Micron Technology Earnings Call Insights: Gaming Demand Opportunities and NAND vs. DRAM

Micron Technology (NASDAQ:MU) recently reported its third quarter earnings and discussed the following topics in its earnings conference call.

Gaming Demand Opportunities

Glen Yeung – Citi: Just a question about the opportunities, demand opportunities from gaming. We’ve seen those game consoles go from quite a low amount of DRAM to quite a high number now. To what extent do you think this is a meaningful demand driver for DRAM in the next few quarters?

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Mark W. Adams – President: Glen, this is Mark Adams. I think it’s all pretty positive for us. When we look at the gaming sector and compare it to other segments, it’s still a pretty positive segment for us. Looking at the densities, kind of on average about 8 gigabytes, it’s all pretty favorable and of course going to the holiday season, we’re pretty excited.

Glen Yeung – Citi: Can I ask another question about cost then. Just thinking about Inotera, I recognize Inotera costs are below yours and you know over time it’s a bit of a drag on the net cost down of the two companies. But is there a point at which the cost come together and at that point we then kind of revert back to more normal cost declines in DRAM?

D. Mark Durcan – CEO, Director: Glenn, this is Mark Durcan. It’s not likely to happen in the short-term and that’s primarily because there is a pretty significant difference in the mix that runs in Inotera today versus the mix that runs in other places. So, you look at Micron DRAM today, it’s – there is a lot of networking, server, consumer gaming products that aren’t necessarily sound Inotera that typically drive pretty good ASP, but also maybe not advancing to the leading edge not as quickly. So, we’re not particularly concerned that the cost profiles don’t marry up. The other thing to keep in mind obviously is that going forward, Inotera costs, to Micron are going to track with the end markets and those are going to move over time. As we bring Elpida into the fold, we will have wholly-owned DRAM capacity that will be much more leading edge and cost efficient to service some of those more high volume markets.

NAND vs. DRAM

Joseph Moore – Morgan Stanley: You said that NAND was the most profitable category, but it (doesn’t look that) far apart if you look at DSG being a little higher than NSG and I know that doesn’t map exactly to the chips, but they’re pretty close and now you’ve got DRAM prices going up and NAND going down. So, going forward, how do you think about the relative profitability of the two and how do you think about moving capacity over to NAND, is it possible that DRAM would be more profitable?

D. Mark Durcan – CEO, Director: So, I think the clarification I’d like to make is that the pricing trend you identified in NAND, I should clarify is really driven by a shift and a mix from SLC and MLC and some other applications. Now, we think as gross margin positive and we think the relative profitability is about the same.

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Mark W. Adams – President: Let me jump in here. We’re not going to be moving capacity around on a high frequency basis, but the changes we’re making are over the long haul and as we look at the market going forward for NAND, there is just insatiable demand. It looks like there is pretty strong demand growth out there into the future and that’s why we’re making the adjustments.

Joseph Moore – Morgan Stanley: Then, at the beginning of the quarter you had talked about NAND bits being up sequentially and they ended up flat, and pricing being down and it ended up quite a bit higher, what was the change over the course of the quarter (indiscernible)?

Mark W. Adams – President: Sure. Ron has mentioned in his comments that the nature of the SSD business will provide some variance in terms of inventory levels and how we stage products for our strategic customers around SSDs. When you get to a category that — as I mentioned in my comments are up, around 60% of our trade NAND capacity, that will have an effect on the timing of the shipments.

A Closer Look: Micron Technology Earnings Cheat Sheet>>