Micron's Fiscal 2Q16 Suffered from Weakness in the Memory Market
Micron’s revenue by end consumer market
In the previous parts of the series, we saw that Micron (MU) has been working fast to enhance technology in the DRAM (dynamic random access memory) and 3D NAND (negative AND) spaces to meet future demand and overtake Samsung (SSNLF). Micron aims to maximize growth by tapping high-growth consumer markets.
The company serves four major market segments: computer and networking, mobile, embedded, and storage. All four segments reported revenue falls in fiscal 2Q16. In the coming few parts of the series, we’ll look at the performances of Micron’s products in each of these segments.
Compute and Networking Business Unit
Revenue from Micron’s CNBU (compute and networking business unit) fell 42.2% YoY (year-over-year) to $1.1 billion in fiscal 2Q16. Its operating margin fell from 27.1% in fiscal 2Q15 to -5.2% in fiscal 2Q16.
This segment accounts for 36% of the company’s revenues. It was hit the hardest by falling average selling prices. The fall in PC (personal computer) sales was partially offset by growth in enterprise, networking, and graphics sales.
Industry forecast
According to IDC (International Data Corporation) estimates, global PC shipments fell 10.6% YoY in 4Q15. Notebook vendors expect shipments to fall another 10% in 2016 with a slow first half and a slightly better second half. However, IDC expects growth to pick up in 2016 due to a rise in the increasing adoption of Microsoft’s (MSFT) Windows 10 by enterprises.
Like Intel (INTC), Micron is taking efforts to move away from PCs toward the data center and embedded space. In the PC space, it will focus more on the high-margin graphics and enterprise segments.
Micron’s design wins in CNBU
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Micron’s NVDIMM (non-volatile dual in-line memory module) has been qualified at two major enterprise customers.
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The company’s new 20nm (nanometer) 8 GB (gigabyte) GDDR5X SDRAM (graphics double data rate type five synchronous DRAM) has been received well by graphics customers.
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The company’s 20nm, 8 GB, DDR4 products received strong demand from the enterprise and cloud segments.
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On the networking front, the company reported slow demand in fiscal 1H16. However, it stated that there were early signs of recovery in LTE (long-term evolution) demand from China (MCHI), and this would improve demand in fiscal 2H16.
In the next part of the series, we’ll look at the performance of Micron’s mobile segment in fiscal 2Q16.
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