design mobile showcased displayed later product this where fiscal wins.

end our in represent and the markets. Last, XX% the and revenue stable fast-growing revenue more important market share markets, of which now auto I'll leader contribute cover and industrial profitability. these over and Micron is

grew X% revenue auto QX, year-over-year. fiscal In approximately

began the industry's several new record first automotive milestones in a and shipping automotive first in quality the solution. We industry's UFS automotive reached product, leadership qualified XXX-layer customer XXX-layer score, by was e.MMC X.X X.X QX. Our evidenced

vehicle. We of constraints supply half gradually per by expect calendar easing and XXXX, for nonmemory memory driven continued growth in second content auto increasing memory the demand

sampling half and second OEMs, the quarter, to in we The improve our year. with our and our QX, some of latest industrial partners of end Inventories to as to majority and market generation continued their across demand reduce the for demand design-in of soften and are customers, products. In automation second inventory channel in at starting fiscal expect advanced distribution weakened our achieved ODMs levels startup integrators fiscal our customers. stabilize Micron

Now outlook. turning to our market

calendar percentage are X% DRAM in in assessment DRAM as forecast bit driven XXXX calendar moderated XXXX The customer by degradation low-XXs CAGR demand growth is as in for percentage below of well expectations from some in and long-term expected to which have end an of prior range mid-teens market Our range well the range low-teens NAND. in inventories industry demand. our and percentage in demand approximately reduction NAND,

sequential reopening We China's growth expect calendar calendar positive for factor support the and inventories through will NAND demand. a customer bit also year. that bit demand DRAM is XXXX improving for

cuts NAND be and improve suppliers. and indicate reports been industry, the industry there that for We declined inventories. supplier growth, DRAM will NAND that have will help CapEx and which DRAM bit significant throughout now the calendar growth utilization Public XXXX demand below all expect rates at have supply in

extremely inventories, balance supply-demand the free levels high to the to cash likely are near of term. industry challenged profitability due to is in the While improve flow gradually and remain expected

industry NAND year-to-year a in accelerate XXXX. DRAM Market or, reduction bit in and negative in recovery is other production supply can words, if growth there

decisive In actions a industry Micron has environment, taken of in XXXX. fiscal response the to number

reducing we are First, our further supply.

fiscal expect X-beta with in down plan further XXX-layer WFE CapEx We have last and $X we to than approximately more to year, made our additional XXXX and XX%. we now from fall expect to than down fiscal a WFE billion, XX% more XXXX, In as invest ramp reductions capital-efficient nodes manner.

down reduced XX%. which are and by We have starts, approximately DRAM NAND now wafer further

XXXX, calendar be meaningfully result, supply to now a for growth year-on-year As negative we Micron's expect DRAM. for bit

in to produce expect also than XXXX. calendar XXXX NAND calendar in bits We fewer

decline sequentially the its write-downs, second impact from the DIO inventory Excluding quarter. in Micron's of to we expect going peak forward

operating largely workforce expenses Micron's executive well combination to occur have of expect beyond overall year. we of the further are suspension reduction XXXX complete through as attrition headcount Second, as through XX%. our anticipated salary our remainder the company-wide. of fiscal now reductions to and bonuses This the We will now which made a reductions, cuts approach

a in Third, and both strategy share Micron continues to DRAM bit flat to maintaining NAND. of annual execute

reduce to to have done in share. While we an so have gain market, remain we not in attempt had to competitive price the

As such, transitory. at generally share are changes customers

storage this will our to ensure Lastly, continues Mark the pure-play us strongest balance we liquidity and additional among downturn to ensuring strong have our Micron while further steps to and product ample will liquidity. memory sheet taken companies, the and weather technology enable into have detail. go competitiveness.

it will I turn Mark. over now to

Mark Murphy

challenging continued QX market with conditions and Fiscal Sanjay. deterioration pricing Thanks, profitability. in results reflected

revenue approximately provided QX we settlement revenue the guidance. billion, fiscal at XX% down year-over-year. time Total and million QX Fiscal $X.X sequentially was disclosed $XXX an from XX% insurance included

in prices declined fiscal bit QX Fiscal DRAM of DRAM the increasing XX% billion, Fiscal shipments timing of sequentially, total by shipments X% mid-teens fiscal revenue from range QX between with shipments XX%. percentage declining benefited approximately was QX revenue. and bit and the $X.X QX. revenue DRAM representing

Fiscal with mid- QX shipments the $XXX XX% declined NAND bit total to sequentially, mid-XXs declining revenue. NAND revenue prices XX% increasing high-single-digit representing million, percentage was range. in range and revenue Micron's in of the percentage

down while $X.X and by Compute Business And cloud revenue revenue Unit sequentially. revenue unit. basis, Networking was stable. client business on XX% to turning sequential Now down was was revenue a billion,

Revenue for $XXX the timing QX fiscal Mobile QX. revenue and Business shipments between sequentially. up from million, Mobile XX% some was benefited the Unit of fiscal

was sequentially. weakness. Embedded relatively Business end industrial were XX% basis, revenue markets sequential markets $XXX a On automotive and down Unit experienced stable consumer million, following

Revenue for and NAND the the Storage in conditions down challenging XX% Business million, impacted was sequentially $XXX Unit by market.

basis of cost down -- in results of are fiscal $XX for noncash $X.X write-downs, by cost margin result $XXX lower which gross expenses write-down sequentially. prices were the the was projected inventory, and of falling inventory result impacted points selling million, or the percentage inventory of resulted negatively fiscal negative Consolidated obsolescence. billion XX.X%. These QX QX recorded not approximately in XX.X million roughly Operating was below the This quarter. from

expenses both and We and operating continue in QX. fiscal to to manage aggressively QX them decline expect fiscal our sequentially

operating in The margin. roughly the quarter a in XX% X% write-down an of to the in operating XX operating point $X.X XX%, impact $X.X of resulting QX, recorded and fiscal the from in billion year. in for operating down loss billion had positive prior percentage negative loss the We included quarter prior negative an margin inventory

Fiscal million. QX taxes were $XX

despite quarters, geographies income basis, still on a taxes levels geographies. worldwide payable a previous loss to have in due certain reported in consolidated mentioned those taxable As we in

in $X.XX Fiscal per from $X.XX, prior QX loss share impact earnings $X.XX $X.XX prior Non-GAAP share QX and of loss in fiscal was from losses in a write-down. of down per the the per of approximately quarter EPS the included inventory the year. of share

operations in cash to from flows representing during the cash QX, quarter. and spending. Turning We revenue. approximately X% $X.X $XXX billion of capital generated expenditures fiscal were Capital million in

be to CapEx weighted, in of a half. XXXX mix construction spend fiscal front-half second expect the X/X We higher with

flow in cash negative Free quarter. $X.X billion the was

and days, in reflects are days the Our ending fiscal and higher DRAM. QX of Average billion inventory $X.X for days of was $X.X write-down. NAND than XXX impact and quarter write-downs, days. inventory the was the excluding levels Inventory billion XXX

intent our work reflect down these to on actions from days levels. Our supply of inventories

billion end, credit total liquidity of facility. $XX.X held billion when our At investments had and of we quarter cash considering and untapped $XX.X

billion environment, during debt. and Given long-term through macroeconomic addition quarter, further the liquidity the we bolstered uncertainty market the $X.X of of our

$XX.X fiscal billion. Our QX ending debt was

Under low net net to moves debt interest a average net debt liquidity, QX. XXXX. with our a on income Micron's net ample of weighted December interest is maturity sheet balance expense debt position, in solid and

Now Market remain for conditions turning extremely fiscal to outlook third our quarter. the challenging.

fiscal we pricing, to of inventory, associated we to calendar year, will guidance assumes to of write-down approximately a unrelated approximately changes NAND. third write-down inventory, ranges of an of have in However, substantial rest write-downs and higher expect underutilization the shipments QX we factored recognized fiscal write-down and to that will In guidance and beyond margin margins be million which inventory QX. are the as $XXX gross and fiscal continue recovery, positive produced fiscal QX could for gross DRAM of inventory our expectations to separate of Small million of improve. this $XXX NAND by write-down in mix the of or that $XX amount EPS. not the in to cost negatively QX, expect insurance gradually a QX. fiscal negative million, impacted recognize of revenue. for price inventory balance variances expect during Potential a increase On is fiscal Included into and supply-demand quarter with guide impact bit

weak, our profile. remain we manage As expense continue market aggressively to conditions will

our increased approach approximately target OpEx to expect to we We of fall from target in quarter As million of XXXX. below XX% reduction now Sanjay $XXX previous fourth headcount our mentioned, fiscal XX%. the

in $X For nonoperating QX. items, approximately million of we expect net interest expense fiscal

fiscal be to project less million. XXXX now We than $XXX taxes

flow we sequentially forecast write-downs the year. We negative term. improve inventory expect and flow operating improve We reduced to margin capital to free lower and by profitability extremely cash slightly, significantly fiscal do challenged remain to to project But to driven remain profitability the near in cash due free through spend.

non-GAAP for With guidance our QX the all these factors fiscal mind, in follows. as is

revenue million; or to to XX%, of $XXX range expenses basis in million. plus billion, $X.X plus gross and million, XXX to expect We be approximately negative be or minus minus the be plus margin points; minus or $XX $XXX operating

We expect expense tax of approximately million. $XX

this balance EPS a $X.XX, we technology to approximately operational of minus loss X.XX aggressively and a we through $X.XX. conditions, Based preserving competitive or positions, to period billion on market shares, share count closing, expect continue of of be solid plus strong our sheet. challenging In manage and product capability

growth to this Following we we storage. our and believe sequential We the on a revenue close and transition downturn, secular to results. demand trends memory expect are in quarterly to in capitalize growth

returns. in we'll cash flow on focused XXXX. business improving our positive are shareholder significantly the within manner remain a confident disciplined fiscal We and free profitability long-term returning cash model, and in financial and We profitability, to flow generate to quarterly to operate continue

Sanjay Mehrotra

Mark. you, Thank

managing in leading-edge manufacturing in downturn, is only our are and capabilities. industry one NAND Micron world. and DRAM business our technology We process preserving the product semiconductor and portfolio of technology this the leader competitiveness carefully handful a to of and manufacturers weather

breakthroughs Our to team customers. drive continues our for new

advances to long-term we conditions, multiple normalization value based Memory demand around and productivity new a that spud markets. forward and efficiencies, look the the the global systems heart at people and create across We solutions confident better they of and are economic life higher on for in make storage drive remain create the world. engine, of that our fuel end market solutions the for

Thank us joining you for today.

for questions. We open will now

Operator

from of C.J. [Operator first Evercore comes our from line Muse ISI. Instructions]. the And question

Christopher Muse

thinking of look Obviously, was you're it. how to of recovery. shape don't the today, this through about things the I get your get been sense through great you've will hoping but before guess I and

an for to today, I'm likelihood. as particularly like how data in love some your so we're And of largest customers consider across looks out around what be given you are will certainly this would calendar going to come at CapEx DRAM thoughts undersupply we've the to hear And situation, start 'XX. the it of they saying think in this. industry, the curious least center cuts your seen

Sanjay Mehrotra

Thanks, C.J., question. the for

still at demand to and we are sequential a inventories demand think while view. have So look increase point customer improving I of the the supply elevated, here we expect that in on. side, as And customer can are we but inventories we continue the from that that the the from from for basis aggregate, of are NAND, will improving. the question indicated do volume And and both DRAM on shipments, seeing

And have actions the supply supply in will taking the reductions through going heard of made a you various being the of from players. that a made in out industry. on And underutilization have be are as CapEx And course, as is to industry bite being well you the -- that chunk is side, seen the industry. reports, take at

trend supply the begin will to basically, So improve. also

the and the course year. improve of will through So supply the demand balance gradually

we believe as have also We improve inventory that inventory continue -- days of to said will well.

us, expect QX, adjustments, inventory in days inventory of we here to of peaked For and days of exclusive to improve from would on. continue inventory

in transition business for close We sequential about going revenue have growth see we talked forward. to our that being to

industry pricing expect we be supply the gradually of demand So improving, with also the trajectory improving. overall the and to environment,

the So industry the but and profitability remains free fundamentals cash this improve. remains then beginning to ultimately while the means of that are challenged, flow challenged, yes,

underutilization OpEx on shortages taking But focusing timeframe as really taken, I we the in be as that with XXXX have with have managing is certainly, could supply Micron, And that there managing well. could managing discussed, growth think, been respect be and actions, industry. in our it decisive overall, the actions in that CapEx, fab, to the

the couple Smartphones, but to continue shared have trends the we you've a will and meaningfully customer couple versus some customers talked in next customers, that quarters. some improve the basically, in are terms inventory inventories about, that over to of better of of of have the trends And as other PC inventories well. and market over improve quarters high continue market may smartphone

revenue us, for bottomed Cloud we -- timeframe. has in think, QX at

and While strong drive towards the by inventories them get as improve in at cloud, remain levels with in data elevated the center the CPUs product. of elevated We levels, of at with through the do position DDRX to normalized year cloud do new levels. and our expect positioned deployment, inventories end with year in -- remain course And the is well. DX well new the Micron to

So tailwinds we think will that increased with cloud be for is the also it demand well. per driving DDRX server as content memory that

all while navigating focus extremely the environment, its trends. are hope responsibly are us. supply these improving on see So positive that is we through managing And the environment I supply continuing you an for business and demand to challenging Micron

the Of for industry demand if bring course, was year-over-year have supply said, our NAND accelerated have supply course, in if be for DRAM and year DRAM of our as our could in be taken the the actions recovery We, growth growth we NAND and the negative. the of to -- negative. terms to

Operator

And from UBS. question our comes Timothy line from of next Arcuri the

Timothy Arcuri

X-part a had I question.

you that that bit of worse you to -- going going First, than about after more all it's Sanjay, engage implement any just us can that thought changes this? LTAs, the industry you, the mean are adding you it curious pricing you is last to out and on think lasting is is go I going think I industry the is it what you mean, been sounds I where much the think would think -- be. be like, wall more cycle? clearly draconian the following but question, Do I so in think was you the certainly, coming the to of industry on Do customers given supply? writing do about the that

can't going why question hit you've where then for I go if immediately floor keep million And you'd I'm immediately $XXX in that? Is you you'd write below and write guess on Mark, terms down worth on that of May. then write-down that to you're of also it a down. utilization for some of produce inventory? curious Why producing sort just the

Sanjay Mehrotra

its adjustments think an the as to all on the in I economy, and the faced that the really macro. the of a that and dislocation its place in impact behavior So a X in respect once-in-XXX-years you material years, of course Russia-Ukraine terms customer dislocation industry demand, And created once-in-multiple-decades have well. last with in XX-year-high look impact environment, world these on pandemic, the war demand, surge the in of of that over kind inflation then to at and resulted of kind material inventory the resulted took environment the and

being seeing with We today. that are the you reductions of implemented. recovery the process starting, is now talked recovery that the supply process to of And growth respect actions about ours are

to are so this to levels sustainable. the healthier in lead The ultimately industry not profitability simply levels. today to And the recover will industry

that demand period the mind these So mentioned, X this to and years been all the before DRAM. improve in in the supply that XX X plus events environment for in keep just And to of industry particularly has disciplined years industry. with I has last

do and, back So the future grow. investments healthy of be believe in the the profitability discipline that require will supply levels will I industry course, and of that

strong last years demand that terms drive I revenue year have of it trends. in -- the years strong We 'XX will for be demand 'XX will because growth been think keeping mind we being growth. talked and the strong a shipments. XXXX will slow about industry particularly, And record in be X think

are The of You the health quarters. be in restored future supply the will seeing on actions industry side. the

that future, at it the our and memory Micron to opportunities well with mean positioned the look storage. really And talk a I trends AI, come I equals AI address very generative really these for for time to and mean about no of very, stages equals -- greater there. right? demand AI, drive we and AI growing AI roadmaps and generative and is ultimately long early are this and is you technology doubt memory, when that product the

Mark Murphy

further. utilization actively down today, on call we your been the you of and as And Micron down We we've in taking -- out company's maybe levels before of fall. us in none on have the We increased that at it's second on that levels question, And history. the supply at took we're market. taking seen summer. even underutilization now have the utilization more late Tim, Yes. heard

So it's significant a reduction.

I'll add that principally do, know, we as you build to WIP.

we So and those And to we that very seeing products we amount that reduced get when important reductions then horizon time to also build. way looking benefits when we're we're in can later able the minimize finish reduce. on We've from in then it the bit sequentially that note it's utilization, increase we thoughtfully, done of that are here the we've at, cash out. maximize the volumes

Now seeing But third volumes we expect note we of quarter, quarter, challenged. -- both and as NAND more NAND getting are in I in balance. that while beginning strongly, and modestly that were are housekeeping the is up some price-challenged, again, is the up better supply/demand should DRAM in too sharply growth into say. is will just third And bits, I the

Operator

comes of Citi. Chris from question Danely Our line the next from

Christopher Danely

DRAM sort us those in PC on level Just quarters? your full utilization? a back increase cell of to that or normal bit of rates base Should to And to end expecting we case case expect expect seasonality? demand half markets that full in is to you recovery. I give NAND to revenue of continue couple the Is of get year, couple a back would shipments? this and utilization you to Or of as for terms that trend your expected utilization base the second is and you guess specific phone should back -- we how indicate you're questions the could to there get some rates

Sanjay Mehrotra

to monitor utilization important demand, our industry and down, our us future as with So as to of, the demand. continue make in the continue could days course, respect work and latest rates, around decisions and into We'll will continue bringing we inventory assessment function of status utilization our it's of again, on of year the a to inventory regarding for to fiscal position 'XX well. utilization

said smartphone then above year And for your be as the market. over smartphone us that as unit smartphone volume course restored inventory demand in market, decline of on the Regarding seasonal. question trends that will basis, we growth and we calendar in customers' the on also year, year-over-year expect was the normal a will have levels QX normalize 'XX,

the be the smartphone down its mix market, is may regarding is memory towards important even shifting phones, volume a that smartphone require as year-over-year market And flagship though more basis, unit on well. flagship the phones and thing more

demand the that as So for market. trends will -- smartphone some in out of the these are play the of over the grows course the year

Operator

Harlan question next our comes JPMorgan. of And from the from line Sur

Harlan Sur

QX. the million underutilization last call team the roughly and On had recognized I charge, articulated know QX $XXX of charges primarily fiscal in

guidance? in the XX%. And cut much tick XX% by lower and it embedded of it how numbers down QX your utilization, given QX is So or to this

to about in calendar year? this half do lower of some continue second of we of you this QX charges and second half utilization drive think calendar like year, If how utilization through the the fiscal

Mark Murphy

talk briefly it the maybe just the gross margin. at here opportunity to take gross then so and Harlan, answer and through utilization effective I'll beginning Yes. margins

we'd So based went and told 'XX we around costs on have some about I and thought and last last 'XX charges in what period million we quarter, But FY the $XXX $XXX hit you so and would fiscal COGS. forth. quarter into last quarter million length about

of the cost we inventory up $XXX and costs, 'XX. that's inventory is and combination million costs FY -- cost. by utilization and -- not underutilization pull increase that a accounting in And driven in the $X.X about see With and into of flowing of write-down and here, 'XX, write-downs the of the driven billion effects the only forward stepped is by the see or period that this underutilization now cost about and we've we actually

as view if step our and look of incorporate forward pricing, write-downs, and So costs, our the including we environment utilization, our function volumes effects our we market on of at reported factors, to inventory a These last mix. many of actions. factors we pricing, and discussed their of course, continuously and due changing the which back gross margin and outlook, quarter, the leverage period are associated

further, such lower in profitability, slight that these levels the and I'll sensitive add the assumptions, of then more as at And results to margin importantly, are forecast price. changes

we given million that So $X.X a then we've on of inventories price seen of write-down we view contemplates of QX, on material recent and as pricing, a reported $XXX on the the these write-down our QX trends price, produced. billion. current in inventories And guide additional took

costs thus, we write-downs, we'll realize we've we those than future inventory inventories. clears on-hand would charge. cost pulled in quarters, carrying forward lowered without value these income more of and With inventory quarters in have as those lower And the the

So an in benefit portion $XXX from QX these a sell of inventories expect we the charge lower as cost around as a through. QX million example,

we expect inventories about mentioned, cost I most see So of as underutilization as next also over have adding year. additional underutilization we some to of to now in and that, and will year question, higher carry per we hit your creating P&L and $X.X as mentioned, period then the of 'XX, FY costs. the And effects impact this billion it

would it of less year next accounting, write-down have effective the will carry than of because to over Now otherwise.

much inventory XX.X%. see large $X.X QX. expect reported better relative our quarter, the third all that billion to gross that in With we trough, we XX by a be you is Now in quarter so that, forecasted lower about points write-down. charge again, the second to margin driven guided the this, considering And part

talked in charge, view, very then the our pricing the are as talked grow would bit changes, And over estimates these and sense as get leverage if our improves. current sensitive costs I be volumes on again, but we we QX to better today, a QX than last of about call lower utilization about time, Now in any. and in period

First, reported it expect the through importantly, end, will inventories to would have at continue utilization the here. supply/demand lot improve margins a And work better, customer is inventories 'XX. FY and factors come end. back again, of on most as down improve front balance we in we'll improve, better But then to

be costs, this would down of write-downs strip and cost margin, third If pricing be margin, to and considerably. period I again, X.X% charges last you so of in impairment XQ a gross a second the were would quarter. environment is And function including the X.X% negative underutilization, again, which, just the QX a discussed out quarters, or the

margin, in half improve would these Under levels FY then off on the trough through this 'XX. gross second view, low would we

in the So a second of the course, outlook bit in -- and improvement we because environment of recovery expected FY through and end, again, trough the some half the we've though, the profile of lower last discussed levels the pricing a similar quarter, volumes. with is bit are to the is lower 'XX. seen delayed But what

Operator

from comes Goldman the question of next line Our Toshiya from Sachs. Hari

Toshiya Hari

question One end on NAND market. the business

'XX, I about talked year-over-year is of calendar believe little more your a down You than most in being your competition. which production draconian bit bit

you're and you that, around potential medium you to for term. you a if to NAND. how about express permanent strategy Could customers curious the of concerns Wondering your related of and one China. has relative thinking Just in had your to the kind this capacity could if to that, competitiveness? long be that significant damage over positive cause relative competitors And in come

Sanjay Mehrotra

yields been of So to XXX begun plus XX% we doing XXX-layer industry. supply XXX, NAND, with well with NAND, already. we we as any ahead XXX-layers. product the XXX-layer, are plus as that competitor XXX-layer market And well with of in NAND in in well have you today our NAND shipping we is have technology respect are with exceptionally are that well. and our shipping shared today the We positioned roadmap.

So are our overall, technology. with we well positioned

if actions, to business. believe demand, line in think and restore to the And in the And that said the accordingly. are really needed taking we our have we with what underutilization these be industry could health accelerated recovery and remarks prepared actions of Our needed growth, supply growth, are NAND the is actions is basis. bring year-over-year -- negative our that are we is are on a we DRAM production supply certainly

what product But tell and it's product do I on our that a And you execution is part other can comment see can't really regarding Micron, China, strong I the technology from execution, a really strong customers portfolio. customers. our of

We packages. leveraging mobile have multichip markets and DRAM NAND our done in well with with

center to been NVMe SSDs to expanding well. automotive market, continuing creating an have our opportunity. some leadership data In the I SSDs in and NAND the the certainly, position is strengthen portfolio product do as automotive, in GenX well And client opportunities our about markets. also of in market talked And

capabilities our NAND So and execution business. the products, customers stronger us and relationships technology innovation and see is bringing in our that's what for our with customers

we terms Micron NAND-displacing in to the data in has and in been in future. And growing now terms HDDs of -- data opportunities the products future. center, our NVMe have been right absent to market a those product and healthy SSDs grow have portfolio, the This in center, past, the and forward continue of space and having the opportunities, opportunities we that those we of in to look we course, healthy been in with -- be have

our and DRAM, strong that here a So product with customers. certainly, our are and value positioned enables in is actions NAND us Micron combination to supply overall, with differentiated have our roadmap, prudent. well believe And for technology we

Operator

question next comes our of Fargo. Rakers line from And Wells Aaron from the

Aaron Rakers

relative apologize, inventory is in I'm a underutilization at obsolescence at the I Mark, that? inventory, go discussion quarter. goods had embedded just sounds inventory Is of this of the bridge Or point? brought little 'XX. any cost million, that of up the to back for the a just lower again, Harlan margin gross comment there It on $XXX prior to bit. So what's way guess for there to like inventory? want sold I I this any fiscal it through on curious million the $XXX gets is of just to And good, risk

Mark Murphy

the as still on is And underutilization inventories. It -- your the is then the Yes, cost gets inventory charges. good. as question just far lower it on basis

And we as $XXX So said that that million combination FY bridging of time in we million the million incurred underutilization costs and we of was would a do pass total of from it through inventories about what which period were to 'XX, have, costs. just $XXX FY that last time, believe P&L we had 'XX. last charges $XXX in that clear and also then

Now half year a the believe view are costs. $XXX amount combination is we is the our with is period pass And costs Again, that view $X.X will and of in that the in FY of inventory second million. our underutilization, 'XX. costs that increased in through billion

reason charges where FY write-down the percent inventory cost it's 'XX Now of pulled a the total accounting because are -- that that forward. of higher we this saw is those

hope question. So clears the I that up

Operator

from question our the from line Moore Stanley. Joseph of next Morgan And comes

Joseph Moore

and will the there? to -- the quarter? billion. gross price does being and market to of assessment then adjusted, sell-through number price. I How the lower walk of you the you inventory for than appreciate margin. this, mechanics making you compare be price that a there's guess that what how know to the and little February time I if I puts -- With missed extent you're that out of market determination on or Sorry market you far $X.X are take the you? the regards to quarter more Is you the takes the I detailed guess, how pull can in one that's And that over I adjustment, cost through this got

Mark Murphy

Joe. right, That's

as end based hand method and quantities of you you question. as a inventory reminder, recoverability of would values of job This of as answering we analyzed to I pool. evaluate at a consistently applied decent disclosed, public the on a of we single if did But on -- we've the sort and our the quarter. but refer the inventory filings, each our recoverability You

amount sales We during determines days. X a nearly $X.X case, the project cost Since our recent same by quarter. this that selling covers in projection inventory, quarter, charge. million in And days inventory of will forecast period that over result adjusted charge prices in the based the for expected sold which carrying pre-write-down be the selling inventory expected about most expect and we were and values the on yielded write-down exceeds horizon. consider in inventory forecast that $XXX that our the to third process That XXX which quarters. billion expenses second a The

Operator

from of next the question Cowen. Sankar and Krish session question Our line final this for comes from

Hadi Orabi

and more of buying be from your price environment? for regarding of DDRX slightly bit would language low DDRX? new regarding center prior color outlook TD high. center the you crossover surprising data Cowen. mid-XXXX customers from CPUs pretty Eddy that function better than is and This share a Krish Intel of and better-than-expected demand expected by Is It's seeing that taking data to is advantage AMD? DDRX outlook. higher for inventory it outlook Or improved for seems it XXXX, from you mid-to-early driven improved helpful. DDRX a than given is date the ahead Any is It adjusted so in Or

Sanjay Mehrotra

transition, expectations. I Regarding to those changed the mix not DX of trends, made and comments were industry really prior DX that have versus for the the our

are Of of deployment Rapids course, infrastructure. of now those function 'XX. servers, the and data will increase such -- course as the CPUs, and and Intel deployed to are functions into broadly continue Genoa are And and through that 'XX of those seeing they CPUs into Sapphire a the there you are -- center the starting AMD new get to

DX for our well market. timing changed, yes, of with not DX So the our we expectations for terms the positioned and product to transition DX in in industry have remain

Operator

conclude program. well does the ladies gentlemen, This you, your today's Thank you. Thank for participation. session as question-and-answer and as

may You Good now disconnect. day.

Micron Technology (MU) 28 Mar 232023 Q2 Earnings call transcript