Micron Technology, the largest American memory chip maker, said some customers in the personal computer space are paring DRAM and NAND purchases amid an ongoing shortage of other chips. And it is taking a toll.
In a recent conference call to discuss its quarterly earnings, Micron chief executive Sanjay Mehrotra said its unit shipments in the first fiscal quarter ending in November will “decline modestly in both DRAM and NAND from very strong levels” the previous quarter because “some PC customers are adjusting their memory and storage purchases due to shortages of non-memory components that are needed to complete PC builds.”
The dip in demand from the personal computer sector is only a short-term challenge, he said. He said Micron would rebound when supply constraints ease in the coming months and manufacturers can buy the types of chips they need to complete laptops and desktops. Mehrotra said, "shipment growth will resume in the second half of the [next] fiscal year" as buyers start rebuilding inventory, "and we are planning to deliver record revenue" in 2022.
Mehrotra said shortages of non-memory chips pushing out some of its orders will ease throughout 2022. "We are also seeing constraints within our [own] supply chain for certain IC components, which will somewhat limit our bit shipments in the near term," he said.
Micron has been buoyed by a global chip boom in recent months, with sales totaling $27.7 billion in 2021, up from $21.4 billion a year ago. Soaring demand let it charge higher prices for DRAM and NAND memory chips.
But the memory sector is infamous for being one of the most unstable parts of the semiconductor industry, with massive swings between shortages and gluts. Memory chip giants such as Micron, Samsung, and SK Hynix race to expand production to fill orders as demand spikes and supply tightens, causing memory chip prices to jump. But when demand wanes, they tend to be left with a surplus, which saps their pricing power.
The memory chip vendor said sales would be in the range of $7.65 billion in the first fiscal quarter ending in November, growing at a slightly slower rate than the previous quarter. Profit is projected to be $2 to $2.10 a share, Micron said. Demand for DRAM and NAND will be led in 2022 by strong shipments of servers used in data centers and 5G phones. In addition, the amount of memory used in cars and factory equipment is also growing, which will also boost sales.
Micron is at the center of a global supply chain that has been strained by the unprecedented pace of orders for chips in recent months, leading to a widespread shortage that has ravaged the automobile sector and caused delays in shipping PCs and phones. Dell, Lenovo, HP, and other electronics giants are struggling to buy display ICs, power management ICs, and other chips based on lagging nodes—or are paying more to purchase them.
Even as the electronics industry struggles with the supply crunch, Micron has no plans to expand its DRAM or NAND production in the foreseeable future. Instead, it plans to meet demand by upgrading more of its product lineup to advanced memory technologies, including its 176-layer 3D NAND, which leapfrogs rivals' 128-layer NAND flash, and 1-alpha node DRAM, which boosts memory density over its previous 1z node by over 40%.
Micron plans to invest $11 billion to $12 billion into its fabs in 2022, up from $9.7 billion in 2021, as it upgrades more of its flash memory supply to 176-layer 3D NAND and starts pilot production of a future generation of its NAND and DRAM. Micron is also stocking up on semiconductor tools to bring EUV technology to its chip fabs by 2024. Micron said it had placed orders with ASML for EUV gear as part of a long-term supply deal.
Micron said sales totaled $8.27 billion in the fourth quarter, up 36% from the same quarter a year ago. Total profit came out to $2.72 billion or $2.39 a share in the quarter, which ended in September, the company said.
For the fourth quarter, Micron said average NAND flash prices were up in the mid-single digits from the previous quarter, while average prices for DRAM were up in the high-single-digit percent range.
