Q3 2020 Micron Technology Inc Earnings Call

Ron Technologies third quarter 2020 financial conference call at this time, all participants are in a listen only mode. Please be advised that todays conference maybe recorded if you require any further assistance. Please press star then zero.

I would now like to hand, the conference over to your speaker.

Head of Investor Relations for Honda Mod Sir Please go ahead.

Thank you and they'll come to my contract value, that's kirker quarter Twentytwenty financial conference call.

On the call written today, I can get matter, though president and CEO and deep, though chief financial Officer.

Today's call will be approximately 60 minutes Emlen this call, including the audio in flight, it's all coming webcast from on Investor Relations website, and investors dark Micron Dot com.

In addition, our website contains the earnings press release and prepared remark find their shocked by a nickel.

Today's discussion will financial results will be presented on a non-GAAP financial leases I left at the White that's right.

He consummation of GAAP to non-GAAP financial measure maybe follow on our website.

As a reminder, a webcast replay will be available on our website later today.

We encourage you to monitor all web site at Mike on Dot com throughout the quarter put the most current information on the company, including information on the radio financial conferences that we will be attending.

You can follow up on Koodo, Mike on Tech.

As a reminder mountains, we wouldn't be discussing today include forward looking statement.

These forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially E. Com statements made today.

We refer you to the documents we filed with the FCC.

This quickly our most recent bomb thinking and thank you.

For a discussion of risks that may affect our future dessert.

Although we believed to be expectations reflected in a forward looking statement are reasonable you cannot guarantee future dessert levels of activity performance or achievements.

Yeah, and no duty to update any of the forward looking statement. After two days. It took on all of these statements to actual result.

I'll now turn the call over two times here.

Thank you for Don Good afternoon, everyone I hope that you your family and your clean safe and healthy.

Along with David <unk> I'm doing this calls from microns offices.

Micron strong execution in the fiscal third quarter drove solid sequential revenue and EPS growth.

We are ramping the industry's most advanced de them known and increasing our mix of high value then.

Our strong competitive position and diversified product portfolio, what micron and then outstanding position for the many exciting growth Unfortunately in the memory and storage markets.

I'll start with an update on our operation.

You do the excellent work with Micron celebrations team most of our Fab and assembly sites operated at full production throughout the quarter, there's not much Singapore, and Taiwan Assembly and test facilities achieving record production.

Corporate 19th and back to other production early in our third quarter was limited to our backend Assembly and test sites and more and Penang, Malaysia and be quickly offset this impact that production adjustment at our other facilities.

On our production facilities other operating normally at this time.

We continue to prioritize the health and safety of all team members and contractors and have strong covered 19 safety measures in place at all our sites worldwide.

We are taking a conservative phased and site specific approach to returning our team members on site prioritizing our manufacturing workforce and engineering team.

Now turning to the market environment.

Depend to make has impacted the cyclical recovery in DRAM, and NAND, causing stronger demand in some segments and weaker demand in others.

Market segments, driven primarily by consumer demand has seen a negative impacts.

Calendar Twentytwenty analyst estimates for the end unit sales of autos smartphones and Pcs are meaningfully lower than Picoway 19 levels, even though estimates for enterprise laptops and chromebook have increased.

The reduced level of global economic activity has also contains near term demand.

[noise] dependent make is driving the epic change in consumer and conflict practices around the world.

Consumers are significantly increasing online activity, including ecommerce gaming and video streaming all of which drive additional data center capacity requirement.

Trends like working from home and online learning are likely to drive long term changes in how we think about workforce flexibility and education.

700 governments around the world are considering ways to ensure the level playing field by considering significant programs that for white chromebooks or tablets to students who cannot afford them as online learning becomes the necessity in these times.

And there's still government fiscal stimulus programs I'd also supportive of economic activity and will accelerate Chen like electric vehicle production.

Emerging technologies, such as joint base deliveries and then she is use of robotics across many application are now being pursued with urgency.

Technology solutions that rapidly, helping society adapt and manage the temporary and permanent changes stemming from this spend to make.

The only 13 trends that would have taken two to four years to develop have been accelerated into month.

It is easy easy to see how these changes will drive higher consumption of memory and storage in the long term.

The faster pace of digital transformation and the economy is here to stay.

Looking ahead to the second half of calendar Twentytwenty, let me discuss certain key market trend.

First we expect the data center outlook to remain healthy.

Second, we expect smartphone and consumer and unit sales to continue to improve accelerating and mentally consumption across the supply chain.

And third new gaming consoles will drive stronger DRAM and NAND demands.

Despite these trends I was shortened visibility across end markets remains limited due to covert 19 macro and treat uncertainties as well as customer inventory changes.

The recent restrictions on Ravi I'd also impacting other opportunity in the near term.

As easily see this receipt, we expect the resumption of industry growth mid to long term based growth CAGR of mid to high teens for DRAM and approximately 30% for NAND.

This call it shouldn't be supported by powerful secular technology Chan ranging from AI and machine learning to cloud computing Fiveg and the growth in edge computing and industrial Aiotv economy.

Turning to industry supply second half Twentytwenty supply growth may be somewhat muted compared to pre covert 19 expectations.

Some suppliers have commented about delays and equipment deliveries, which can result in floored node transition and Louis bed growth.

Specific to micron, we are proactively aligning our bid supplier to market demand.

Our fiscal year 20, Frontend equipment Capex is down more than 40% from fiscal year 19 and is at its lowest level in the last five years.

Why do we expect to increase fiscal year 21, capex to support high although I see no transition.

This capex will be meaningfully lower than our peak over 19 flat.

We've also made changes to our DRAM utilization to align with the current lower demand and automotive market.

And then market conditions evolves, we will remain flexible to make any needed adjustments to our supply.

Since 2016 Micron has made tremendous progress narrowing the competitive gap on leading edge technology nodes.

Indeed them, we are ramping Bonzi technology, which is the industry's most advanced node and achieving yield improvement that reduce our costs.

We have several customer qualifications underway for the technology.

Our runway and one de Novo together now make up more than 50% of our bed production.

We continue to make progress on our one alpha nodes, which we expect to introduce in fiscal 2021.

We have begun sampling our first high bandwidth DRAM memory product, which is competitive bid the industry's most advanced products and will expand our AI data Center reports unity.

We're excited about entering this new high value segment of the Dina market and look forward to ramping this product. After it was qualified with our customers.

And then I would've been 28 layer first generation RG NAND technology entered volume production in FQ three and we're pleased to announce that you have recently initiated customer shipment.

We're also making good progress on our second generation RG note, we shouldn't be deployed broadly across our product portfolio.

We remain on track for RG production to make up meaningful portion of our NAND output by the end of calendar Twentytwenty.

Micron also continues to make progress with QLT.

You will see better now represent more than 10% of microns overall NAND production contributing to our NAND cost improvement.

Fiscal Twentytwenty has been a year of extraordinary gains in the mix of our high value solutions in NAND, which now make up over 75% of our quarterly NAND bit.

We remain on target to increase there to 80% for fiscal 2021.

The new Micron is undergoing a dramatic transformation to combine product leadership that technology manufacturing and supply chain excellent.

Across our entire portfolio of DRAM and NAND products, we will continue to focus on product differentiation and portfolio expansion to grow our share of industry profit, while maintaining stable which is.

Turning to end markets.

We had record quarterly revenue and solid state drive Este Lauder says the revenue more than doubled quarter over quarter.

We continue to introduce new Nvme me products in our SSD portfolio, while maintaining our leadership in the enterprise set up market.

Customer qualifications are progressing well for our next generation products for both the N.V. and set up market.

Our trying to India Me I says these have also contributed to our SSD growth.

In Maine, we announced a T L C client SSD and never first you will see client SSD, both using next generation 96 layered managed technology.

As the only company with a portfolio of DRAM, NAND and CD costs going technologies Micron is uniquely positioned to benefit from the secular data growth that is driving the cloud enterprise and networking market.

Our cloud de them sales grew significantly quarter over quarter that strong demand due to the work from home and E learning economy and significant increases in ecommerce activity around the world.

This quarter, we started early sampling of one di di out five for enterprise application.

Additionally, we also started sampling our higher frequency DDR for modules for Intels Isely server platform, which we expect to drive server de them content growth.

In networking our de then bet shipment expanded significantly on a sequential basis.

Driven by rapid work from home infrastructure deployment as well as increase Fiveg deployment, particularly in Asia.

Despite demand headwinds in the smartphone market due to covert our mobile business delivered healthy sequential and year over year growth due to continuing momentum of our DRAM and NAND solution.

The outlook for calendar 2021 is promising with Fiveg expected to drive a resumption in smartphone unit sales growth with a multiplier effect of higher memory and storage content.

Fiveg phones will have greater content, then fourg phone and we can see this already in the phones being introduced in calendar Twentytwenty.

We see the strongest memory and storage content growth in that low to mid range part of the smartphone market, which is also the largest segment in terms of unit.

In this part of the market Fiveg reforms have six gigabyte of be them and 64 and 128 gigabyte of NAND. What's this fourg before the two to four gigabyte of Vietnam, and 32 to 64 gigabyte of meant.

We are encouraged to see sub 250 dollar fiveg form, which may fiveg accessible to a broader markets.

This lower price point has been enabled by Bom cost reduction in semiconductor content outside of memory and storage.

Micron is well positioned to help our customers when in the Fiveg era, with an industry, leading product portfolio, including low power DRAM and multi chip packaging.

We continue to achieve design wins, what else before and they'll be five fiveg platforms and our most advanced managed NAND products based on your fell 3.1 are now sampling at several major Android OEM.

In PC overbid shipments declined modestly as we strategically most supply of compute de though to edge as demand in the datacenter market.

Demand was strong for certain Pcs and sub segments that are supporting increased work from home and remote learning activities and never PC DRAM revenue was up sequentially at their speeds increased.

While certain parts of the PC market has strengthened overall PC unit shipments are expected to decline this year due to weakness in desktop Pcs.

In draft fixed we have started shipping G.D.D.R. 60, now for next generation gaming console and we expect strong demand in the second half of calendar Twentytwenty.

In auto revenue declined significantly from the previous quarter due to broad auto supply chain disruption.

Despite all the units weakness secular content growth from Adas and autonomous driving platform resulted in record as before DRAM revenue for our auto business in the fiscal third quarter.

As automotive production rates improve around the world our auto business should return to a growth trajectory.

I'll now turn it over to Dave to provide our financial results and guidance.

Thanks Sanjay.

Despite covered 90, we achieved strong results thanks to resilient execution for her team members across the globe.

Total at Q3 revenue was approximately $5.4 billion up 13% sequentially and 14% year over year sequential revenue growth was led by the datacenter and mobile markets.

Hi, Q3, DRAM revenue was $3.6 billion, representing 66% of total revenue.

DRAM revenue increased 16% sequentially and 6% year over year.

Pit shipments were up by approximately 10% sequentially.

Yes piece were up sequentially in the mid single digit percentage range.

At Q3, NAND revenue was approximately $1.7 billion, representing 31% of total revenue.

And revenue increased 10% sequentially and was up over 50% year over year.

But shipments increased in the lower single digit percentage range sequentially.

Hey, Asps increased sequentially in the upper single digit percentage range.

Now turning to our revenue trends by business unit.

Revenue for the compute and networking business unit was $2.2 billion up 13% sequentially and up 7% year over year.

Seem to use sequential growth was driven by double digit quarter over quarter pricing improvements and stronger demand for data center products.

We were supply constrained for certain compute DRAM products, which limited our ability to meet some demand upside from customers.

Revenue for the mobile business unit was $1.5 billion up 21% sequentially and up 30% year over year.

The sequential growth was primarily driven by strong growth in our L.P. DRAM bit shipments.

MCP revenue remained strong and it was up significantly year over year.

Revenue for the storage business unit and that Q3 was $1 billion up 17% from F Q2, and up 25% year over year.

SBQ operating margins increased dramatically to 17% up from a breakeven level last quarter.

The significant sequential improvement in operating margins was driven by improved pricing stronger datacenter SSD mix and overall record SSD revenue.

And finally revenue for the embedded business unit was $675 million down, 3% sequentially and down 4% year over year, primarily from a reduction in automotive demand.

The consolidated gross margin for F Q3 was 33.2%.

Sequential gross margin improvement was driven by pricing improvements in both DRAM and NAND as well as our ongoing improvements in product mix that continue to underpin our financial performance.

The impact of under utilization at our Lehigh Fab was approximately $155 million were 285 basis points in Q3.

We expect under utilization to be approximately $135 million and at Q4 and expect gradual declines in under utilization through fiscal 2021.

Operating expenses were $823 million in FQ three.

As we said on last quarter's call. We've taken several actions to control our operating expenses given the increased uncertainty surrounding covert 19.

As a result, we continue to expect favorable underlying opex trends to continue into fiscal Q4.

F Q3, operating income was $981 million, resulting in an operating margin of 18% compared to 11% in the prior quarter and 23% in the prior year.

Net interest expense increased to $24 million compared to $6 million up net interest expense in the prior quarter.

This increased expense was primarily driven by the draw down of our revolver and subsequent 1.25 billion dollar investment grade note issuance in the quarter.

We expect an interest expense will be approximately $30 million in FQ four due to the due to the decline in interest income because of lower interest rates.

Our Q3 effective tax rate was 3%, which benefited from approximately $19 million of onetime items.

We expect our tax rate in the fourth quarter to be approximately 6%.

Going forward into fiscal 2021, we expect our tax rate to be in the high single digit to low double digit range.

Non-GAAP earnings per share in FQ, three were 82 cents up from 45 cents in FQ, two and down from one dollar and five cents in the year ago corridor.

F Q3, non-GAAP EPS was approximately two cents higher due to the tax benefits reported in the quarter.

Turning to cash flows in capital spending we generated $2 billion in cash from operations in FQ, three representing 37% of revenue.

During the quarter net capital spending was approximately $1.9 billion approximately flat quarter over quarter.

As we enter the final quarter F. why 20, we are projecting fiscal year 2020, capex to be approximately $8 billion.

Our F. why 20 front end equipment, Capex will still be down more than 40% from last year, However, backend capex and building capex, either up which add to pits supply growth are up from last year.

Free cash flow in the quarter was a $101 million compared to $63 million in the prior quarter.

This represents the 14th consecutive quarter of positive free cash flow, reflecting the structurally improved profitability and working capital improvements of the new micron.

We repurchased approximately 929000 shares for $40 million enough Q3 at an average price a $43.54.

In the nine months of Fytwenty, we've returned $134 million of capital through repurchases and paid $266 million to settle conversion of convertible notes.

Combining the convert premiums and share repurchases, we have used $338 million or 135% of F., why 20 free cash flow towards rytary, reducing the share count.

And do you have Q3 inventory was $5.4 billion or a 131 days versus 134 days last quarter.

Our overall days of inventory or above our approximately 110 day target level, partly due to elevated NAND inventory as we transition to replacement gate.

We're also carrying higher raw material levels as a caution given the increased supply chain uncertainty due to the pandemic.

We ended the quarter with total cash of $9.3 billion and total debt at $6.7 billion.

Total liquidity with approximately $11.8 billion up from $10.6 billion at the end of the second quarter.

In the quarter, we issued $1.25 billion of investment grade notes and those proceeds together with $1.25 billion, a cash on hand, which used to repay the $2.5 billion revolving credit facility. We drew at the beginning of the fiscal third quarter.

Prior to providing our outlook and guidance, we'd like to remind everyone that our fiscal Q4 is a 14 week quarter.

Now turning to our outlook as Sanjay mentioned, well visibility remains limited overall datacenter trends are strong and new gaming consoles will be a tailwind to demand in the second half of the calendar year.

Well in unit sales of consumer devices, such as smartphones have started to recover we're seeing an impact from the recent restrictions imposed on why way.

It is also important to remember that we are lagging indicator relative to the end demand.

In addition, the risk of a second wave of covert 19 infections is continuing to drive greater uncertainty for the economic recovery and our business.

Lastly, inventory strategies of our customers are difficult to predict we continue to closely monitor market conditions and respond to changes in the market environment in a timely and disciplined manner.

With all of these factors in mind, our non-GAAP guidance for Q4 is as follows.

We expect revenue to be $6 billion, plus or minus $250 million.

Gross margin to be in the range of 35.5% plus or minus 150 basis points.

An operating expenses to be approximately $850 million plus or minus $25 million.

Finally based on a share count of approximately 1.14 billion fully diluted shares we expect S to be one dollar and five cents plus or minus 10 cents.

In closing, we're extremely proud of microns performance in this unprecedented period of market uncertainty and operational challenges that tenacity creativity and dedication of our team members around the world drove strong results that surpassed our initial expectations.

Micron remains on very solid footing with an investment grade balance sheet ever strengthening product portfolio and secular industry trends that will continue to drive long term demand.

I'll now turn the call over to Sanjay for closing remarks.

Thank you Dave the pandemic has impacted our financial performance trajectory, which was shaping up for the robust outcome. This calendar year. Nevertheless, we have moved fit agility to leverage the new opportunities in the marketplace and have further strengthened our product portfolio.

Microns portfolio is no dramatically better better position from a competitive perspective, and we have driven a tremendous transformation here over the last three years in.

In the coming quarters and years, given continued to strengthen our business Foundation.

And as the industry environment improves micron is exceptionally well positioned to take advantage of long term trend and drive superior the returns for our shareholders.

Of course, preparing micron put a bright future has to be about more than just quarterly business performing.

We also have to be leaders in creating positive outcome, but all of our stakeholders in that context. There are two topics that I would like to touch upon before do you moved from Q1 day.

First earlier this month, we issued our fifth Danville sustainability report.

This year, we said challenging you goals for the energy use and mission more to use and vs generation that aim to dramatically improve the environmental sustainability of our operations worldwide over the years ahead.

You also established an estimation on future vision that their drivers to achieve even more reaching our goal Smith the quite investment and we plan to devote approximately 2% off annual capital expenditures to environmental sustainability initiatives amounting to about $1 billion over the next five to seven years.

These initiatives underpin our commitment to achieve significantly higher standard and help create a better planet.

Second I would like to address the social unrest and nations division that have gripped our country.

Senseless and tragic debts of people in our black community in the U.S. must be addressed video and lasting reforms hate nation discrimination violence and social ingested have no plays in our society.

Micron is committed to creating a better coming and safe work environment for everyone and we are taking concrete action to increase technical training career preparedness and unfortunately, it's what underserved population.

We had also actively engaging and investing in community program that aim to create a more just and fair society for everyone.

It is much work to do and we look forward to being part of the solution.

We will now open for question.

Thank you.

To ask a question you will need to press star one on your telephone to withdraw your question press the pound cake.

Please standby well, we compile the culinary roster.

[noise] Oh first question comes from the line of John Pitzer of Credit Suisse.

Your line is.

Good afternoon, guys. Thanks for let me ask questions on your David Congratulations on solid results. So I Wonder if you think back 90 days ago. When you gave guidance for the May quarter. There was a lot of uncertainty around the pandemic and you guys guided accordingly in hindsight extremely conservatively I think your comment on the call last time was that your.

How are you, saying, you're assuming that your customers are building inventory I guess you'd look to the August quarter Guide was there a similar methodology.

Do you use to inform this guy and I guess, specifically, there's a lot of consternation the investment community about data center demand and you seem to be arguing that in your fiscal fourth quarter remains strong and you expected to remain strong and the calendar second half I'm wondering if you could just share with US why you think that and why you're not as concerned as some perhaps.

In the investment community about inventory builds.

So specifically with respect to data center, you know people bid, we expected twentytwenty to be a years off strong growth in cloud a again with all their trends building around yeah, hi, and that needing more and memory and storage.

We expected to healthy demand for people that in cloud applications and of course with all of it as we discussed in the last earnings call. You know certainly some of the trends guard pointed in work from home economy as well is ecommerce gaming video streaming all of these drove strong surge in demand on the cloud front.

As you look ahead at the second half of course, you know given that Doritos colvin environment and uncertainties around cool events around the globe.

We basically have limited visibility yet we do believe that cloud demand in the second half of their calendar year Ville continued to be healthy for us.

They've worked closely with our customers in terms of understanding their inventories me understand what their demand trends are and from what we can see customer inventory is with respect to cloud are in a healthy place and sale of course, you know that ought to other parts of the market you know such as mobile phone.

You know very there are other considerations such a geopolitical considerations as well as a you know related to corporate as well where customers me have built up some additional inventory and in mobile in particular, you know you saw in China, that's how it though a forced pooling then China the debate.

Then went up I sort of stuff for smartphones. So some of their customers maybe preparing for you know as the consumer comes back given the north point to that devoted experience in March April timeframe that customers want to be prepared to supply the smartphone demand to them as well so.

Well, a you know and it's a mixed picture you know with respect to the inventory on the customer front.

Oh didn't mean toadies odd in decent shape mobile I would say somebody in anticipation of demand as well as.

You know when managing to the supply chain cancellations due to go ahead, and some geopolitical considerations as well. So overall I would say and then you look at fiscal first quarter. The environment is similar to what do you have experience in that you'd see FQ four and of course all are best assessment, you know what is baked into.

The Guy who said we have provided to you.

Perfect. Thanks, guys appreciate it.

Thank you. Our next question comes from C.J. Muse Evercore. Your line is open.

Good afternoon. Thank you for taking the question I guess of course, you know gross margins, how should we thinking about mix, particularly DRAM as we move into the August corridor, and I guess would would love to hear as part of that what implied cost down so well look like and really just trying to understand.

Nice step up you're seeing.

You know how much of that is mix versus cost down versus perhaps other.

So well, let me sit back to Q3 to for a second so gross margins, obviously expanded in the third quarter as well.

As I said in the prepared remarks, I'd I'd say that that was priced the pricing environment in both DRAM and NAND.

Combined with just a richer mix of higher value products, which which obviously carry with it better gross margins.

You know from a from a high value solution perspective, I think we see that again in the fourth quarter that is helping drive an improved outlook for gross margins for the fourth fiscal quarter. You know you know CJ that we don't telegraph pricing and cost out for a for future quarters, but suffice it to say you know we we take.

Both pricing and cost reductions into account and then obviously the combination of those are are pretty favorable.

You know the other thing I would say is in the second or third fiscal quarter. We did have some.

Fences associated with covert 19, both in terms of just increased spending on our part to manage through some disruptions that we had early on and then on top of that we did have to move around the.

The backend production that did increase our tariff expense in the third quarter. So those things we wouldn't expect to happen.

Again in the fourth quarter, which is helping also on the gross margin front in the fourth quarter.

Thank you.

Sure.

Thank you. Your next question comes from Blayne Curtis of Barclays. Your question. Please.

Yeah. Thanks to my question I'll Echo the congrats just on Capex.

Like this year there were some concern that may be lower it if they billion I guess when you look an extra I don't know where you're starting point was what I was wondering if you could walk us through some you're moving pieces you talked about fiveg is being the big tailwind that make sense and I'm curious what you would highlight.

That you're taking in account for next year on the other way.

Yeah, I mean, the one thing to keep in mind is so you know capex spending this year had a fair amount of construction expense and actually we drove the front end equipment expense down quite considerably on year over beat your basis somebody said in the prepared remarks, <unk> was down more than 40% in both DRAM and NAND. So yes.

Cut back pretty heavily on the front end equipment side this year.

Next year, we would expect some of that to come back in particular, we're going through a full.

A rotation into our second generation of replacement gate that certainly will drive some cutbacks increases.

And you know offsetting that we'll have to look at construction see a you know what what Directionally, we want to do there I'd say, we haven't firmed up but the capex plans quite honestly for the year.

As you know, we maintain a lot of flexibility around capex.

We take a hard look at the demand profile of bets over the next few years and we kind of manage stuff. The front end capex accordingly to make sure that that we're staying aligned with that so you know over the next.

Couple of months will continue to refine our outlook over the next year or two and I think we'll be able to.

Ill give you a better picture when we have our fourth quarter earnings announcement I would say when we looked at a you know coming in pre covert levels on the Capex, Brian for front end equipment and now that we look at it now it certainly has been cut back and our expectation is that will impact kind of our bit supply.

Hi.

In the calendar fourth quarter.

Thanks.

Sure.

Thank you next question comes from Harlan sur of JP Morgan Your line is open.

Good afternoon, and congratulations on the solid execution no last earnings call. The team highlighted the supply production shift in mix from mobile to serve or de rounds to service the higher demand from your data center customers given the outlook for stronger data center demand are you guys keeping the production mix more heavily weighted towards server.

Do you ramp or are you already starting to shift part of your DRAM production mix stuck to mobile.

So he of course manage our mix on an ongoing bases, we assess customer demand expectations and make judgments regarding managing that mix. So yes. Like you noted we had shifted some of the supply from mobile toward the server applications.

And you know at this point, we continue to make study how there tends that evolving and do things yet in a good position with respect to managing on mix, but if some changes are needed will of course revert to making those changes in the future.

Great. Thank you.

Thank you. Your next question comes from alignment 70, Arcuri Oh, Yes. Your line is open.

Thanks, a lot on Sunday, you talked about why way I think twice or you know maybe three three times and I know you didn't reshipping under the licenses and the new restrictions are really on a six not on standard products. So is that comment really more around the fact that this is sort of the last extension of the commerce licenses.

And and so you won't be able shipped to them. You know you know not a few months and can you sort of quantify how much is your quality exposure right now thanks.

So thanks for asking that question just to be clear the favia placement on entities list of you had applied for licenses and be secured those licenses for mobile and said where shipments and we do not supply into the networking side of the business, we never saw that license.

So the entity lifts placement that had happened several months ago did impact some of our outlook, but do you have been operating under the licenses that we have already received the comments that that was making today is really related to last month action by Commerce Department, which will go into effect.

Oh sometime next month and as a result off that action or have you had already starting to see an impact in our fiscal Q4 and not a customer reacts to the actions by the U.S. and quite frankly impacts related to while they are still unfolding we expect somewhat.

The impact to Harvey, yes related to the foundries, but didn't affect there potentially or what other considerations on managing their business managing their supply chain and we expect some of these impact to continue in FQ, one and be aren't as well and then this is compounded further by changing in Maine.

These strategies that customers.

As well as market share shifts that happened between the smartphone players. So that's what we have concerns you know that we have improved our revenue never severity and diversity of you have significantly expanded and strengthened our product portfolio and we have good design in activity, even all key players, but clearly that new product.

We have introduced such as Europe at 3.1, it would be five de them and multi chip packages.

So we continue to work, they're not customer ecosystem to mitigate the effects of this but the particular comments that you heard us talk about on the Javier front I'd really relate to the actions from U.S. government that have a last month that have impacted.

Dot customer reaction, the though Javier reaction I do those actions and impacting our outlook in FQ four.

And then I guess, just how much of you know revenue wasn't median may day.

In the mid quarter, the eschewed see quarter, a that did not the action announced last month Dennard action announced by the Commerce Department last month did not have an effect in FQ three.

Now suffice it to say that we Didnt list them as a you know over 10% customer. So you can.

You know maybe assumption that it was below 10%.

Okay. Thanks it.

Sure.

Thank you. Our next question comes from a line of Joe Moore of Morgan Stanley. Your line is open.

Great. Thank you I wanted to ask about a customer inventory went to revisit that.

To the extent that customers are wrestling with pretty unprecedented potential supply challenges.

Do you think they're building up buffer inventory to deal with Adam and we've seen single earthquakes in one region caused that behavior in the past now we're dealing with rolling outages across multiple continents. Do you think customers maybe building inventory and if so do you think memory sort of less or more impacted than other things from that and have a follow up.

So what I can tell you is that micron itself in our supply chain operations has focused on making sure given all the considerations around the globe you know with all the uncertainty that encore bed and covered containment and corporate spread.

Mike one itself and its supply chain. All patients is increasing then may 20 fold. It all materials do make sure that you had when compared to meet our customer demands. So this trend off hire never lost in mentally elevated level off inventory is.

You know it's been talked about in this call my name the deck supply chain.

And you know with respect to hours specific customers from memory and storage so as I mentioned earlier.

Yes, some customers may have built some inventory given their considerations then concerns around supplies potential supply chain disruptions that may occur you do all the corbett related uncertainties as well as I as I pointed out some of their customers in the mobile may have been some inventory given U.S. China.

Retentions and the regulations. So the thing is you know these on unprecedented times uncertain times not just for us off one of them any industry bunch, what our customer ecosystem as well and customers a in Minto. These strategies are changing they ought adapting as they themselves.

The hollow their market trends are evolving and you know how they want to best and there's there's one inventory position as well. So this is that changing environment. We continue to work it wasn't even though its customers and a you know V make adjustments as appropriate and key is to be adaptable and to be edge Island I think we have shown over the four so.

The first half of this calendar year that you have been or do you need running out all patients with tremendous amount of adaptability and agility and continuing to produce healthy to those.

Great. Thank you for that and then in terms of the strength that you guys are seeing in cloud.

In the second half would you differentiate it all by geography, I think you mentioned, China being stronger, but isn't any different China versus the rest of the world in cloud.

You know when we know we're going to break it down here between China and rest of the world, but Oh, what all of a you know when do you look look at in totality heavy continue to see healthy demand trend in cloud in the second half of the a and of course you know.

Well I'll then you look at long term trends I mean long terms cloud is still actually in early innings and long term trends for cloud our strong because yeah, hi, as well as you know fiveg fiveg driving more intelligent devices at the edge growing more data. Unfortunately, that's really the virtuous cycle.

Between cloud and intelligent devices at the edge and then industrial Aiotv and everything I don't know dawn them on a single BARTEX. All of these trends you appoint do growth at the edge as well as a in the cloud. So long term trends continue to be healthy build and really never be little bit lumpy hit or there certainly.

Can be but the point is that long term growth drivers are solid and secular in nature for cloud.

Great. Thanks, so much.

Thanks. Your next question comes from Mr. Steven.

RBC capital markets. Your line is open.

Hey, guys. Thanks, taking my question so very much in Q2 things on the cold I wanted to talk with double click on so first wanted to you mentioned that.

Some of the shipments a semi cap didn't come in on time. So this enough in your opinion to kind of impact the price of memory I'm not looking for specific numbers, but but what is the shipment mess.

Impactful not do you think it today [laughter] hurt supply enough to move the price and then secondly, just high level any comments on the U.S. government kind of incentivizing U.S. manufacturing. So we've got TSMC coming to the United States and any any impact you guys think it'll it'll happen you guys have future.

[laughter].

So regarding the equipment piece that you asked let me be very clear that micron did receive its equipment in time, because our equipment deliveries would rather early in fiscal Q3, two word ARD ones the technology them in DRAM and of course, our that aspect. So.

On demand front as well so we did not say that equipment deliveries were delayed for us during sq. Three however, it is well known and has been talked about in the industry that given the various challenges due to covert such as logistics and transportation related challenges as.

As well as supply chain challenges some of the equipment deliveries have been impacted in the industry and yes, you know put us in the future.

As possible you know given the challenges of coverage that some of our deliveries in the future me get impacted but in the past you know if you have been in good shape overall with respect to all of the seedorf equipment again, because diming off most of that equipment delivery was such that we weren't able to actually escape some of the potential challenge.

Just in this regard so it's all my industry point of view if equipment deliveries get impacted you know which have been talked about that have been supports equipment suppliers have talked about some of that as well then obviously that impacts technology transition capabilities and therefore it can impact.

Apply but have some blood supply growth somewhat lower than equal varied expectations due to the difficulty in making sure that they could have been delivered on time as well as equipment installed and equipment DRAM is happening smoothly given all the travel and physicians involved as well so yes.

To the extent that effects the supply growth and lessons that supply growth you, obviously impacts the industry supply and demand environment.

We have talked about the demand also due to covered in certain pockets. You know certainly has been less particularly those buckets related to go ahead. So you know and you don't really comment on the pricing, but obviously supply has an important role to play on the pricing front your.

Second piece of the questions regarding.

Possible.

U.S. incentives for semiconductor manufacturing, let me first say that you know we are pleased that a the U.S. administration as well as the Congress is considering incentives for U.S. semiconductor industry. There's just goes to highlight that U.S. semiconductor industry is extremely important to already.

Economy today, a semiconductor really for forms the foundation all day economy of the future and also highlights the recognition of this importance.

By the officials in Washington DC.

And really it's important that U.S. maintains its global competitiveness and innovation capabilities. So from that point of view. We are pleased that there are these cancellations the bill that is.

There has been put together of course, you know lot of detail still has to be looked out of the bills have to be approved so even continue to monitor this and from the point of view of a minimally I think important thing is that.

<unk> costs and scale in memory and extremely important considerations.

Micron in this regard actually has a very diversified footprint a front end manufacturing I thought the glow of you know that we have fabs yet in the U.S. in Manassas, Virginia, as well as in Utah and state of the or best in class R&D facility in Boise, Idaho, as well and of course, we have R&D and manufacturing.

And for memory in Asia as well, so even though you know continue to monitor these trends, but important considerations our scale cost and auto why on any investments is important it's not just about government incentives, it's about managing the business in a healthy fashion keeping in mind auto why considerations.

And above all it's extremely important that supply growth is managed in a cost effective fashion, but also managed in a fashion dennard to serve the industry do certainly not just enough to microns supply plans and make sure that like supply Cabot is aligned with demand CAGR. So why we welcome.

These are a you know a incentives for you a growth of U.S. semiconductor industry and innovation agenda.

We'll continue to monitor this in a very disciplined fashion before do you make any decisions in this regard.

Thank you very much.

Thank you. Our next question comes from Chris Danely of Citigroup. Your line is open.

Just a question.

Can you just talk about the linearity of bookings during the quarter to date.

Build all quarter was there some volatility in there and then you also mentioned that mobile in data center were the strongest end markets were both of those are stronger than expected.

No. So a linear any bookings was was pretty I would call it pretty linear through the quarter no surprises.

And the mix I'm of course, we as we said data centers showed.

Good strength through the through the quarter and mobile was a bit weaker than.

Than perhaps we we were thinking coming into it but you know just in terms of linear already but in general I would say you know.

Actually a fairly linear quarter for us.

Great. Thanks.

Thank you My next question comes from Meaty Hosseini.

Outside G. Your line is open.

Yes, Thanks for squeezing me.

Most of the good questions have been asked I just have the fog.

I'm, just wondering sun, Jay what would it take for your customers.

To feel comfortable in starting multiyear.

Hi quarter, rather contracts I remember when something was tied back in 2016 and 17 the industry was hardly do.

Longer term contracts associated with enterprise cuts I think.

Changed.

Context, how do you see.

Coming back in.

And more and part of that memory industry. Thank you.

So maybe you were breaking up a little bit. However, your question is a good question and of course me as you know our customer base is extremely vendor words can fight you know from automotive to data center to be seed to smartphones and networking and industrial and consumer customers. So the you know customer requirements.

With respect to no discussions around supply and.

From us they really you know some of their customers that managing it on monthly basis. Some management on quarterly basis. Then there's some customers. We do have you know supply agreements that extend for the Eurs timeframe of course, you know certain pricing discussions et cetera.

I mean are not part of these contracts they tend to be around supply and you know discussion said on pricing tend to be on an ongoing basis auto is an example, there the contracts can be multiyear contracts and long term contracts. So it really varies from a market to market. Then you know that the technology and product mix.

The news to change as well. So I think you know we want to be careful in terms of the length of the contracts that we manage with their customers and have you manage I believe the diversity of our customers very well and our customers value our supply. They are valuing the product portfolio that micron is delivering they recognize.

The thing that you know, we're the only company in the world that have NAND, DRAM and Threed Cross point and the ability to bring innovative products and solutions to them with a mix of technologies in them as well and this really positions us a uniquely so our discussions really gardening and longer term nature of.

Our next Roadmaps and supply considerations Viva and all of these various aspects and are built an owned the roadmaps as well so things do change in this business and therefore multiyear contracts are more in the market that our auto market, even more legacy nodes are required to be in production for longer terms.

But the parts of the markets, where technology and products that are moving fast you know if north about multiyear contracts, there, but you varying length of contracts, depending upon the end market customers.

Thank you.

Thank you. Our next question comes from Karl Ackerman of Cowen.

Your line is open.

Good afternoon, gentlemen, thanks for let me ask the question.

It's great to see the improvements you in your SSD segment, those Cline and enterprise.

First what's worked percentage could you don't see drives represent as a portion of your overall SSD next next year could it be 25% or more.

You know and had appreciate hearing your perspective on the development taking place in enterprise Ssds No. One on one hand, you are you must be competitor has been adamant, they're going to gain significant share in enterprise that's the Steve This year.

At merchant controller manufacturers, you enable cloud provider suit is on their own in house enterprise Ssds, rather than just relying on off the shelf accessories from Oems. So I was hoping you could just provide high you know the opportunity that you see an enterprise to see this year versus peers and how you see that playing out over the next totaled 24 months, particularly.

Yes, I assume the new technologies that youre, introducing ana and and providing such as P. 34 point out becomes more mainstream thank you.

Thank you for asking the question, we're very pleased without execution NFV. These as we noted.

That record quarter for the us in Ssds and really solid sequential growth in this disease and this is happening as we had said before that you didn't calendar year Twentytwenty, we will be expanding our portfolio of SSD solutions, introducing nvme solutions for clients as well as datacenter market.

And we had said before that as we.

Being dollar those new solutions says you qualify them get those customers and those nvme solutions. If it gave us an abortion or do you during the course of the year to gain share and this is what has been happening during the course of this year.

Our strong performance in Ssds, we actually have been.

Gaining share yet our shared is still relatively low and as we continue to bring out a new products in the future in several are underway and several qualifications on under via as well with other customers. We will have ongoing. Unfortunately these through the course of next year as well in terms of driving for profitable share.

Gains in the SSD market and regarding Q L.C. that you asked about we're really pleased with our execution on the Q will see front as well I've got shipping Q Lcs disease in the consumer market as well as you have a product offerings.

That will be having you know drive future. Unfortunately for us on the value sides of the PC or on the OEM front as well and Q Lcs says these out also been views in lead intensive applications and replacing 10-K hdds as well so you see there not merger.

Hello.

End market applications and unfortunately, these four hour ssds and we had already a you know more than 10% off our door Doe and then consumption.

With respect to Q L.C. and disappears then it's a good unfortunately for the us.

And we fully expect I Wouldnt SSD mix to continue to increase as we bring out more new products over the course of.

Next.

Seven quarters. So yes, I mean, if you will see as a mix of SSD and ports and page will go up for us going forward.

Thank you.

And let me just said that you know if you will see is obviously, an unfortunately that instead of see that's Marcellus has for this quarter sale. So obviously you know once done right and you really have all the bomb costing can get off on the product side. It gives you lower cost and therefore improved profitability. Unfortunately as well. So we Oh you know certainly focused on.

In closing them make so if you will see a at the same time, you know DS even demand vast majority of the market for considerable period of time.

Thank you. Our final question comes on the line now Mark Newman Bernstein. Your line is open.

Hi, Thanks for squeezing again, congrats from strong numbers today, just a question on the data center.

And that seems to be and its it sounds like everything you said stays very upbeat quite bullish on defense demand remaining.

Quite strong.

That seems to be some long as in the market superior around some investors Uh huh.

Okay that is inventory happing increase slightly and I think the Wally stemming from your will happen in 2018 with the top in orders are in late 2018, which.

ER, which continue to much between 19.

So my question is.

How how is the communication changed with the data center the hot scan is.

Or you can you are having more frequent.

Closer communication with them to determine.

To get a better light vehicle inventory levels or or or otherwise.

How how can you.

To help them soon though is that good data center demands can remain stronger for longer as we hope it will.

So first of all I would say on the inventory side, you know equal that did not center customers as well as other customers largely had inventories that has returned to normal levels and certainly you know supplier inventories what at normal level.

As well you know people that and are you, hoping environmental work from home environment has driven strong surgeon demand on the datacenter front end as we mentioned we expect you know demand trends to continue to be healthy in the second half for data center as well in terms of inventories in the data.

Into market, yes, whilst you know certain customers, maybe getting higher levels of inventory again for the reasons that I had mentioned earlier related do you know that on supply chain considerations as well as you know changing environment with respect to the demand, but the point is that compared to 82018 or 2019.

Environment.

My name into these are really at a much better much healthier levels. This is not like a 2018 2019 situation. Even if you know certain customers are getting some higher levels of inventory again, you know given the uncertainties around corporate and other.

Point I would say is that a violent move it does.

You know gave us lower visibility and does bring about uncertainty not just what us but for our customers as well.

Cloud is any of you have entered the long term demand trends as I mentioned earlier, our secular in nature overall, Oh, so memory and storage you know given the kind of applications that customers 'cause datacenter customers Hyperscalers are working on those are requiring more memory and more softness or the longer.

Trend continues to be healthy in the near term, yes, I mean covered does have a you know unprecedented.

Amount off challenges and you know uncertainty in the entire.

System, and you're doing our best to continue to work with our customers our relationships today. Since you were asking about those are certainly a lot closer than they were in the previous timeframe I would say that even hyperscale customers have become somewhat more sophisticated in terms of understanding the memory dynamics in.

And you know improving that on the supply chain operations. So it's really a two way relationship you know we do work closely together, though with them having said all of that of course, you know our visibility cannot be perfect. In this area. We continue to focus on working closely with their customers understanding that acquired.

Vincent planning our supply chain Accordingly, and what also held says that the markets are quite diverse what else I mean, yes cloud is a strong a driver of.

Growth for the business, but also very diversified with a strong mobile footprint as well as a b C and between DRAM and NAND.

And as we talked about diversified into the gaming side, the new gaming consoles coming in you know needing more DRAM twice as much detail from new gaming consoles. So there wasn't any other business is certainly a helpful factor for us to manage through some of these uncertainties.

Hi, Thanks, very much under its very helpful.

Thanks Mark.

Okay.

Thank you ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.

[noise].

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Ladies and gentlemen, thank you for standing by and walk in some micron Technologys third quarter 2020 financial conference call.

At this time, all participants Arnie listen only mode. Please be advised that todays conference maybe recorded if you're acquiring any further assistance. Please press star then zero.

I would now like to hand, the conference over to your speaker.

Head of Investor Relations <unk>, Sir Please go ahead.

Thank you and they'll come to my thought technology, that's good quarter 2021 that show called <unk>.

On the call with me today, I can get Mad <unk>, President and CEO, Dave So Chief Financial Officer.

Today's call will be approximately 60 minutes and then that's called including the audio and flights adults will be webcast from Investor Relations website at <unk> Dot Micron Dot com.

In addition, our website <unk> earnings that's really.

Prepared remark find a shot quite a nickel.

Today's discussion will find that should result will be presented on a non-GAAP lunch or would be Uh huh.

That's right.

I think unconditional GAAP to non-GAAP financial measure maybe on a website.

As I am I know a webcast replay will be available on our website later today.

We encourage you to monetize all web site at Mike on Dot Com well the portal quit the most cutting consolidation on the company, including information on the radio one actually content that we will be attending.

You can follow up on who don't like on that.

And let him lined up a lot of we'll be discussing today includes forward looking statement.

These forward looking statements object to that and I couldn't be that may cause actual results to depomed you didn't call statements made today.

We didn't play you did the documents you probably would be a season.

That's correct me most recent Bob thinking and then Q.

Hard to cushion offering that may affect our feature to the.

Although we believe the expectations reflected in a forward looking statement are reasonable you cannot guarantee feature to the levels of activity performance or achievements.

We undertake no duty to update any of the forward looking statement. After two days. It took on all these statements to actual result.

I'll now turn the call or what was Anja.

Thank you for Don Good afternoon, everyone I hope that you your family and your clean safe and healthy.

Along with Stephen Sondheim I'm doing this calls from microns offices.

Micron strong execution in the fiscal third quarter drove solid sequential revenue and EPS cool.

Yeah that being the industry's most advanced do them known and increasing our mix so I've been doing that.

Strong competitive position and Dennis if I thought it portfolio, what micron and then outstanding position for the many exciting growth. Unfortunately to you in the memory and storage markets.

I'll start with an update on I would operation.

You do the excellent work of microns, all patients team most of our Fab and assembly sites operated at full production throughout the quarter, then, our Singapore, and Taiwan Assembly and test facilities achieving record production.

Got it 19th and back to all of production early in our third quarter was limited to alert backend empty and best site, and more and Penang, Malaysia and be quickie offset the impact that production adjustment at what other facilities.

On that one production facilities other operating normally at this time.

We continue to prioritize the health and safety of all team members and contractors and have strong Corbett 19 safety measures in place at all our sites worldwide.

We are taking a conservative phased and site specific approach to returning our team members on site.

Using our manufacturing workforce and engineering team.

Now turning to the market environment.

Depend to make has impacted that they pick up as a company in DRAM and NAND, causing stronger demand in some segments and weaker demand and others.

Market segments, driven primarily by consumer demand has seen a negative impacts.

Calendar Twentytwenty analyst estimates for the end unit sales of autos smartphone and PC meaningfully lower than peak will get 19 levels, even though estimates what enterprise laptops and chromebook have increased.

Then views level of global economic activity has also incur danced near term demand.

[noise] dependent make is driving that might change in consumer in conflict actresses around the world.

Consumers that significantly increasing online activity, including ecommerce gaming and video streaming all of which drive additional data center capacity requirement.

Sounds like working from home and online learning are likely to drive long term changes in how we think about workforce flexibility and education.

Said another government that on the worried about considering ways to ensure that level playing field by considering significant programs that for white chromebooks or tablets, so students who cannot afford them as online learning becomes the necessity in these times.

And there's no government fiscal stimulus program I'd also supportive of economic activity and will accelerate Chen like electric vehicle production.

Emerging technologies, such as drone based 11 leave and then she is you sell through bought it across many application are now being pursued video gensix.

It's all these solutions I definitely helping society adapt and manage the temporary and permanent changes stemming from this spend to make.

The only certain trends that would have taken two to four years to develop had been escalated into month.

It is easy to see how these changes will drive higher consumption of memory and storage in the long term.

The thing, it's a digital transformation and the economy is here to stay.

Looking ahead to the second half of calendar Twentytwenty, Nick we discuss certain key market trend.

First we expect that need to think that outlook does remain healthy.

Second we expect smartphone and consumed by the end unit sales to continue to improve.

Anything in mentality consumption across the supply chain.

And third new gaming console, they drive stronger DRAM and NAND demands.

Despite these trends I will shorten visibility across end markets have been limited you took over 19 macro and create uncertainty as well as customer inventory changes.

Then he seemed to fix doesn't involve a I'd also impacting all that unfortunately in the near term.

These we see this receipt, we expect an exemption of industry growth mid to long term bed growth CAGR mid to high teens for DRAM and approximately 30% ordinance.

This call it shouldn't be supported by powerful secular technology, Chad ranging from Yale and machine learning to cloud computing Fiveg and the growth in edge computing and industrial Aiotv economy.

Turning to industry supply second half Twentytwenty supply growth, maybe somewhat muted compared to peak over 19 expectation.

I'm suppliers have commented about delays and equipment deliveries between deserved and nor nor transmission and lower bed growth.

Specific to Mike, Sean we are proactively aligning our bit supplier to market demand.

Our fiscal year, Twentys Suntan, Kookmin Capex is down more than 40% from fiscal year 19 and is at its lowest level in the last five years.

Why do we expect to increase fiscal year, two and even capex to support <unk>, Although I see no transition.

This capex would it be meaningfully lower than our peak over 19 flat.

We've also made changes to our de them utilization to align with the current lower demand and automotive market.

And then market conditions of all you will remain flexible to make any needed adjustments to our supply.

Since 2016 Micron has made tremendous progress meddling their competitive gap on leading edge technology nodes.

Indeed.

Ramping one lead technology, which is the industry's most advanced node and achieving yield improvement that reduce our costs.

Several customer qualifications underway for the technology.

I would have and why and one de known together now make up more than 50% off a little bit production.

We continue to make progress on our one outside nodes, which we expect to introduce in fiscal 2021.

We have begun sampling other first high bandwidth DRAM memory product, but just competitive did the industry's most advanced product and will expand our AI datacenter to Fortunately.

We had excited about entering the new high value segment of the D. that market and look forward to ramping this product often it is qualified with our customers.

And then I would want aren't the clear first generation RG NAND technology entered volume production in FQ three and we're pleased to announce them you have recently initiated customer shipment.

You had also making good progress on our second generation or do you know there shouldn't be deployed broadly across our product portfolio.

We remain on track for RG production, you make up meaningfully portion of our NAND output by the end of calendar Twentytwenty.

Micron also continues to meet progress with QLT.

You will see better now represent more than 10% of microns all NAND production.

Contributing to our NAND cost improvement.

Fiscal Twentytwenty has been a year of extraordinary gains and the mix of our high value solutions and NAND, Mitch now make up over 75% of our quarterly NAND bit.

We remain on target student sees the 280% for fiscal 2021.

The new Micron is undergoing a dramatic transformation two combined product leadership technology manufacturing and supply chain excellent.

Across our entire portfolio of DRAM and NAND products, even continued to focus on product differentiation and portfolio expansion to grow our share of industry profit by maintaining stable which is.

Turning to end market.

We had record quarterly revenue and solid state drive Este Lauder fuzzy revenue more than doubled quarter over quarter.

We continue to introduce new Nvme, you, Florida, and now what SSD portfolio.

Feeding our leadership in the enterprise that the market.

That's one qualifications are progressing well for our next generation products for both envy, I mean and that that market.

I want to try and be EMEA. Because these have also contributed to about SSD growth.

In May we announced that DLC client SSD and our first Q will seek lined up as the both using next generation 96 their advanced technology.

As the only company with a portfolio of de them meant and CD cost point technologies.

Micron is uniquely positioned to benefit from the secular data growth that is driving the cloud enterprise and networking market.

Our cloud the them feel grew significantly quarter over quarter that strong demand due to the work from home and E learning economy and significant increases in ecommerce activity around the world.

This quarter, we started R&D sampling of Bundy Mediatek five for the enterprise application.

Additionally, we also started sampling our higher frequency DDR for modules for Intel ice Nate server platform, which we expect to drive February de them content growth.

And next working our de then bet shipment expanded significantly on a sequential basis.

And by that bid work from home infrastructure deployment as one have been cheese fiveg deployment, particularly in Asia.

Despite demand had been in the smartphone market due to covert our mobile business delivered healthy sequential and year over year growth due to continuing momentum of our DRAM and NAND solution.

The outlook for calendar Twentytwenty, one is promising mid fiveg expected to drive assumption and smartphone unit sales growth.

Multiply the effect of hired memory and storage content.

Finally, before we'll have great content, then fourg phone and you can see this already in the phones being introduced in calendar Twentytwenty.

We see the strongest memory and storage content growth in that low to mid James <unk> part of the smartphone market, which is also the largest segment in terms of unit.

In this part of the market Fiveg reforms have fixed gigabyte of be them and 64 and 128 Gigabyte man.

What's this fourg phone they do four gigabyte of Vietnam, and 32 to 64 gigabyte of men.

We are encouraged to see sub 250, doner, fiveg form, which may five GE accessible to a broader markets.

This nor pricepoint has been enabled by Bom cost reduction in semiconductor content outside of memory and storage.

Micron is well positioned to help our customers when in the Fiveg.

With an industry, leading product portfolio, including low power Dina and multi chip package it.

We continue to achieve design wins, what as before and that'd be five fiveg platforms and our most advanced management product based on your Pepsi 0.1, I know sampling at several major Android OEM.

NBC Olympics shipments declined modestly as we strategically most supply of compute detail to address demand in the datacenter market.

Demand was strong for certain Pcs and sub segment, that's supporting increased work from home and the most learning activities and that would be CD them revenue was up sequentially at their speeds and treat.

While the second part of the PC market have Jensen overall PC unit shipments are expected to decline this year due to weakness in desktop Pcs.

In got fixed me, if dr. shipping GDR 60 them for next generation gaming console and we expect strong demand in the second half of calendar Twentytwenty.

In auto revenue declined significantly from the previous quarter due to broad auto supply chain disruption.

Despite all the unit eaten a secular content growth from you death and autonomous driving platform resulted in record as before de them to venue bought our auto business in the fiscal third quarter.

As automotive production rates improve around the world, although it auto business should return to a growth trajectory.

I'll now turn it over to Dave to avoid that would if I understand the though and guide.

Thanks Sanjay.

Despite covered 19, we achieved strong results thanks to resilient execution for her team members across the globe.

Total Q3 revenue was approximately $5.4 billion up 13% sequentially and 14% year over year sequential revenue growth was led by the datacenter and mobile markets.

At Q3, DRAM revenue was $3.6 billion, representing 66% of total revenue.

DRAM revenue increased 16% sequentially and 6% year over year.

Bit shipments were up by approximately 10% sequentially.

Asps were up sequentially in the mid single digit percentage range.

At Q3, NAND revenue was approximately $1.7 billion, representing 31% of total revenue.

And revenue increased 10% sequentially and was up over 50% year over year.

Fit shipments increased in the lower single digit percentage range sequentially.

Hey, Asps increased sequentially in the upper single digit percentage range.

Now turning to our revenue trends by business unit.

Revenue for the compute and networking business unit was $2.2 billion up 13% sequentially and up 7% year over year.

CMB use sequential growth was driven by double digit quarter over quarter pricing improvements and stronger demand for datacenter products.

We were supply constrained for certain compute DRAM products, which limited our ability to meet some demand upside from customers.

Revenue for the mobile business unit was $1.5 billion up 21% sequentially and up 30% year over year.

The sequential growth was primarily driven by strong growth in our L.P. DRAM bit shipments.

MCP revenue remained strong and it was up significantly year over year.

Revenue for the storage business unit net Q3 was $1 billion up 17% from F Q2, and up 25% year over year.

SBQ operating margins increased dramatically to 17% up from a breakeven level last quarter.

The significant sequential improvement in operating margins was driven by improved pricing stronger datacenter SSD mix and overall record SSD revenue.

And finally revenue for the embedded business unit was $675 million down, 3% sequentially and down 4% year over year, primarily from a reduction in automotive demand.

The consolidated gross margins for Q3 was 33.2%.

Sequential gross margin improvement was driven by pricing improvements in both DRAM and NAND as well as our ongoing improvements in product mix that continue to underpin our financial performance.

The impact of under utilization at our Lehigh Fab was approximately $155 million were 285 basis points in FQ three.

We expect under utilization to be approximately $135 million in Q4, and expect gradual declines in under utilization through fiscal 2021.

Operating expenses were $823 million in FQ three.

As we said on last quarter's call. We've taken several actions to control our operating expenses given the increased uncertainty surrounding covert 19.

As a result, we continue to expect favorable underlying opex trends to continue into fiscal Q4.

If Q3 operating income was $981 million, resulting in an operating margin of 18% compared to 11% in the prior quarter and 23% in the prior year.

Net interest expense increased to $24 million compared to $6 million up net interest expense in the prior quarter.

This increased expense was primarily driven by the drawdown of our revolver and subsequent 1.25 billion dollar investment grade note issuance in the quarter.

We expect an interest expense will be approximately $30 million in FQ four due to the due to the decline in interest income because of lower interest rates.

Our FQ three effective tax rate was 3%, which benefited from approximately $19 million of onetime items.

We expect our tax rate in the fourth quarter to be approximately 6%.

Going forward into fiscal 2021, we expect our tax rate to be in the high single digit to low double digit range.

Non-GAAP earnings per share in FQ, three were 82 cents up from 45 cents in FQ, two and down from one dollar and five cents in the year ago corridor.

F Q3, non-GAAP EPS was approximately two cents higher due to the tax benefits reported in the quarter.

Turning to cash flows in capital spending we generated $2 billion in cash from operations in FQ, three representing 37% of revenue.

During the quarter that capital spending was approximately $1.9 billion approximately flat quarter over quarter.

As we entered the final quarter fight 20, we are projecting fiscal year 2020, capex to be approximately $8 billion.

Our F. why 20 front end equipment, Capex will still be down more than 40% from last year, However, backend capex and building capex, either up which at the pit supply growth are up from last year.

Free cash flow in the quarter was a $101 million compared to $63 million in the prior quarter.

This represents the 14th consecutive quarter of positive free cash flow, reflecting the structurally improved profitability and working capital improvements of the new micron.

We repurchased approximately 929000 shares for $40 million in FQ three at an average price of $43.54.

In the nine months of Fytwenty, we've returned $134 million of capital through repurchases and paid $266 million to settle conversion of convertible notes.

Binding the convert premiums and share repurchases, we have used $338 million or 135% of F. why 20 free cash flow towards return to reducing the share count.

Ending Q3 inventory was $5.4 billion or a 131 days versus 134 days last quarter.

Our overall days of inventory or above our approximately 110 day target level, partly due to elevated NAND inventory as we transition to replacement gate.

We're also carrying higher raw material levels as a caution given the increase supply chain uncertainty due to the pandemic.

We ended the quarter with total cash of $9.3 billion and total debt of $6.7 billion.

Total liquidity with approximately $11.8 billion up from $10.6 billion at the end of the second quarter.

In the quarter, we issued $1.25 billion of investment grade notes and those proceeds together with $1.25 billion. The cash on hand was used to repay the $2.5 billion revolving credit facility. We drew at the beginning of the fiscal third quarter.

Prior to providing our outlook and guidance, we'd like to remind everyone that our fiscal Q4 is a 14 week quarter.

Now turning to our outlook as Sanjay mentioned, well visibility remains limited overall datacenter trends are strong and new gaming consoles will be a tailwind to demand in the second half of the calendar year.

Well in unit sales of consumer devices, such as smartphones have started to recover we're seeing an impact from the recent restrictions imposed on while way.

It is also important to remember that we are lagging indicator relative to the end demand.

In addition, the risk of a second wave of coking 19 infections is continuing to drive greater uncertainty for the economic recovery and our business.

Lastly, inventory strategies of our customers are difficult to predict we continue to closely monitor market conditions and respond to changes in the market environment in a timely and disciplined manner.

With all of these factors in mind, our non-GAAP guidance for Q4 is as follows.

We expect revenue to be $6 billion, plus or minus $250 million.

Gross margin to be in the range of 35.5% plus or minus 150 basis points.

And operating expenses to be approximately $850 million plus or minus $25 million.

Finally based on a share count of approximately 1.14 billion fully diluted shares we expect EPS to be one dollar and five cents plus or minus 10 cents.

In closing, we're extremely proud of microns performance in this unprecedented period of market uncertainty and operational challenges that tenacity creativity and dedication of our team members around the world drove strong results that surpassed our initial expectations.

Micron remains on very solid footing with an investment grade balance sheet ever strengthening product portfolio and secular industry trends that will continue to drive long term demand.

I'll now turn the call over to Sanjay for closing remarks.

Thank you Dave the pandemic has impacted our financial performance objectively Mitchell shaping up for the robust outcome. This calendar year. Nevertheless, we have moved fit agility to leverage the new opportunities in the marketplace and have further strengthened our product portfolio.

Microns portfolio is no dramatically better better position from a competitive perspective, and we have driven the tremendous transformation here over the last three years in.

In the coming quarters than years, given continued to strengthen our business Foundation.

And as the industry environment improves micron is exceptionally well positioned to take advantage of long term trend and drive superior in the near terms for our shareholders.

Of course, the bidding micron put a bright future has to be about more than just quarterly business performance.

We also have to be leaders in creating positive outcome, but all of our stakeholders in that context that our two topics that I would like to touch upon before you move confusion day.

First earlier this month, we issued our fifth and low sustainability to board.

This year, you said challenging new goals for the energy use emission water use and vs generation that aim to dramatically improve the environmental sustainability of our operations worldwide over the years ahead.

You also established an estimation on future vision that would drive us to achieve even more reaching our goal Smith, the quite investment and we plan to devote approximately 2% off and little capital expenditures to environmental sustainability initiatives amounting to about $1 billion over the next five to seven years.

These initiatives underpin our commitment to achieve significantly higher standard and help create a better planet.

Second I would like to address the social unrest and nations division that have dipped other country.

Senseless and tragic death of people in our black community in the U.S. must be addressed video and lasting the farms.

Eight nation discrimination violence, and social and just to have no plays in our society.

Micron is committed to creating a better coming and safe work environment for everyone and we are taking concrete action to increase technical training Kodiak prepared now and a portion of these what underserved population.

We had also actively engaging and investing in community program that aim to create a more just and fair society for everyone.

It is much work to do and we look forward to being part of the solution.

We will now open for questions.

Thank you.

Ask a question you will need to press star one or your telephone to withdraw your question press the pound cake.

Please standby and while we compile the culinary roster.

I will first question comes from the line I'm, John Pitzer of Credit Suisse.

Your line is.

Good afternoon, guys. Thanks for let me ask questions onto David Congratulations on solid results.

I Wonder if you think back 90 days ago. When you gave guidance for the May quarter. There was a lot of uncertainty around the pandemic and you guys guided accordingly in hindsight extremely conservatively I think your comment on the call last time was that you are building inventory, saying, you're assuming that your customers are building inventory I guess as you look to the.

This quarter guide was there a similar methodology.

Do you have to inform this guide and I guess, specifically, there's a lot of consternation the investment community about datacenter demand and you seem to be arguing that in your fiscal fourth quarter remains strong and you expected to remain strong and the calendar second half I'm wondering if you could just share with US why you think that and why you're not as concerned us some perhaps.

In the investment community about inventory builds.

So specifically with respect to data center piece of it we expected twentytwenty to be years off strong growth in cloud.

Again with all their trends building alone.

And that needing more memory and storage.

We expect to Hendi demand for people that in cloud applications and of course with all of it as we discussed in the last earnings call certainly some other trends what pointed in.

Work from home economy, as well as ecommerce gaming video streaming all of these drove strong surge in demand on the cloud front as we look ahead at the second half of course, you know given that auto Corbett environment and uncertainties that own covanta around the globe.

And we basically have limited visibility yet we do believe that cloud demand in the second half of their calendar year Bill continued to be healthy for us.

Before closing, even though it customers in terms of understanding bit inventories me understand what their demand trends are and from what we can see customer inventory is with respect to cloud are in a healthy place and sale of course, you know that ought to other parts of the markets you know such as mobile phone.

There's a there are other considerations such as geopolitical considerations as well as.

Related to cultivate as well where customers may have been tough some additional inventory and in mobile in particular.

You saw in China, that's how it though.

Forced pooling in China, the demand ventev sourced out for smartphones. So some of their customers maybe preparing for.

You know as that consume when it comes back given the low point to that devoted experience in March April timeframe.

Just wanted to be prepared to supply the smartphone demand to them as well so although a you know it's a mixed picture you know with respect to the inventory on the customer front cloud inventories are in decent shape mobile I would say somebody in anticipation of demand as well as.

You know, we're managing to the supply chain cancellations due to covert and some geopolitical considerations as well. So overall I would say and then you look at fiscal first quarter. The environment is similar to what we had experience in that you would see FQ four and of course, all our best assessment you know is big.

Into the guidance that we have provided to you.

Perfect. Thanks, guys appreciate it.

Thank you. Our next question comes from C.J. Muse Evercore. Your line is open.

Good afternoon. Thank you for taking the question I guess a question on gross margins.

How should we thinking about mix, particularly DRAM.

As we move into the August quarter.

And I guess would would love to hear as part of that.

What implied costs down so we'll look like and really just trying to understand.

The next step up you're seeing.

How much of that is mix versus cost down versus perhaps other.

So well they sent back to Q3 to for a second so gross margins, obviously expanded in the third quarter as well.

As I said in the prepared remarks, I'd I'd say that that was probably the pricing environment in both DRAM and NAND.

Combined with just a richer mix of higher value products, which which obviously carry with it better gross margins.

From a from a high value solution perspective, I think we see that again in the fourth quarter that is helping drive an improved outlook for gross margins for the fourth fiscal quarter.

You know you know CJ that we don't.

Telegraph pricing and cost out for for future quarters, but suffice it to say you know, we we take both pricing and cost reductions into accountant and obviously the combination of those are.

Our pretty favorable.

The other thing I would say is in the second or third fiscal quarter, we did have some.

Expenses associated with covert 19, both in terms of just.

Increased spending on our part to manage through some disruptions that we had early on and then on top of that we did have to move around.

The backend production that did increase our tariff expense in the third quarter. So those things we wouldn't expect to happen.

Again in the fourth quarter, which is helping also on the gross margin front in the fourth quarter.

Thank you.

Sure.

Thank you. Our next question comes from Blayne Curtis of Barclays. Your question. Please.

Yes, Thanks to my question I'll Echo the congrats.

Just on Capex.

Seems like this year, there's some concern that may be lower it. It's 8 billion I guess when you look an extra I don't know where you're starting point was what I was wondering if you could walk us through some you're moving pieces you talked about fiveg is being the big tailwind that makes sense I'm curious what you would highlight.

That you're taking in account for next year on the other way.

Yeah, I mean, the one thing that keep in mind is so capex spending this year had a fair amount of construction expense and actually we drove the front end equipment expense down quite considerably on year over year basis.

He said in the prepared remark there was down more than 40% in both DRAM and NAND. So you know we cut back pretty heavily on the front end equipment side this year.

Next year, we would expect.

Some of that to come back in particular, we're going through a full.

Rotation into our second generation replacement gate that certainly will drive some.

Capex increases.

And you know offsetting that we'll have to look at construction C.

What what Directionally, we want to do there I'd say, we haven't firmed up but the capex plans quite honestly for the year.

As you know, we maintain a lot of flexibility around capex.

We take a hard look at the demand profile of bits over the next few years and we kind of manage stuff. The front end capex accordingly to make sure that that we're staying aligned with that so you know over the next.

Couple of months will continue to refine our outlook over the next year or two and I think we'll be able to.

Ill give you a better picture when we have our fourth quarter earnings announcement, I would say when we looked at coming in pre covert levels on the Capex front for front end equipment.

And now that we look at it now it certainly has been cut back and our expectation is that will impact kind of our bit supply.

In the calendar fourth quarter.

Thanks.

Sure.

Thank you. Our next question comes from Harlan sur of JP Morgan Your line is open.

Good afternoon, and congratulations on the solid execution no last earnings call. The team highlighted the supply production shift in mix from mobile to silver DRAM to service the higher demand from your data center customers given the outlook for stronger data center demand are you guys keeping the production mix more heavily weighted towards server.

Do you ramp or are you already starting to shift part of your DRAM production mix stock to mobile.

So we of course manage on mix on an ongoing basis VSS customer demand expectations.

And make judgments regarding managing that mix. So yes. Like you noted we had shifted some of the supply from mobile toward the server.

Locations.

And you know at this point, we continue to make study how that tends that evolving and do you think you had in a good position with respect to managing on mix, but if some changes are needed will of course revert to making those changes in the future.

Great. Thank you.

Thank you. Our next question comes from the line, let Tim Arcuri Oh, Yes. Your line is open.

Thanks, a lot on Sunday, you talked about La I think twice or maybe three three times and I know you've been reshipping under the licenses and the new restrictions are really on a six not on standard products. So is that comment really more around the fact that this is sort of the last extension of the commerce licenses and.

And so you wont able to shipped to them.

Not a few months and can you sort of quantify how much is your quality exposure right now thanks.

So thanks for asking that question just to be clear.

The Flavio placement on entity.

Yes.

You had applied for licenses and we secured those licenses for mobile and said what shipments and we do not supply into the networking side of the business, we never saw that license.

So then to be lifts placement that that have been several months ago did impact some of our outlook, but do you have been operating under the licenses that we have already received the comments that that was making today is really related to last month action by E Commerce Department, which will go into effect.

Sometime next month and as I deserved off that action.

All of these starting to see an impact in our fiscal Q4 as our customer reacts to the actions by the U.S.

And quite frankly impacts related to while they are still unfolding.

Expect some of the impact.

Two Harvey yet related to the foundries, but defect there potentially or what other considerations on managing that business managing their supply chain and we expect some of these impact to continue in FQ, one and beyond as well and then this is compounded further by changing and meant to these strategies that customer.

Yes.

As well as market share shifts that happened between the smartphone players. So that's one is we have concerns you know one day, we have improved our revenue diversity and diversity, we have significantly expanded and strengthened our product portfolio and we have good design in activity that all key players, but clearly that new product.

We have introduced such as Europe has 3.1 LP five DRAM and multi chip packages.

So we continue to work without customer ecosystem to mitigate the effects of this but the particular comments that you heard us talk about it on the Javier front really relate to the actions from U.S. government that have.

Last month that have impacted.

Customer reaction, the though Rob any action.

Do those actions and impacting that outlook in FQ four.

And then I guess, just how much of you know revenue wasn't media May day.

In the mid quarter, though at Q3 quarter that did not the action announced last month Dennard action announced by the Commerce Department last month and did not have an effect in FQ three.

Now suffice it to say that we didnt lift them as a over 10% customer. So you can.

Maybe assumption that it was below 10%.

Okay Thats it.

Sure.

Thank you. Our next question comes from a line of Joe Moore of Morgan Stanley. Your line is open.

Great. Thank you.

I wanted to ask about customer inventory I went to revisit that.

To the extent that customers are wrestling with pretty unprecedented potential supply challenges do you think they're building up buffer inventory to deal with Adam only seen single earthquakes in one region caused that behavior in the past now we're dealing with rolling outages across multiple continents do you think customers may.

The building inventory and if so do you think memory sort of less or more impacted than other things from that and have a follow up.

So what I can tell you that micron itself in our supply chain operations has focused on making sure given all of their considerations around the globe.

With all the uncertainty that encore bed and cultivate containment and Corbett spread.

Micron itself and its supply chain. All patients is increasing then may 20 fold. It all materials to make sure that yet when compared to meet our customer demands. So this trend off hire never lost inventory elevated level up inventory is.

It's been talked about and this call among them the deck supply chain.

And with respect to our specific customers from memory and storage so as I mentioned earlier.

Yes, some customers may have built some inventory given the other considerations their concerns around supplies potential supply chain disruptions that may occur due to all the corbett related uncertainties as well as I as I pointed out some of their customers in the mobile may have been some inventory given U.S. China.

Attentions and the regulations. So the thing and these are the unprecedented times uncertain times not just for us off one of them any industry veteran about customer ecosystem as well and customers in Minto. These strategies are changing they ought adapting as they themselves.

Hello, there market trends are evolving and you know how they want to best address that one inventory position as well. So this is that changing environment. We continue to work closely with our customers and you know V make adjustments as appropriate and key is to be adaptable and to be edge Island I think we have shown over the four so.

The first half of this calendar year that you have been.

Do you need running out all patients with tremendous amount of adaptability and agility and continuing to produce healthy to those.

Great. Thank you for that and then in terms of the strength that you guys are seeing in cloud.

The second half would you differentiate it all by geography, I think you mentioned, China being stronger but is it any different China versus the rest of the world in cloud.

You know if you're not going to break it down here between China and that's in the world, but what are you know if indeed, no CAC in totality heavy continuing to see healthy demand trend.

In cloud in the second half of the and of course you know.

So then you look at long term trends I mean long terms cloud is still actually in early innings and long term trends for cloud our strong because yeah, hi, as well as you know fiveg fiveg driving more intelligent devices at the edge growing more data. Unfortunately, that's really the virtuous cycle.

Between cloud and intelligent devices at the edge and then industrial Aiotv and everything I don't know dawn them on a single BARTEX. All of these trends you at point to growth have the edge as well as a in the cloud. So long term trends continue to be healthy villette admin it ever being a little bit lumpy hit or there certainly.

It can be but the point is that long term growth drivers are solid and secular in nature for cloud.

Great. Thanks, so much.

Thank you. Our next question comes from Mr. Steven.

RBC capital markets. Your line is open.

Hey, guys. Thanks for taking my question. So there's much into two things on the call. It I wanted to double click on so first wanted to you mentioned that.

Some of the shipments a semi cap didn't come in on time. So this enough in your opinion to kind of impact the price of memory I'm not looking for specific numbers, but as well what is the shipment mess.

Impactful and out do you think it today [laughter] hurt supply enough to move the price and then secondly, just high level any comments on the U.S. government kind of incentivizing U.S. manufacturing. So we've got TSMC coming to the United States and any impact you guys think it'll happen you guys have future.

[laughter].

So regarding the equipment piece that you asked let me be very clear that micron did receive its equipment end time, because our equipment deliveries was rather early in fiscal Q3 toward our vanzee technology them and de them and of course, our that aspects on that.

Meant front as well so we did not say that equipment deliveries were delayed for us during sq. Three however, it is well known and has been talked about in the industry that given the various challenges due to covert such as logistics and transportation related challenges as well as supply chain challenges some of that.

Equipment deliveries have been impacted in the industry and yes, you know put us in the future.

It is possible you know given the challenges of corvette that some of our deliveries in the future me get impacted but in the past you have been in good shape overall with respect to I'm going to feed off equipment again, because diming off most of that equipment delivery was such that we weren't able to actually escape some of the potential shallow.

Engines in this regard.

So if so my industry point of view, if equipment deliveries get impacted which had been talked about that have been supports equipment suppliers have talked about some of that as well then obviously that impacts technology transition capabilities and therefore, it again impact supply, but have some blood supply.

Growth somewhat lower than equal varied expectations due to the difficulty in making sure that they could think their delivered on time as well as equipment installed on the equipment DRAM is happening smoothly given all the travel and physicians involved as well.

So yes, it does make sense that effects, the supply growth and lessons that supply growth, obviously impacts the industry supply and demand environment.

Thoughts about the demand also due to covered in certain pockets. You know certainly has been less particularly those buckets and related to go ahead. So you know and we don't really comment on the pricing, but obviously supply has an important role to play on the pricing front youre.

Second piece of the questions regarding.

Possible.

You asked incentives for semiconductor manufacturing, let me first say that you know we are pleased that the U.S. administration as well as the Congress is considering incentives 40, U.S. semiconductor industry. There's just goes to highlight that U.S. semiconductor industry is extremely important to us.

Economy today, a semiconductor meaningful forms the foundation offtake on any of the future and also highlights that recognition of this importance.

By the officials in Washington DC.

Andy It's important that you asked maintains its global competitiveness and innovation capability. So from that point of view. We are pleased that they are these considerations the bill that is.

That has been put together of course, you know what a lot of detail still has to be like dollar bills have to be approved so even continue to monitor this and from the point of view of a minimally I think important thing is that.

<unk> costs and scale in EMEA exceedingly important considerations.

Micron in this regard to actually has a very diversified footprint our front end manufacturing I thought the glow of you know that we have fabs yet in the U.S. in Manassas, Virginia, as well as in Utah and state of the or best in class R&D facility in Boise, Idaho, as well and of course, we have R&D and manufacturing.

And for memory in Asia as well so vivo a you know continue to monitor these trends, but important considerations our scale cost and auto why on any investments is important it's not just about government incentives, it's about managing the business in a healthy fashion keeping in mind auto why considerations.

And above all it's extremely important that supply growth has managed in a cost effective fashion, but also managed in a fashion dennard to serve the industry to certainly not deceptive microns supply plans and make sure that some supply Cabot is aligned with demand CAGR. So why we are available.

These.

You know a incentives for growth of U.S. semiconductor industry and innovation agenda.

We'll continue to monitor this in a very disciplined fashion before do you make any decisions in this regard.

Thank you very much.

Thank you aren't next question comes from Chris Danely of Citigroup. Your line is open.

Just a question.

Can you just talk about the linearity of bookings during the quarter to date.

Sort of build all quarter was there some volatility in there and then you also mentioned that mobile and datacenter were the strongest end markets were both of those are stronger than expected.

No. So a linear any bookings was.

Was pretty I would call it pretty linear through the quarter.

No surprises and the mix of course, we as we said data centers showed.

Good strength through the through the quarter.

And mobile was a bit weaker than.

Then than perhaps we we were thinking coming into it but.

Just in terms linearity, but in general I would say.

Okay.

Actually a fairly linear quarter for us.

Great. Thanks.

Thank you want next question comes from meeting see upside to your line is open.

Yes, Thanks for squeezing me.

Most of the good questions have been asked I just haven't filed.

Im just wondering Sanjay what would it take for your customers.

To feel comfortable in signing multiyear.

Hi quarter, rather contracts I remember when something was tied back in 2016 and 17 industry was highlighted.

Longer term contracts associated with enterprise customers I think.

Changed.

Context, how do you see.

Coming back and.

And we'll and part of that memory industry. Thank you.

So maybe you want to making up a little bit. However, your question is a good question and of course me as you know our customer base is extremely vendor diversified you know from automotive to data center to PC to smartphones and networking and industrial and consumer customers. So the you know customer requirements.

With respect to no discussions that aren't.

Fly and.

You know.

From us they maybe some of their customers that managing it on monthly basis, some management on quarterly basis and that some customers. We do have you know supply agreements that extend for the Eurs timeframe of course, you know certain pricing discussions et cetera.

I mean are not part of these contracts they tend to be around supply in discussions that on pricing tend to be on an ongoing basis auto is an example vendor contracts can be multiyear contracts and long term contracts. So it really varies from a market to market. It then you know that that technology and product mix.

Continues to change as well so I think you know we want to be careful in terms of the length of the contracts that we manage with their customers and have you manage I believe the diversity of pharma customers very well and our customers value our supply they had valuing the product portfolio that micron is delivering they have it could.

Anything that you know the are the only company in the world that have NAND, DRAM and Threed Cross point and the ability to bring innovative products and solutions to them with a mix of technologies in them as well and this really positions us.

Uniquely so our discussions neely regarding longer term nature of product Roadmaps and supply considerations Viva and all of these various aspects and our Vincent owned that Roadmaps as well so things do change in this business and therefore multiyear contracts are more.

In the market that auto market, even more legacy nodes are required to be in production floor no longer terms, but the parts of the markets, where technology and products out of moving fast you know if north about multi year contract there, but you varying length of contracts, depending upon the end market customers.

Thank you.

Thank you. Our next question comes from Karl Ackerman of Cowen.

Your line is open.

Good afternoon, gentlemen, thanks for let me ask a question.

It's great to see the improvements you in your SSD segment, those client and enterprise.

First what's weren't percentage could you will see drives represent as a portion of your overall SSD next next year could it be 25% or more.

You know and had appreciate hearing your perspective on the development taking place in enterprise Ssds No. One on one hand, Youre U.S. based competitor has been adamant, they're going to gain significant share and enterprise SSD. This year.

Yet merchant controller manufacturers.

Enable cloud providers, who does on their own in house enterprise Ssds, rather than just relying on off the shelf that proceeds from Oems. So I was hoping you could just provide you know the opportunity that you see an enterprise a steep this year versus peers and how you see that playing out over the next totaled 24 months, particularly as some of the new technologies that youre.

Introducing ana and often providing such as PJ for why now becomes more mainstream thank you.

Thank you for asking the question, we're very pleased without execution NFS. These as we noted.

The next quarter for the us in Ssds and really solid sequential growth in Ssds and this is happening as we had said before that during calendar year Twentytwenty, we will be expanding our portfolio, if SSD solutions, introducing nvme solutions for clients as well as datacenter market.

And we had said before that as we.

Vanguard those new solutions as we qualify them with those customers as those nvme solutions. It does give us an abortion or de during the course of the year too.

I have no qualifications on under via as well with our customers. We will have ongoing apportion deals through the course of next year as well in terms of driving for profitable share gains in the SSD market and regarding Q, we'll see that you asked about we're really pleased with our execution on the Q will see front as well, yes shipping QM csds in.

Consumer market as well as you have product offerings.

That will be having.

Hi, future Unfortunately for us on the value side of the PC.

The OEM front as well and QLT Ssds are also being used in read intensive applications and replacing 10-K hdds as well. So you see there are multiple.

End market applications and a portion of these four hour ssds and we're already more than 10% of our total NAND consumption.

With respect to key we'll see and this presents a good opportunity for us.

And we fully expect our SSD mix to continue to increase as we bring out more new products over the course of.

Next.

Several quarters, so yes, I mean.

Q, we'll see as a mix off.

So as the percentage will go up for us going forward.

Thank you.

And let me just add that you know QL see is obviously an opportunity that instead of three bits per cell. It has for this for sale. So obviously once done right and you really have all the bond costs taken care off on the product side. It gives you lower cost and therefore improved profitability. Unfortunately as well so we are.

Certainly focused on increasing the mix of you'll see at the same time TLC will remain vast majority of the market for considerable period of time.

Thank you. Our final question comes on the line now Mark Newman Bernstein. Your line is open.

Hi, Thanks, Thats, great again, congrats on some numbers today.

Question on the data center.

Man.

That seems to be sounds like everything you said stays very upbeat quite bullish on defense demand remaining.

Quite strong.

That seems to be commodities in the market, particularly around for investors.

Hi scale is.

Inventory Happing increase slightly and I think the Wally stemming from your will happen in 2018.

Orders.

In late 2018, which.

Which continued to much between 19.

So my question is.

How how is the communication changed with the data center decline scanners.

You can you, having more frequent and close the communication with them to the timing.

I want to get a better idea of what the inventory levels or or or otherwise.

How how can you.

Hello.

Susan those is.

The data center demand remains strong for longer as we hope it will.

So first of all I would say on the inventory side peak overage datacenter customers as well as other customers largely had inventories that had returned to normal levels and certainly supplier inventories what at normal level.

As we go peak of it and.

The corporate environment work from home environment has driven strong surge in demand on the datacenter front and as we mentioned we expect.

Demand trends to continue to be held the in the second half for data center as well in terms of inventories in.

The datacenter market, yes, while certain customers, maybe getting higher levels of inventory again for the reasons that I had mentioned earlier related to.

Good on supply chain considerations as well as you know changing environment with respect to the demand, but the point that compared to 82018 or 2019 environment.

Somebody inventories are really at a much better much healthier levels. This is not like a 2018 2019 situation.

Even if certain customers are getting some higher levels of inventory again, given the uncertainties around.

Corporate and other point I would say is that.

While covered does.

Give us lower visibility and does bring about uncertainty not just for us, but for our customers as well Greg cloud is an area, where the long term demand trends as I mentioned earlier, our secular in nature overall.

So memory and storage given the kind of application that customers are custom datacenter customers Hyperscalers are working on those Arctic Whiting more nimbly and more softness or the longer term trend continues to be healthy in the near term, yes, I mean covered does have unprecedented.

Amount of challenges and.

You know uncertainty in the entire.

Ecosystem and we're doing our best to continue to work with our customers our relationships today. Since you were asking about those are certainly lot closer than they were in the previous timeframe I would say that even hyperscale customers have become somewhat more sophisticated in terms of understanding the memory dynamic.

And.

You know improving their own supply chain operations. So it's really a two way relationship. We do work closely together with them, having said all of that of course.

Our visibility cannot be perfect. In this area. We continue to focus on working closely with their customers understanding that requirements and planning our supply chain Accordingly, and what also helps is that the markets are quite diverse what us I mean, yes cloud is a strong.

Driver of.

Growth for the business, but also very diversified.

Strong mobile footprint as well as PC and between DRAM and NAND.

And as we talked about diversified into the gaming side, the new gaming console is coming in.

Needing more DRAM twice as much DRAM, new gaming consoles. So there wasn't any of the business is certainly a helpful factor for us to manage through some of these uncertainties.

Thanks, Thanks, very much on Thats very helpful.

Thanks Mark.

Okay.

Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.