Micron's Fiscal 2Q16 Suffered from Weakness in the Memory Market
Micron looks to grow in 3D NAND space
While DRAM (dynamic random access memory) continues to be a major product of Micron Technology (MU), NVM (non-volatile memory) is slowly gaining pace. Micron earns 37% of its revenue from NVM. More than 50% of this comes from the consumer market, 10%–14% comes from mobile, 13%–18% comes from SSDs (solid-state drives), and 13%–18% comes from embedded drives.
While the three dominant DRAM players Samsung (SSNLF), SK hynix, and Micron compete in the NAND (negative AND) market, Intel (INTC) and SanDisk–Toshiba (SNDK) (TOSBF) have also joined the battle. The hottest product in the NVM market is 3D NAND, and all players are currently ramping up production.
Samsung is ahead of all of its rivals in the 3D NAND space. It started mass production of the technology two years ago, and it’s likely to have an edge over others in terms of cost.
Let’s see how Micron is doing in this space.
Micron’s NAND position in fiscal 2Q16
Micron’s NVM revenue fell 6% quarter-over-quarter, and its gross margin fell a few percentage points in fiscal 2Q16 as a 15% fall in NVM ASP (average selling price) was partially offset by a 12% fall in cost per bit and an 11% rise in sales volume.
Micron’s NAND strategy
Micron is ramping up production of 3D NAND Generation 1 at its Singapore (EWS) facility. Its aim is to produce over 50% of its NAND output on 3D by fiscal 4Q16. Meanwhile, it’s also planning to start the manufacturing of its 3D NAND Generation 2 by summer 2016.
Second-generation 3D NAND is expected to reduce costs by 30% compared to first-generation NAND. The company should start realizing the cost and yield benefits in fiscal 2017.
Industry growth
Micron expects NAND industry demand to grow at a CAGR (compound annual growth rate) of 30%–40% in 2016 and 2017. It expects NAND industry supply growth to be in the mid to high 30% range in 2016 as the industry transitions to 3D.
Micron expects its NAND supply to be below the market in 2016 as it ramps up production and above the market in 2017 as it starts realizing the benefits.
In the price war between NAND and DRAM, Micron is looking to maximize growth by catering to high growth markets such as the automotive and server markets.
In the next few parts of the series, we’ll aim to understand how the company’s products have performed in end consumer segments.
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