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Why Micron expects more strong demand growth for some products

Puneet Sikka

Why Micron's 2nd quarter results signal the company's revival (Part 2 of 7)

(Continued from Part 1)

Micron continues to improve its financials

In the last article of this series, we discussed Mircon’s (MU) fiscal Q2 2014 results and how the company’s profitability and top line have improved consistently over the past year or so. In this article, we’ll discuss the outlook for the company’s main product line, its DRAM and NAND products, which constitute about 90% of the company revenues. DRAM products are random access memory devices used in servers, PCs, and mobile devices to provide data storage and retrieval, while NAND Flash products are mass storage devices used in mobile phones, solid-state drives, tablets, and computers. HP (HPQ) and Intel (INTC) are the two main customers of Micron’s products. Micron must win customers over rival companies like Samsung (SSNLF) and Sandisk (SNDK).

Micron expects continuing strong demand growth for its products

During the company’s conference call to discuss earnings, Mark Durcan, Micron’s CEO and director, mentioned, “We continue to forecast five-year DRAM demand CAGR in the mid 20% to 30% range which implies continued favorable market conditions and likely a reduction in volatility compared to historically DRAM trends. For NAND, we’re projecting industry growth in the low 40% range for 2014. This includes an increase in industry wafer production of just over 10% with the remaining supply growth coming from technology. We expect 2015 to be in a similar range, but we could see a reduction in the growth rate beyond 2015 as 3D production becomes more predominant and there is a subsequent reduction in wafer output given the additional cleaning space required for 3D NAND. We are forecasting a five-year NAND demand CAGR in the high 30% to low 40% range.”

Durcan further commented, “As you’ve seen recently in NAND additions to industry capacity can cause volatility in the market given the challenge of matching long-term capacity decisions with short-term demand trends. However, we’re very bullish about the future of NAND Flash and we believe that this will be a very healthy market. There are strong demand drivers and elasticity to drive rebalancing. Micron NAND process technology positioning remains strong, during the quarter, we continue to make progress on ramping yields of our 20 nanometer and industry leading 16 nanometer technologies.”

Continue to Part 3

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