The Six Five team dives into Micron Investor Day.
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Patrick Moorhead: Let’s move to the final topic, and that is Micron Investor Day. For those of you who don’t know, Micron is a leader in memory and storage out there. They’ve had a new CEO installed for the last five years, and I got to tell you, they had an investor day, and well, while you and I are industry analysts, it’s super important that, well, I find it valuable to get a one stop shop to get a great bird’s eye view of a company.
Daniel Newman: I love investor days, Pat. I actually think they consolidate a lot and make it really digestible, usually.
Patrick Moorhead: Well, and marketing, just because they’re under the auspice of the SEC, they can’t stretch too much, otherwise they’re going to get sued. So, what you’re getting is likely a conservative view of it, but here here’s really the upshot here, from a basis. So first of all, memory and storage are moving up the bill of materials for all electronics as a percentage. So if you look all the way out to 2030, there’s going to be a two X growth in the dollar volume, and that seems very reasonable to me, that would mean like a 9% CAGR increase, so that seems very doable. But one of the cool parts though, and let’s get back to CXL, is we haven’t even looked at the potential for the explosion of memory out here using CXL to have these pools of memory.
The storage business was humming along just nicely, and then we hit Storage Area Network, SAN, and NAS, Network Attached Storage, and that business absolutely took off. And this is where I see something that’s not baked into the valuation of the company moving forward. One of the biggest messages that the company made, they said, “Hey, we might be, we’re number one share in DDR five, which is the world’s fastest graphics memory, and we’re rebuilding out the data center and getting bigger with PCs. But, hey, don’t worry about this whole PC potential decline, look at what we’re doing in the data center as a percentage of our growth. And oh, by the way, look at, in auto embedded, look at that growth, not only is there growth in that market, but we are number one market share in auto and also in industrial.” What’s new in the world of mobile? Well, it’s LP DDR4 and LP DDR5. This is some of the magic behind Apple’s M1 processor is that they have tightly linked the memory to the processor. Well, the company is first to market with LP DDR5.
So I guess the final thing I’ll comment on is they talked about, and I need to dig into the details on this, but they’re experimenting with a new pricing model called forward pricing agreements. Essentially, it’s funny, the industry did this already, it looks like a formal program where you can lock in capacity in the future. And the company said they already have a top 10 customer signed to the model at more than half a billion dollars of revenue for a three year agreement. This is one way that you get around supply chains. So a company on the move, memory and storage is more important than it’s ever been before, not about just the explosive growth of it, but the applications like AI and also the memory pooling in the data center. I cannot wait to see what’s next at their big thought leadership conference called Micron Insight. Who knows, Daniel, we might be making an appearance at it, I’m not sure.
Daniel Newman: Yeah, that would be great, I love making appearances at events. Event appearances are, they’re my jam, man.
Patrick Moorhead: Yeah.
Daniel Newman: So Pat, you covered a lot of the ground, the company made some really great commitments over the last several years and have executed. And by the way, that’s something you and I don’t take lightly because companies make a lot of claims and, oftentimes, due to the short memory and the way social media works and the way we forget things, we don’t go back and hold them accountable for what they’ve been able to accomplish. I was reading comment by their Executive Vice President of Global Operations that was shared at the event yesterday, Manisha Tia, and he said, “Micron’s commitment to smart manufacturing has enabled us to drive increased productivity, keeping development of leading edge technologies on track for delivery to customers.”
And by the way, the reason I went to this guy, is I think on the technology side, you covered a lot of it, but one of the things that I thought really resonated with me was just how effectively Micron has been able to execute its supply chain and operate to be able to manage costs. This is the part of the semiconductor industry that probably has the least pricing elasticity. Whereas like in compute, you’ve seen how these companies have been able to flex on pricing. There’s going to be some interesting auditing over the next few years to see how much growth, in this revenue growth, came from the elasticity that these fans had right now with the crazy demand and all. In storage and memory typically don’t have that as much, so they had to be a little bit more sensitive to that. They were able to stay on leading edge, they were able to get their customers the supply they needed.
And by the way, Pat, this is something I keep talking about, but they’re deploying the intelligence in their supply chain automation that is going to be required to avoid further inflation in pricing. And basically, this type of automation can help Micro run more efficiently, deliver more volume, satisfy their customers and take leadership in the markets that they’re focused on.
The other thing I would say is that Micron’s pivot over the past few years to focus more on things like automotive path, data center, is prudent and is proven to be a very important move for the company. I do believe over the next handful of years, what we might see will be some contraction in discretionary, in consumer spending and things like PCs, potentially, maybe a slowing in some mobile device sales, not as much as some people are thinking, but just some slowing as there hasn’t been as much stimulus, people will have less free cash flow.
Companies have done a lot of their upgrade cycles on PCs, and maybe won’t be doing them as regularly over the next couple of years, but what I don’t see slowing down though, Pat, is data center. I don’t see the data center or investments in cloud infrastructure, edge, networking, slowing at all. And as you see, that’s been one of the biggest growth areas for Micron. I felt they really exuded their confidence.
They showed clearly that they know what they’re doing there, and that strategy has been prudent and successful. So Pat, just demarking from what you talked about, I like some of their operations strategy, I like some of the direction they’re taking their products, and it was a good day. I felt like I learned a lot, wish I could have been there for the whole thing, but I did have to listen to some of it afterwards, Pat, but congratulations to Micron on a successful investor day.
Daniel Newman is the Principal Analyst of Futurum Research and the CEO of Broadsuite Media Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise. Read Full Bio