Micron Reports Short-Term Reduction in PC Memory, Storage Orders

Micron Technology’s efforts to increase supply chain resilience and “provide business continuity to our customers” will cause “headwinds” to its assembly and packaging costs, “consistent with the trend in the overall industry,” said CEO Sanjay Mehrotra on an earnings call Tuesday for fiscal Q4 ended Sept. 2. Higher demand for Micron’s memory chips in 5G smartphones compared with 4G handsets helped drive 25% Q2 year-over-year revenue growth in the chip maker’s mobile business, for a quarterly record, he said.

Some PC OEM customers are curtailing their memory and storage purchases from Micron “due to shortages of non-memory components that are needed to complete PC bills,” said the CEO. “We expect this adjustment for our PC customers to be largely resolved in the coming months. We're also seeing constraints within our supply chain for certain IC components.” The constraints likely will “limit our big shipments in the near term,” he said. “Big shipping growth” will resume in the second half of the fiscal year ending early September 2022, he said.

“End-user demand” in the PC space remains “very strong,” said Mehrotra. Most of Micron’s PC OEM customers have “an unfulfilled backlog” of orders that’s “quite extensive,” he said. That prices in the PC industry “have gone up” amid the order backlog “speaks to the end-user strong demand,” he said. “It really is all driven by work from home, learn from home,” he said.

The “demand acceleration” that has persisted throughout the COVID-19 pandemic “will continue to support a healthy environment for PC in calendar year '22 as well,” said Mehrotra. The PC industry had “double-digit unit growth” in calendar 2020 and 2021, he said. “We expect that to moderate in calendar year '22 to perhaps from flat to low-single-digit year-over-year growth in terms of PC units sold, yet it will be a healthy market.”

Though consumer PCs may well experience “less than the demand today” in 2022, “commercial PC demand is getting stronger,” driven by the “trends” in the anticipation of businesses reopening and “workers coming back” to the physical office, said Mehrotra: “That drives a greater mix of enterprise PCs, commercial PCs.”

Customer inventories “by and large” are in “decent shape,” said Mehrotra. Some customers strategically might be “carrying more inventory” than others, due to “geopolitical considerations or through the lessons learned during the pandemic,” or their own “considerations” of supply chain shortages, he said. Micron’s own inventory is “very lean,” said Mehrotra. “It is at the leanest level and below our target levels, and that is impacting some of our ability to meet the demand as well.”

The 25% year-over-year revenue growth in mobile was driven by "continued unit sales and content growth,” said Mehrotra. “We expect overall smartphone unit sales to grow this year, with sales of over 500 million 5G mobile phones forecasted” globally, he said. The typical 5G smartphone has more than 50% higher DRAM content and double the NAND content of a 4G phone, he said. “We expect 5G and AI to drive new innovation in applications such as AI-optimized video capture and editing that will fuel DRAM and NAND content growth for years to come.”