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Micron has seen its stock surge 55% over the past three months. Manish Bhatia, Micron EVP of Global Operations joins Yahoo Finance Live to discuss Micron’s strong Q1 earnings report and break down the outlook for the chipmaker in 2021.
BRIAN SOZZI: Chip maker Micron has seen its stock surge 55% over the past three months as demand for chips that power PCs, car infotainment systems, and the cloud, regain momentum during the pandemic. Those factors allowed Micron to easily beat Wall Street profit estimates when it reported earnings last Thursday. Let's welcome in Micron's Executive Vice President of Global Operations, Manish Bhatia. Manish, always good to speak with you here.
I have to start on the DRAM- on the DRAM market. You guys sound very bullish on prices. But what, in fact, are some of the factors driving those higher prices for DRAM right now and how severe is the supply shortage in that market?
MANISH BHATIA: Well, I think the-- but first of all, thank you, Brian, for having me back on and always happy to be here. You know, I think the DRAM market is really driven by the twin pillars of 5G and AI, or artificial intelligence. We're seeing stronger demand for 5G-enabled smartphones growing from Calendar '20 into '21 by 2 and 1/2 times to be probably 500 million 5G-enabled smartphones projected in Calendar 2001.
We're seeing strong growth for artificial intelligence solutions in the cloud, as well as for PCs that the world is still in a work-from-home state, so the PC market is still very strong. And then we're also seeing strong growth in automotive as the world moves more and more towards electric vehicles.
Electric vehicles tend to have a much higher content for all semiconductors, but especially for DRAM and NAND flash storage. So all of these trends together are driving what we think are already starting to see strong demand trends, and they're only going to get stronger as the global pandemic hopefully recedes, as the world starts to see-- the vaccine takes hold, and as the monetary and fiscal stimulus that's been injected gradually starts to create economic growth through Calendar 21.
BRIAN SOZZI: Manish, you have-- the Street, I would say, is somewhat buzzing about a new chip you're about to start producing. It's called the 1-alpha, and they're pretty optimistic on it because they say it will dramatically reduce your costs by the second half of this year. Why is that so and what does this chip actually do?
MANISH BHATIA: Sure. So you know, we're really excited about our technology roadmap, Brian. Actually, both in DRAM and in NAND, but the technology that you're talking about is our 1-alpha DRAM. It's the smallest line with geometry DRAM in the industry. And for the first time in the history of the industry, Micron is leading the memory industry in both DRAM with our 1-alpha chip, as well as our 176-layer NAND technology at the same time.
And so we've really done an excellent job executing on our technology and manufacturing roadmap. And what both of these technologies will do is both increase the density that we have on an individual chip to be able to provide higher capacity solutions. It also, because we get more bits on a chip and then more bits on a wafer, it reduces the cost of our solutions. And then it also improves our power performance capability for high-performance solutions-- whether they're in 5G smartphones, whether they're in the cloud server, DRAM in the cloud. So really, really excited about all the advantages of this leading-- that both of these leading technologies provide for us and for our customers.
JULIE HYMAN: Manish, it's Julie, here. It's good to talk to you. So you've made a good argument for why the demand side of the equation is robust-- both because of the end markets, but also because of the technology you're developing. I'm curious about the supply side of the equation--
MANISH BHATIA: Yeah.
JULIE HYMAN: --and whether you think there is going to be-- the DRAM market is always kind of, being a commodity market, always finds these areas of equilibrium, right? So I'm wondering when, from a pricing perspective, you think the supply side is going to start to catch up more and maybe some of the price increases are going to slow down?
MANISH BHATIA: So in terms of supply, you know, the industry in Calendar Year '20 have actually been fairly disciplined-- the DRAM industry and the suppliers, in terms of the capital that they've put to use. And the lead time for those capital investments-- really, the investments we're making now impact our supply 6 to 9 to 12 months from now. So we feel like Calendar Year '21, the capital discipline that everyone showed and in last year, in Calendar '20, bodes well for the supply in Calendar '21. And we think we're just going to see continuing tightening environment, continuing improvement in the supply demand balance as we go through the year.
And we think we're very well-positioned with our leadership technology portfolio with our 1-alpha technology gradually ramping up throughout the year.
BRIAN SOZZI: Manish, how does the vaccine, the COVID-19 vaccine roll out? How will that impact your business? Let's say if we do get half of the US vaccinated by the middle of this year-- a tall order given where things are now, but how does that change your outlook?
MANISH BHATIA: So the vaccine rollout, combined with the fiscal and monetary stimulus that you see all central banks really injecting around the world, we certainly think has the potential to enhance the end-market demand. Consumer device is really growing. We think, obviously, consumers will be the ones most impacted by a return to normalcy and return to normal buying patterns. That's why we're so bullish on the 5G-enabled smartphones. That's why we're bullish on PCs, why we're bullish on automotive.
We have the number one position in automotive in the industry. While we're bullish on gaming, we have the number one position in the graphics DRAM space, which is the highest performance DRAM, the highest performance DRAM chips. And we see strong demand for the gaming consoles from some of our gaming customers and a strong end market pull for that market, as well.
So we really think consumers can lead the economy forward once the vaccine takes hold and starts to bring about a return to normalcy and more economic growth. And we think we're very well positioned with our broad portfolio of DRAM and NAND solutions across all of those end markets.
BRIAN SOZZI: All right, Micron Executive Vice President of Global Operations, Manish Bhatia. Always good to speak with you. Stay safe, and we'll talk to you soon.
MANISH BHATIA: Thank you very much, everyone.