Q1 2024 Micron Technology Inc Earnings Call

Yeah.

Thank you for standing by and welcome to Micron Technology's first quarter 2024 financial results Conference call. At this time all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session.

Thank you for standing by and welcome to Micron Technologies' first quarter 2024 Financial Results Conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session.

To ask a question during the session, you'll need to press star 1-1 on your telephone. To remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host with today's program, Satya Kumar in Festa relations. Please go ahead.

Ask a question. During this session you will need to press star one on your telephone to remove yourself from the queue simply press Star One one again as a reminder, today's program is being recorded and now I'd like introduce your host for today's program such a Kumar of Investor Relations. Please go ahead.

Okay.

Thank you and welcome to Micron Technologies fiscal first quarter 2024 financial conference call.

Sachin Kumar: Thank you and welcome to Micron technologies fiscal first quarter 2024 financial conference call.

On the call with me today are Sanjay Mehrotra, our President and CEO , and Mark Murphy, our CFO .

Sachin Kumar: On the call with me today are Sanjay Mehrotra, President and CEO and Mark Murphy our CFO.

Today's call is being webcast from our investor relations site at investors.micron.com, including audio and slides.

Sachin Kumar: Today's call is being webcast from our Investor relations site at investors that micron dot com, including audio and slides.

In addition, the press release detailing our quarterly results has been posted on the website, along with the prepared remarks for this call.

Sachin Kumar: In addition, the press release detailing our quarterly results has been posted on the website.

Sachin Kumar: Long with the prepared remarks for this call.

Today's discussion of financial results is presented on a non-GAAP financial basis unless otherwise specified.

Sachin Kumar: Today's discussion of financial results as presented on a non-GAAP financial basis, unless otherwise specified.

A reconciliation of GAAP to non-GAAP financial measures can be found on our website.

Sachin Kumar: A reconciliation of GAAP to non-GAAP financial measures can be found on our website.

We encourage you to visit our website at micron.com throughout the quarter for the most current information on the company, including information on financial conferences that we may be attending. You can also follow us on X and Z.

Sachin Kumar: We encourage you to visit our website at micron dot com throughout the quarter for the most current information on the company, including information on financial conferences that we may be attending you.

Sachin Kumar: You can also follow us on X at Micron Tech.

As a reminder, the matters we are discussing today include forward-looking statements regarding market demand and supply, market trends and drivers, our expected results and guidance, and other matters.

Sachin Kumar: As a reminder, the matters. We're discussing today include forward looking statements regarding market demand and supply.

Sachin Kumar: Market trends and drivers our expected results and guidance and other matters.

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

Sachin Kumar: These forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today.

We refer you to the documents we file with the SEC, including our most recent Form 10-K and upcoming 10-Q for a discussion of risks that may affect our future results.

Sachin Kumar: We refer you to the documents.

Sachin Kumar: We filed with the SEC, including our most recent Form 10-K and upcoming 10-Q for a discussion of risks that may affect our future results.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievement.

Sachin Kumar: Although we believe that the expectations reflected in the forward looking statements are reasonable we.

Sachin Kumar: Cannot guarantee future results levels of activity performance or achievements.

We are under no duty to update any of the forward-looking statements to confirm these statements to actual results. I'll now turn

Sachin Kumar: We are under no duty to update any of the forward looking statements to conform these statements to actual results.

Sachin Kumar: I'll now turn the call over to Sanjay.

Thank you, Satya. Good afternoon, everyone. In fiscal Q1, Micron delivered revenue, gross margin, and EPS above the high end of the guidance ranges we provided at the last earnings call, reflecting Micron's strong execution combined with improved prices.

Sanjay Mehrotra: Thank you Cynthia good afternoon, everyone and fiscal Q1 Micron delivered revenue gross margin and EPS above the high end of the guidance ranges. We provided at the last earnings call, reflecting micron's strong execution combined with improved pricing.

We are in the very early stages of a multi-year growth phase catalyzed and driven by generative AI and this disruptive technology will eventually transform every aspect of business and society.

Sanjay Mehrotra: We are in the very early stages of a multiyear growth phase capitalized and driven by generator.

Sanjay Mehrotra: And this disruptive technology will eventually transform every aspect of business and society.

Memory is at the heart of GPU enabled AI servers and we are already seeing strong demand driven by early deployment of AI solutions which will only accelerate over time.

Memory is at the heart of the GPU enabled AI servers, and we are already seeing strong demand driven by early deployment of AI solutions. This will only accelerate over time.

Sanjay Mehrotra: Micron is well positioned to leverage this growth having executed the most robust set of new technology and product introductions, and our 45 year history.

Micron is well positioned to leverage this growth, having executed the most robust set of new technology and product introductions in our 45-year history.

The improved supply demand environment in the current calendar quarter gives us additional confidence in the trajectory of our business.

Sanjay Mehrotra: The improved supply demand environment and the current calendar quarter gives us additional confidence in the trajectory of our business we.

We have given a strong inflection in industry pricing this calendar quarter, which will allow us to benefit from higher prices earlier in our fiscal year compared to our prior plan.

Sanjay Mehrotra: We have driven a strong inflection in industry pricing this calendar quarter, which will allow us to benefit from higher prices earlier in our fiscal year compared to our prior plans.

We intend to stay very disciplined with our supply and capacity investments as our pricing is still far from level associated with necessary ROI.

We intend to stay very disciplined with our supply and capacity investments as our pricing is still far from level associated with necessary ROI.

We expect our pricing to continue to strengthen through the course of calendar 2024.

Sanjay Mehrotra: We expect our pricing to continue to strengthen through the course of calendar 2024 weeks.

Sanjay Mehrotra: We expect improved margins and financial performance throughout 2024 and record industry Tam in calendar 2025.

We have made significant progress with our industry-leading technology roadmap. Micron is at the forefront of ramping the industry's most advanced technology nodes in both DRAM and NAM.

Sanjay Mehrotra: We have made significant progress with our industry, leading technology roadmap micron is at the forefront of ramping the industry's most advanced technology nodes in both DRAM and NAND.

The vast majority of our bits are on leading edge nodes, one alpha and one beta in DRAM, and 176th layer and 232th layer in NAND.

Sanjay Mehrotra: The vast majority of our bets are on leading edge nodes, one alpha and one beta in DRAM, and 176, and <unk> 32 layer and land.

As previously stated, both 1-beta DLAM and 232-layered NAND nodes have reached maturials faster than the prior nodes.

Sanjay Mehrotra: As previously stated both one beta DRAM and 232 layer NAND nodes have least mature yields faster than the prior nodes.

We expect fiscal 2024 front-end cost reductions to track in line with our long-term expectations of mid to high single digits in DRAM and low teens in NAM.

Sanjay Mehrotra: We expect fiscal 2020 for front end cost reductions to track in line with our long term expectations of mid to high single digits in DRAM and low teens in NAND.

We are on track for volume production in one gamma DRAM using EUV in calendar 2025.

Sanjay Mehrotra: We are on track for volume production and one gamma DRAM using UV in calendar 2025.

Sanjay Mehrotra: Now turning to our end markets.

Inventories for memory and storage are at or near normal levels for most customers across PC, mobile, auto and industrial end markets.

Sanjay Mehrotra: Inventories for memory and storage are at or near normal levels for most customers across PC mobile auto and industrial end markets.

Consequently, the demand that you see from customers in these markets is closer to their end market demand.

Sanjay Mehrotra: Sequentially the demand that we see from customers in these markets is closer to the end market demand.

Data center customer inventory of memory and storage is improving and we continue to expect customer inventory to approach normal levels in this market sometime in the first half of calendar 2024.

Sanjay Mehrotra: Data center customer inventory of memory and storage is improving and we continue to expect customer inventory to approach normal levels in this market sometime in the first half of calendar 2024.

Across our data center and PC markets, we are ahead of the industry in our transition to D5 and we expect to cross over our D5 volume from D4 in early calendar 2024.

Sanjay Mehrotra: Across our data center and PC markets. We are ahead of the industry and our transition to <unk> five and we expect to cross over our <unk> volume from before in early calendar 2024.

Generative AI use cases are expanding from the data center to the edge, with several recent announcements of AI-enabled PCs, smartphones with on-device AI capabilities, as well as embedded AI in the auto and industrial end markets.

Sanjay Mehrotra: Generally I used cases are expanding from the data center to the edge with several recent announcements of AI enabled Pcs smartphones with on device AI capabilities as well as embedded AI in the auto and industrial end markets.

The proliferation of on-device AI at the edge offers a host of benefits such as enhanced privacy, lower latency, improved performance, greater personalization, and competitive costs for a wide range of use cases from content creation to productivity.

Sanjay Mehrotra: The proliferation of on device AI at the edge offers a host of benefits such as enhanced privacy lower latency improved performance greater personalization and competitive costs for a wide range of use cases from content creation to productivity.

We see a rapid evolution in our customer product roadmap, enabling and leveraging this AI market expansion, which in turn is driving higher capacity, lower power, and increased performance requirements for memory storage.

Sanjay Mehrotra: We see a rapid evolution and our customer product roadmaps, enabling and leveraging this AI market expansion, which in turn is driving higher capacity lower Fowler and increased performance requirements for memory and storage.

We expect to increasingly benefit from content growth as these trends in AI gain momentum.

Sanjay Mehrotra: We expect to increasingly benefit from content growth as these trends in the AI gained momentum.

In data center, total server unit shipments are expected to increase by a mid single digit percentage in calendar 2024, following a year of low double digit percentage decline in calendar 2023.

Sanjay Mehrotra: In data Center total server unit shipments are expected to increase by a mid single digit percentage in calendar 2024, following a year of low double digit percentage decline in calendar 2023.

Demand for AI servers has been strong as data-centered infrastructure operators shift budgets from traditional servers to more content-rich AI servers.

Sanjay Mehrotra: Demand for AI servers has been strong as datacenter infrastructure operators shifting budget from traditional servers to more content rich AI servers.

Also, in response to AI-driven data center demand, several customers have announced aggressive roadmaps for new GPU and AI accelerator ASIC product introductions with increasing requirements for HBM capacity, performance, and power.

Sanjay Mehrotra: Also in response to AI, driven data center demand several customers have announced aggressive roadmaps for new GPU and AI accelerator ethic product introductions with increasing requirements with HBM capacity performance and power.

Micron is addressing these exciting opportunities brought on by the proliferation of AI with an industry-leading portfolio of data center solutions, including HBM-3E, D5, several types of high-capacity server memory modules, LPD RAM, and data center SSDs.

Sanjay Mehrotra: Micron is addressing these exciting opportunities brought on by the proliferation of AI with an industry, leading portfolio of data center solutions, including <unk> E. <unk> five several types of high capacity server memory modules.

DRAM and data Center Ssds.

We have received very positive customer feedback on our HVM3E, which has approximately 10 percent better performance and about 30 percent lower power consumption compared to competitive offerings of HVM3E.

We have received very positive customer feedback on our <unk>, which is approximately 10% better performance and about 30% lower power consumption compared to competitive offerings of <unk>.

In fiscal Q1, we shipped samples of HBM-3E to a number of key partners and are making good progress in our qualification.

Sanjay Mehrotra: In fiscal Q1, we shipped samples of <unk> to a number of key partners and are making good progress in our qualifications.

Micron is in the final stages of qualifying or industry leading HVMCE to be used in NVIDIA's next generation Grace Hopper GH200 and H200 platform.

Sanjay Mehrotra: <unk> is in the final stages of quantifying our industry, leading <unk> to be used in Nvidia next generation Grace Hopper, <unk> 200, and H 200 platforms.

In addition, our LP5S is being used for the GRACE CPU, driving a new use case for LP memory in the data center for accelerated computing.

Sanjay Mehrotra: In addition, our LP <unk> is being used for degrees CPU driving a new use case for LP memory in the data center for accelerated computing.

We are on track to begin our HBM-3E volume production ramp in early calendar 2024 and to generate several hundred millions of dollars of HBM revenue in fiscal 2024.

Sanjay Mehrotra: We are on track to begin at <unk> volume production ramp in early calendar 2024 and to generate several hundred millions of dollars of <unk> revenue in fiscal 2024.

We expect continued HBM revenue growth in 2025 and we continue to expect that our HBM market share will match our overall DRAM bid share sometime in calendar 2025.

Sanjay Mehrotra: We expect continued <unk> revenue growth in 2025, and we continue to expect that our <unk> market share will match, our overall DRAM bit share sometime in calendar 2025.

Sanjay Mehrotra: Last month, we introduced the industry's fastest and lowest latency 128 gigabytes high capacity modules built on our industry, leading one beta node and using a monolithic die.

Last month we introduced the industry's fastest and lowest latency 128GB high capacity modules built on our industry leading one beta node and using a monolithic die which does not require 3D stacking and thus enables a simpler process flow for assembly.

It does not required CD stacking and thus enables a simpler process flow for assembly.

Featuring best in class performance, our solution will support customers' memory-intensive data center workloads today and into the future.

Sanjay Mehrotra: Featuring best in class performance, our solution will support customers memory intensive data center workloads today and into the future.

Additionally, leading CPU vendors have confirmed validation support for our monolithic dye-based 128-gigabyte modules on existing platforms released in 2022 and 2023, as well as upcoming new platforms.

Additionally, leading CPU vendors have confirmed validation support for our monolithic die based 128 gigabyte modules on existing platforms released in 2022, and 2023 as well as upcoming new platforms.

This ensures that our offering has a significant plan that we can address immediately.

Sanjay Mehrotra: This ensures that our offering has a significant tam that we can address immediately.

We expect volume production to start next quarter with significant growth in fiscal 2025 and beyond.

Sanjay Mehrotra: We expect volume production to start next quarter with significant growth in fiscal 2025 and beyond.

A testament to our solid execution and superior offerings, Micron ended the third calendar quarter with a record high revenue share in data-centered SSDs based on independent industry assessment.

Sanjay Mehrotra: A testament to our solid execution and superior offerings Micron ended the third calendar quarter with a record high revenue share and data center Ssds based on independent industry assessments.

This marks the second consecutive quarter of record revenue share in data center SSDs and we look to build on this revenue momentum through fiscal 2024.

Sanjay Mehrotra: This marks the second consecutive quarter of record revenue share in data Center Ssds, and we look to build on this revenue momentum through fiscal 2024.

In PCs, we forecast unit volumes to grow by a low to mid-single-digit percentage in calendar 2024, after two years of double-digit percentage PC unit volume decline.

Sanjay Mehrotra: In PC, we forecast unit volumes to grow by a low to mid single digit percentage in calendar 2024. After two years of double digit percentage PC unit volume declines.

We expect PCOMs to start ramping AI on device PCs in the second half of calendar 2024 with an additional capacity of four to eight gigabytes of DRAM per unit, and we see average SSD capacities increasing as well.

Sanjay Mehrotra: We expect PC Oems to start ramping AI on device ECS in the second half of calendar 2024, with an additional capacity of four to eight gigabyte of DRAM per unit and we see average SSD capacities, increasing as well.

We also completed qualifications for our industry-leading one-beta-based 16-giga-bit D5 at several PC customers in fiscal Q1.

Sanjay Mehrotra: We also completed qualifications with our industry, leading one data base 16 gigabit <unk> five at several PC customers in fiscal Q1.

In fiscal Q1, we achieved record-bid shipments in both client and consumer SLBs as customers adopted our industry-leading solution.

Sanjay Mehrotra: In fiscal Q1, we achieved record <unk> shipments in both client and consumer ssds as customers adopted our industry leading solutions.

Building upon our QLC leadership, our Client SLE QLC Bitshiftments also reached a new record in fiscal Q1.

Building upon our <unk> leadership, our client SSD <unk> bit shipments also reached a new record in fiscal Q1.

QLC now comprises the majority of our bid shipments max for both client and consumer FSD.

Sanjay Mehrotra: TLC now comprises the majority of our bit shipments mix for both client and consumer SSD.

Sanjay Mehrotra: This month, we also announced that we are shipping the micron 3500, nvme SSD the world's forests performance client SSD with 200, plus layer NAND built on our industry, leading 232 layer NAND. The 3500 will help our customers handle demanding workloads for.

This month, we also announced that we are shipping the Micron 3500 NVME SSD, the world's first performance client SSD, with 200 plus clear names.

Built on our industry leading 232 layer NAND, the 3500 will help our customers handle demanding workloads for business applications, scientific computing, gaming, and content creation.

Sanjay Mehrotra: Business applications scientific computing gaming and content creation.

Sanjay Mehrotra: And mobile smartphone demand is showing signs of recovery and we forecast the smartphone unit shipments to grow modestly in calendar 2024.

In mobile, smartphone demand is showing signs of recovery, and we forecast smartphone unit shipments to grow modestly in calendar 2024.

Leading chips at vendors have announced powerful new products supporting on-device large language models with 10 billion or more parameters.

Sanjay Mehrotra: Leading chipset vendors have announced powerful new products supporting on device large language models with $10 billion or more parameters, we expect smartphone Oems to start ramping AI enabled smartphones in 2024 with an additional capacity of four to eight gigabyte of DRAM per unit.

We expect smartphone OEMs to start ramping AI-enabled smartphones in 2024 with an additional capacity of 4 to 8 GB of D-RAMP per unit.

Longer term, many popular generated AI applications will be on smartphones and our leading product portfolio is poised to capture this memory and storage opportunity.

Sanjay Mehrotra: Longer term many popular generator applications will be on smartphones and our leading product portfolio is poised to capture this memory and storage opportunity.

Our new industry leading 9.6 Gigabit per second LP5X will adjust the bandwidth requirements of the most demanding AI-based mobile application.

Sanjay Mehrotra: Our new industry, leading nine gigabit per second <unk> can address the bandwidth requirements of the most demanding <unk> mobile applications.

We also began sampling our next-generation 232-layer NAND, UFS 3.1, and our 1-beta DRAM, 24-gigabit LP5X, to support the memory needs of emerging AI foundational models.

Sanjay Mehrotra: We also began sampling our next generation 232 layer NAND Uff's three one and our one beta DRAM 24 gigabit LTE <unk> to support the memory needs of emerging AI foundational models.

Last, I'll cover auto and industrial, which are end markets we value as part of the portfolio due to their relatively more predictable revenue and profitability and long-term growth opportunities.

Sanjay Mehrotra: Last I'll cover auto and industrial which are the end markets, we value as part of the portfolio due to the relatively more predictable revenue and profitability and long term growth opportunity.

The proliferation of AI at the edge continues to increase in the industrial and auto market.

Sanjay Mehrotra: The proliferation of AI at the edge continues to increase and the industrial and auto markets.

For memory, this translates to content growth in a host of AI-enabled edge devices.

For memory this translates to content growth and a host of AI enabled edge devices.

For example, AI-enabled industrial PCs have 3 to 5x more memory than standard PCs and there is an 8x increase in memory content for AI-enabled Edge video security cameras compared to standard non-AI video cameras.

Sanjay Mehrotra: For example, AI enabled industrial Pcs have three to five X more memory than standard BCS and there isn't the apex <unk> and memory content for AI enabled edge video security cameras compared to standard non AI video cameras.

Our automotive business achieved a new quarterly revenue record in fiscal Q1, driven by better demand and volume lamps of new vehicle platforms.

Sanjay Mehrotra: Our automotive business achieved a new quarterly revenue record in fiscal Q1, driven by better demand and volume ramps of new vehicle platforms.

As a leader in automotive market share and quality, Micron will benefit from memory and storage content growth as automotive OEMs expand features in ADAS and in-cabin applications. Our automotive design ventures

Sanjay Mehrotra: As a leader in automotive market share in quantity micron will benefit from memory and storage content growth as automotive Oems expand features in Adas and in cabin application.

Sanjay Mehrotra: Our automotive design win trajectory remains strong.

Our industrial business saw double-digit sequential growth in fiscal Q1 as the industrial market continued to recover.

Sanjay Mehrotra: Our industrial business saw double digit sequential growth in fiscal Q1, as the industrial market continued to recover invent.

Inventory levels for memory and storage continue to improve as distribution partners and are at normal levels at the majority of our customers.

Sanjay Mehrotra: Inventory levels for memory and storage continue to improve at distribution partners and are at normal levels at the majority of our customers.

Industry fundamentals remain strong for memory and storage as a widespread adoption of IoT, AI, and machine learning solutions create new growth opportunities for us. Now turning to our

Sanjay Mehrotra: Industry fundamentals remain strong for memory and storage as a widespread adoption of Iot AI and machine learning solutions create new growth opportunities for us.

Sanjay Mehrotra: Now turning to our market outlook, starting with demand.

We expect calendar 2023 D-RAM bid demands to grow in the high single-digit percentage range up from prior expectations for mid-single-digit growth.

Sanjay Mehrotra: We expect calendar 2023, DRAM bit demand to grow in the high single digit percentage range up from prior expectations for mid single digit growth.

In Nance, we continue to expect calendar 2023 bid to demand growth in the high teams percentage range.

Sanjay Mehrotra: In NAND, we continue to expect calendar 2023 bps of demand growth in the high teens percentage range.

Looking forward, over the next few years, we expect big demand growth caggers of mid-teens in D-RAM and low 20s percentage range in NAM.

Sanjay Mehrotra: Looking forward over the next few years, we expect bit demand growth CAGR of mid teens in DRAM and low 20 percentage range and NAND.

We forecast calendar 2024 batch demand growth for the industry to be near the long-term cagger for DRAM and somewhat below the long-term cagger for NAND.

Sanjay Mehrotra: We forecast calendar 2024 bit demand growth for the industry to be near the long term CAGR for DRAM and somewhat below the long term CAGR for NAND.

Sanjay Mehrotra: Turning to supply Cigna.

Significant supply reductions across the industry have enabled the recovery that is now underway.

Significant supply reductions across the industry have enabled that a company that is now underway.

An extended period of supply growth less than demand growth would strengthen the pace of recovery.

Sanjay Mehrotra: And extended period of supply growth less than demand growth would strengthen the pace of recovery.

MicroN will continue to exercise supply and capex discipline aligned with our strategy to maintain our long-term bid market share for DRAM and NAS.

Sanjay Mehrotra: John will continue to exercise supply and Capex discipline aligned with our strategy to maintain our long term bit market share for DRAM and NAND.

Micron's fiscal 2024 CapEx is projected to be between $7.5 billion and $8 billion.

Sanjay Mehrotra: Micron's fiscal 2020 for Capex is projected to be between $7 5 billion and $8 billion slightly higher than last year's levels and client plans primarily to support the HB MTBE production ramp.

slightly higher than last year's levels and trial plans, primarily to support the HBM-3E production ramp.

We continue to expect WFE CapEx in fiscal 2024 to be down year over year.

Sanjay Mehrotra: We continue to expect <unk> capex in fiscal 2024 to be down year over year.

As we have discussed previously, the ramp of HVM production will constrain supply growth in non-HVM products and will help improve the overall DRAM industry supply demand balance.

Sanjay Mehrotra: As we have discussed previously the ramp of HBM production will constrain supply growth in non <unk> products and will help improve the overall DRAM industry supply demand balance.

Across the industry, the HBM3E dye is roughly twice the size of equivalent capacity D5.

Sanjay Mehrotra: Across the industry. The <unk> di is roughly twice the size of equivalent capacity D. Five.

Additionally, the HVM product includes a logic interface die and has a substantially more complex packaging stack that impacts years.

Sanjay Mehrotra: Additionally, the HCM product includes a logic interface die and has a substantially more complex packaging stack that impacts us.

These factors result in HVM consuming more than two times the wafer supply as D5 to produce a given number of wears.

Sanjay Mehrotra: These factors result in HBM consuming more than two times, the wafer supply as the five to produce a given number of bits.

In last quarter's earnings call, we communicated that we strategically divert it underutilized equipment toward ramping new technology nodes, which will help us increase in leading edge production in a capital efficient manner.

Sanjay Mehrotra: In last quarter's earnings call, we communicated that we strategically diverted underutilized equipment towards ramping new technology nodes, which will help us increase in leading edge production in a capital efficient manner.

Since the number of wafer processing steps is higher for leading edge nodes, this approach of diverting underutilized tools to the leading edge meaningfully reduces our overall wafer capacity.

Sanjay Mehrotra: Since the number of wafer processing steps is higher for leading edge nodes. This approach are diverting underutilized tools to the leading edge meaningfully reduces our overall view for the capacity.

Thus underutilization in our fares early this fiscal year transitions to structurally lower wafer capacity at higher utilization rates as we move through the fiscal year.

Sanjay Mehrotra: Thus under utilization in our Fabs early this fiscal year transitions to structurally lower wafer capacity at higher utilization rates as we move through the fiscal year.

Reports indicate that this redeployment of underutilized tools at the leading edge is an industry-wide practice that is likely to constrain industry supply in 2024.

Sanjay Mehrotra: Reports indicate that this redeployment of underutilized tools at the leading edge is an industry wide practice that is likely to constrain industry supply in 2024.

Taking all these factors into account, Micron's BIT supply growth in fiscal 2024 is planned to be well below demand growth for both DRAM and NAND, and we expect to decrease our days of inventory in fiscal year 2024.

Taking all these factors into account micron's bit supply growth in fiscal 2024 is planned to be well below demand growth for both DRAM and NAND and we expect to decrease our days of inventory in fiscal year 2024.

We expect calendar 2024 industry supply to be below demand for both DRAM and NAND, which will result in a contraction of industry inventory levels.

Sanjay Mehrotra: We expect calendar 2024, the industry supply to be below demand for both DRAM and NAND, which will result in a contraction of industry inventory levels.

As we have highlighted before, we continue to work with the U.S. government and CHIPS grants are assumed in our CAPEX plans for fiscal 2024.

Sanjay Mehrotra: As we have highlighted before we continue to work with the U S government and chips grants are assumed in our Capex plans for fiscal 2024.

The viability and global competitiveness of our Idaho and New York projects depends on Micron receiving CHIPS grants to address the cost difference compared to overseas expansion.

Sanjay Mehrotra: The liability and global competitiveness of our Idaho, and New York projects depends on Micron, receiving chips grants to address the cost difference compared to overseas expansion.

To better support our customers around the globe, we have opened state-of-the-art assembly and test facilities in Malaysia and Taiwan.

To better support our customers around the globe. We have opened a state of the art Assembly and test facilities in Malaysia and Taiwan.

We are proceeding with our previously announced expansion of our Xi'an facility, having received approval from Chinese authorities for our planned investment.

Sanjay Mehrotra: We are proceeding with our previously announced expansion of our Xi'an facility, having received approval from Chinese authorities for our planned investment.

In fiscal Q1, we achieved the first mobile customer qualification of LPD RAM assembled at our Xi'an site, furthering our strong commitment to serve our mobile customers in China.

In fiscal Q1, we achieved the first mobile customer qualification of LTE DRAM assembled at our Xi'an site furthering our strong commitment to serve our mobile customers in China.

Sanjay Mehrotra: Our broad diverse network of global operations remains a key element of our strategy to address customer demand in a reliable and resilient fashion.

Our broad, diverse network of global operations remains a key element of our strategy to address customer demand in a reliable and resilient fashion.

Our leading technology, strengthening product portfolio, strong manufacturing capabilities, and our dedicated team members position us well to capture the opportunities ahead.

Sanjay Mehrotra: Our leading technology strengthening product portfolio and strong manufacturing capabilities and our dedicated team members positioned us well to capture the opportunities ahead.

I will now turn it over to Mark for our financial results and outlook.

Speaker Change: I will now turn it over to Mark for our financial results and outlook.

Mark Murphy: Thanks, Sanjay and good afternoon, everyone.

Micron delivered strong results in fiscal Q1 with revenue, gross margin, and EPS higher than the upper end of the guidance range we provided in our last earnings call.

Mark Murphy: Micron delivered strong results in fiscal Q1 with revenue gross margin and EPS higher than the upper end of the guidance range. We provided in our last earnings call.

During the quarter, an improving supply-demand environment and our team's strong execution resulted in higher prices across DRAM and NAN.

Mark Murphy: During the quarter and improving supply demand environment, and our team's strong execution resulted in higher prices across DRAM and NAND.

The current pricing trajectory has improved our financial outlook for the second quarter and full fiscal year.

Mark Murphy: The current pricing trajectory has improved our financial outlook for the second quarter and full fiscal year.

Total fiscal Q1 revenue is approximately $4.7 billion.

Mark Murphy: Total fiscal Q1 revenue was approximately $4 7 billion.

up 18% sequentially and up 16% year over year.

Mark Murphy: Up 18% sequentially and up 16% year over year.

Fiscal Q1 DRAM revenue was $3.4 billion, representing 73% of total revenue.

Mark Murphy: Fiscal Q1, DRAM revenue was $3 4 billion.

Mark Murphy: Representing 73% of total revenue.

Mark Murphy: DRAM revenue increased 24% sequentially with bit shipments increasing in the low 20 percentage range and prices increasing in the low single digit percentage range.

DRAM revenue increased 24% sequentially, with BIT shipments increasing in the low 20s percentage range and prices increasing in the low single-digit percentage.

Mark Murphy: Robust bookings entering the quarter, including customers strategic buys that occurred in prior quarters for fiscal Q1 shipment <unk>.

Limited or reported fiscal Q1 DRAM price increases despite Micron's strong execution on CQ4 price.

Mark Murphy: Eliminated our reported fiscal Q1, DRAM price increases despite micron's strong execution on key Q4 pricing.

Our strong calendar Q4 price execution contributes to our solid sequential growth and fiscal Q2, even with the effective seasonality.

Mark Murphy: Our strong calendar Q4 price execution contributes to our solid sequential growth in fiscal Q2.

Mark Murphy: Even with the effect of seasonality.

Fiscal Q1 NAN revenue was $1.2 billion, representing 26% of Micron's total revenue.

Mark Murphy: Fiscal Q1, NAND revenue was $1 2 billion.

Mark Murphy: Representing 26% of Micron's total revenue.

NAND revenue increased 2% sequentially, with pricing more than offsetting an expected and communicated decline in volume.

NAND revenue increased 2% sequentially with pricing more than offsetting an expected and communicated decline in volumes.

Mark Murphy: Bit shipments declined in the mid teens percentage range after record shipments in the prior quarter and.

BIT shipments declined in the mid-teens percentage range after record shipments in the prior quarter, and prices increased by approximately 20 percent.

Mark Murphy: And prices increased by approximately 20%.

portfolio mix improvements in NAND contributed to the increase.

Mark Murphy: Portfolio mix improvements in NAND contributed to the increase.

Mark Murphy: Now turning to revenue by business unit.

Compute and networking business unit revenue was $1.7 billion, up 45 percent sequentially.

Mark Murphy: Compute and networking business unit revenue was $1 7 billion up 45% sequentially.

Mark Murphy: Data center and client shipments strengthened in the quarter.

AI-related shipments increased in the data center market and normalized inventory at client customers enabled bit shipment growth.

Mark Murphy: AI related shipments increased in the data center market and normalized inventory at client customers enabled bit shipment growth.

Revenue for the mobile business unit was $1.3 billion, up 7 percent sequenced.

Mark Murphy: Revenue for the mobile business unit was $1 3 billion.

Mark Murphy: Up 7% sequentially.

Mobile revenue continued to show strength as customer inventories normalized and smartphone units and average memory and storage capacity growth at customers drove demand.

Mark Murphy: Mobile revenue continued to show strength as customer inventories normalize and smartphone units and average memory and storage capacity growth at customers drove demand.

Our mobile fiscal Q1 revenue almost doubled from year ago levels.

Mark Murphy: Our mobile fiscal Q1 revenue almost doubled from year ago levels.

Mark Murphy: Embedded business unit revenue was $1 billion up 21% sequentially.

Mark Murphy: Growth was strong across most end markets.

Revenue for the storage business unit was $653 million.

Mark Murphy: Revenue for the storage business unit was $653 million.

down 12 percent sequentially due to sharply lower consumer component sales, partially offset by strong growth and SSD revenue.

Mark Murphy: Down 12% sequentially due to sharply lower consumer component sales, partially offset by strong growth in SSD revenue.

The consolidated gross margin for fiscal Q1 was near 1%, improving 10 percentage points sequentially and driven by higher prices and a greater mix of DRAM products.

Mark Murphy: The consolidated gross margin for fiscal Q1 was near 1%, improving 10 percentage points sequentially and driven by higher prices and a greater mix of DRAM products.

Operating expenses in fiscal Q1 were $992 million, up $150 million sequentially, and in line with our late November update.

Mark Murphy: Operating expenses in fiscal Q1 were $992 million up $150 million sequentially and in line with our late November update.

OPEX increased on higher R&D expenditures and the reinstatement of certain compensation programs suspended in the prior fiscal year, including short-term incentive companies.

Mark Murphy: Opex increased on higher R&D expenditures and the reinstatement of certain compensation programs suspended in the prior fiscal year, including short term incentive compensation.

We had an operating loss of $955 million in fiscal Q1, resulting in an operating margin of negative 20%, improved from negative 30% in the prior quarter.

Mark Murphy: We had an operating loss of $955 million in fiscal Q1, resulting in an operating margin of negative 20% improved from negative 30% in the prior quarter.

Fiscal Q1 taxes were $59 million, lower than the anticipated $80 million.

Mark Murphy: Fiscal Q1 taxes were $59 million lower than anticipated at $80 million.

based on an updated view of projected taxes across the year driven by our improved fiscal

Mark Murphy: Based on an updated view of projected taxes across the year drill.

Mark Murphy: Driven by our improved fiscal 2020 for outlook.

Mark Murphy: The non-GAAP loss per share in fiscal Q1 was 95.

compared to a non-GAAP loss per share of $1.07 in the prior quarter.

Mark Murphy: Compared to a non-GAAP loss per share of $1 seven in the prior quarter.

and a non-GAAP loss per share of $0.04 in the year ago.

Mark Murphy: On a non-GAAP loss per share of <unk> in the year ago quarter.

According to cash flows and capital spending, our operating cash flows were approximately $1.4 billion in fiscal Q1.

Mark Murphy: Turning to cash flows and capital spending our operating cash flows were approximately $1 $4 billion in fiscal Q1 rep.

Representing 30% of revenue.

Mark Murphy: During the quarter, we received $600 million in customer prepayments to secure supply for leading edge memory products.

During the quarter, we received $600 million in customer prepayments to secure supply for leading-edge memory products.

Mark Murphy: Capital.

Capital expenditures were $1.7 billion during the quarter, resulting in free cash flow of negative $333 million in the quarter.

Mark Murphy: <unk> were $1 $7 billion during the quarter, resulting in free cash flow of negative $333 million in the quarter.

Our fiscal Q1 ending inventory was $8.3 billion or 159 days, down from 170 days in the prior year.

Mark Murphy: Our fiscal Q1, ending inventory was $8 3 billion or 159 days down from 170 days in the prior quarter.

As mentioned in prior quarters, we hold strategic inventory stock associated with build ahead of products for cost optimization and risk mitigation.

Mark Murphy: As mentioned in prior quarters, we hold strategic inventory stock associated with build ahead of products for cost optimization and risk mitigation.

Excluding strategic stock, our fiscal Q1 ending inventory days would be approximately 142 days, only 22 days higher than our target inventory

Mark Murphy: Excluding strategic stock our fiscal Q1, ending inventory days would be approximately 142 days only 22 days higher than our target inventory level.

Mark Murphy: On the balance sheet, we held nine $8 billion of cash and investments at quarter end.

On the balance sheet, we held $9.8 billion of cash and investments at quarter end.

and maintain $12.3 billion of liquidity when including our untapped credit.

Mark Murphy: And maintained $12 $3 billion of liquidity, when including our untapped credit facility.

We ended the quarter with $13.5 billion in total debt, low net leverage, and a weighted average maturity on our debt of $20.30.

Mark Murphy: We ended the quarter with $13 $5 billion in total debt.

Our low net leverage and a weighted average maturity on our debt of 2030.

Mark Murphy: Now turning to our outlook for the fiscal second quarter.

while we remain mindful of macroeconomic risks.

While we remain mindful of macroeconomic risks.

The memory and storage market environment is improving.

The memory and storage market environment is improving.

Mark Murphy: We expect supply demand balance to tighten in both DRAM and NAND throughout 2024.

We expect supply-demand balance to tighten in both DRAM and NAN throughout 2024.

Our leading edge DRAM and NAND nodes are oversubscribed for the full year.

Mark Murphy: Our leading edge DRAM and NAND nodes are oversubscribed for the full year.

Mark Murphy: Consequently, we expect prices to increase through calendar 2024.

Mark Murphy: Driving improvements in our financial performance.

Our leading edge inventory is very tight.

Mark Murphy: Our leading edge inventory is very tight.

And we are also working to minimize pull-in of customer demand in response to higher prices.

Mark Murphy: And we are also working to minimize Poland of customer demand and response to higher pricing.

As a result, our sequential growth in the near term will be driven primarily by pricing rather than a sequential increase in Bitship.

Mark Murphy: As a result, our sequential growth in the near term will be driven primarily by pricing rather than a sequential increase in bit shipments.

Both DRAM and NAN bit shipments are expected to decline somewhat in the fiscal second quarter.

Mark Murphy: Both DRAM and NAND bit shipments are expected to decline somewhat in the fiscal second quarter.

We expect our fiscal Q2 gross margin to benefit from sequential price increases and reduced impact from underutilization.

Mark Murphy: We expect our fiscal Q2 gross margin to benefit from sequential price increases and reduced impact from under utilization.

We project the balance of previously written down inventories to clear and fiscal acute.

Mark Murphy: We project the balance of previously written down inventories declare in fiscal Q2.

We forecast operating expenses to decline in the fiscal second quarter on lower R&D program expenses and an asset sale previously expected to occur in the first quarter.

Mark Murphy: We forecast operating expenses to decline in the fiscal second quarter on lower R&D program expenses and an asset sale previously expected to occur in the first quarter.

Mark Murphy: For the fiscal year.

For the fiscal year, due to some higher R&D expenses, including what we saw in Q1,

Mark Murphy: Due to some higher R&D expenses, including what we saw in Q1.

and higher short-term incentive compensation from an improved outlook.

Mark Murphy: And higher short term incentive compensation from an improved outlook.

We now project OPEX to be over $3.9 billion.

We now project opex to be over $3 9 billion.

We forecast a much reduced operating loss in fiscal Q2.

Mark Murphy: We forecast a much reduced operating loss in fiscal Q2.

and project a return to operating income in Q3.

Mark Murphy: Project, a return to operating income in Q3.

Our tax forecast for the year has increased from under $200 million to over $300 million based on an updated taxable income out.

Mark Murphy: Our tax forecast for the year has increased from under $200 million to over $300 million.

Mark Murphy: Just on an updated at taxable income outlook.

Mark Murphy: We project the allocation of tax expense across the year to be heaviest in the fourth quarter driven by profitability and other factors.

We project the allocation of tax expense across the year to be heaviest in the fourth quarter, driven by profitability and other factors.

Mark Murphy: As we've mentioned previously.

At current levels of profitability, tax estimates and the distribution of taxes across the year are highly sensitive to changes in the outlook.

Mark Murphy: At current levels of profitability tax estimates in the distribution of taxes across the year are highly sensitive to changes in the outlook.

We plan fiscal Q2 capital expenditures to be in line with first quarter levels.

Mark Murphy: We plan fiscal Q2 capital expenditures to be in line with first quarter levels.

We see operating cash flows improving substantially in the second half of the fiscal year and are now forecasting positive free cash flow in the fiscal fourth quarter.

Mark Murphy: We see operating cash flows improving substantially in the second half of the fiscal year and are now forecasting positive free cash flow in the fiscal fourth quarter.

With all these factors in mind, our non-gap guidance for Fiscal Q2 is as follows.

Mark Murphy: With all these factors in mind, our non-GAAP guidance for fiscal Q2 is as follows.

We expect revenue to be $5.3 billion, plus or minus $200 million. Gross margin to be in the range of 13 percent.

Mark Murphy: We expect revenue to be $5 3 billion.

Plus or minus $200 million.

Mark Murphy: Gross margin to be in the range of 13%.

Plus or minus 150 basis points.

and operating expenses to be approximately $950 million plus or minus $15 million.

And operating expenses to be approximately $950 million plus or minus $15 million.

Mark Murphy: We expect tax expenses of approximately $45 million.

We expect tax expenses of approximately $45 million.

Based on a share account of approximately 1.1 billion shares, we expect a loss of $0.28 per share, plus or minus $0.07.

Based on a share count of approximately $1 1 billion shares we expect a loss of 28 per share plus or minus seven.

In closing, the industry environment is improving and our financial outlook has strengthened for the fiscal year and beyond.

Mark Murphy: In closing.

Mark Murphy: The industry environment is improving and our financial outlook has strengthened for the fiscal year and beyond.

We will continue to take a disciplined approach to managing the business and remain focused on optimizing price, driving productivity, and controlling capital spend.

Mark Murphy: We will continue to take a disciplined approach to managing the business and remain focused on optimizing price driving productivity and controlling capital spend.

With high levels of liquidity and low net leverage, we continue to operate from a position of balance sheet strength as we forecast return to profitability and positive free cash flow. I will now

Mark Murphy: With high levels of liquidity and low net leverage we continue to operate from a position of balance sheet strength as you forecast to return to profitability and positive free cash flow.

Speaker Change: I will now turn it back over to Sanjay.

Thank you, Mark. Over the last year, our world-class technology, business, and manufacturing teams ensured ongoing leadership in foundational memory technologies and the expansion of our industry-leading product portfolio. We are encouraged by the progress we have made on pricing and we are on track to restore profitability, more commensurate with the great value our solutions provide to our customers.

Thank you Mark over the last year, our World class technology business and manufacturing teams ensured ongoing leadership and foundation of the memory technologies and the expansion of our industry leading product portfolio.

Speaker Change: We are encouraged by the progress we have made on pricing and we are on track to restore profitability more commensurate with the great value our solutions provide to our customers.

Speaker Change: We expect 2024 to be a year of recovery and can see the path towards a healthy supply and demand environment, along with strong growth in critical new technologies like HBM CE.

We expect 2024 to be a year of recovery and can see the path towards a healthy supply demand environment along with strong growth in critical new technologies like HBM-3E.

From the data center to the edge, AI has emerged as a significant secular driver that will further bolster the industry towards record revenue time in 2025 and drive growth for years to come.

From the data center to the edge AI has emerged as a significant secular driver that will further bolster the industry towards record revenue Tam in 2025 and drive growth for years to come.

microns broad and growing suite of leading edge products positions as well to capitalize on the immense opportunities ahead. Thank you for joining us today. We will now

Speaker Change: Micron's broad and growing suite of leading edge products positions us well to capitalize on the immense opportunities ahead.

Speaker Change: Thank you for joining us today, we will now open for questions.

Certainly, ladies and gentlemen, as a reminder, if you do have a question at this time, please press star 11 on your telephone. One moment for our first question.

Speaker Change: Certainly ladies and gentlemen, as a reminder, if you do have a question at this time. Please press star one on your telephone one moment for our first question.

Speaker Change: And.

Our first question comes from the line of Chris Schenker from

Our first question comes from the line Chris.

Chris: Chris Schenker from.

Chris Schenker: TD Cowen your question please.

Yeah, thanks for taking the question. Sanjay or Mark, the first question I had is kind of you spoke about the functionality of pricing in calendar 24. I'm kind of curious if you can fill the onion one layer below and say how we think about pricing through calendar 24 for DRAM and MAN. And if you can extrapolate it into 2025, that would be very helpful. And then I had a follow-up.

Yeah, Hi, Thanks for taking my question Sanjay Mark.

TD Cowen: The first question I had is kind of you spoke about clustered them with your pricing in calendar 'twenty four I'm kind of curious if you can.

TD Cowen: In one layer below and say how do we think about pricing.

TD Cowen: Good morning for DRAM, and NAND and if you can extrapolate into 2025 that would be very helpful. And then I had a follow up.

Thanks Grish for the question and with respect to the pricing, we of course expect pricing to continue to strengthen during calendar 2024 and this is because of the healthy demand supply balance as we discussed in the context of our script. As you've seen, there have been significant cuts in supply growth in the industry, customer inventories have normalized, supplier inventories are improving as we have discussed our own inventory here as well.

Thanks, Chris for the question and with respect to the pricing we have.

TD Cowen: Of course expect pricing to continue to strengthen during calendar 2024, and this is because of the healthy demand supply balance as we discussed in the context of our script as you have seen.

TD Cowen: There have been significant cuts in supply growth in the industry customer inventories have normalized supplier inventories that improving as we have discussed our own inventory here as well and pricing will continue to improve as a result through the course of the year and of course, the demand trends overall because of improvement of <unk>.

and pricing will continue to improve as a result through the course of the year. And of course, you know, the demand trends overall because of improvement of customer inventories are in PCs, in smartphones, automotive, and industrial, the demand trend will continue. And sometime in first half of 24, calendar 24, we expect data center inventories at customers

TD Cowen: Customer inventories are.

TD Cowen: In.

In Pcs and smartphones automotive and industrial the <unk>.

TD Cowen: That trend will continue in sometime in first half of 'twenty for calendar 'twenty four we expect data center.

Inventories at customers to get normalized as well and beyond that point, we would expect data center to become another boost in demand in 2024. So we expect pricing to continue to increase both in NAND and in DRAM as well.

to get normalized as well. And beyond that point, you would expect data center to become another boost in demand in 2020.

So we expect pricing to continue to increase both in NAND and in BNAM as well. And we expect a healthy demand supply environment in 2025 as well as a healthy pricing environment in 25 to.

TD Cowen: And we expect a healthy demand supply environment in 2025, as well as a healthy pricing environment in 2005 two.

And I just want to point out that as we noted, we have tightness on our leading edge nodes. They are already in short supply, and inventories have been continued to improve for us, and all of this results in overall healthy dynamics for pricing improvements, profitability improvements, and revenue opportunity growth, in the backdrop of demand drivers, AI being a dominant demand driver across the end market.

And I just want to point out that as we noted we have tightness on our leading edge nodes.

We had already in short supply and inventories will continue to improve for us and all of this with us.

Overall healthy dynamics floor pricing improvements profitability improvements and revenue opportunity growth in the backdrop of demand drivers AI being a dominant demand driver across the end markets.

got it. That's very helpful. And then just a quick follow up on capex. I understand a lot of the capex is going towards HBM and your WC is going to be down year over year. Is there a way of quantifying how much of the capex for next year is for HBM? And at what is the catalyst for you to start investing in NAND? Is it price? Is it gross margin in any such catalyst for NAND? That'd be very helpful. Thank you.

Speaker Change: Got it that's very helpful. And then just a quick follow up on Capex.

I understand a lot of the Capex is going towards <unk> and AWP is going to be down year over year is that a way of quantifying how much of the capex for next year at both HBO and at what is the catalyst for you to start investing in that is it price is the gross margin any such catalyst for non that'd be very helpful. Thank you.

So we are not breaking down the gap between HVM and other parts of the business but we have noted that our WFPE

Speaker Change: So we are not breaking down the capex.

Speaker Change: Between HBM and other parts of the business, but we have noted that our W. FTE is down and of course, we are very much focused on supporting the growth of our <unk> business. We are very excited about our leading edge product <unk>, which is the most advanced <unk> offering in the industry.

is down. And of course, we are very much focused on supporting the growth of our HBM business. We are very excited about our leading-edge product, HBM3E, which is the most advanced HBM3E offering in the industry. And as we noted in our remarks, post the qualification, you know, we are going to be starting production ramp early in calendar 24 and driving revenue growth. There will be more back half loaded for us.

Speaker Change: And as we noted in our remarks.

It was the qualification.

Going to be starting production ramp early calendar 'twenty, four and driving revenue growth will be more back half loaded for us.

So, I mean, we will, of course, make the necessary investments to support the demand for our HBM in 24. I would just point out that our HBM supply is basically in calendar year 24 is sold out at this point.

So I mean, we will of course make the necessary investments to support the demand for our HBM in 2004, I would just point out that our HBM supply is basically in calendar year 'twenty four is sold out at this point.

And, you know, in terms of, you know, NAND and CAPEX,

Speaker Change: And.

Speaker Change: In terms of.

Speaker Change: NAND and Capex, whether NAND or DRAM, what's most important is that the profitability returns to the levels that are really needed in order to justify at Oi and in teasing any capex investments. So this is what we are focused on and will remain extremely <unk>.

Whether in NAND or in DRAM, what's most important is that the profitability returns to the levels

that are really needed in order to justify ROI in increasing any CAPEX investments. So this is what we are focused on and we'll remain extremely disciplined with respect to any CAPEX, with respect to any supply growth considerations. And you know that the profitability in the industry is still far from the levels that are needed to get ROI on the investments. And we plan to remain extremely disciplined

Speaker Change: Planned with respect to any capex with respect to any supply growth considerations and you know that the profitability in the industry is still far from the levels that are needed to get out ROI on the investments and.

Speaker Change: We plan to remain extremely disciplined in this regard.

Thanks Sanjay.

Thank you one moment for our next question.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Okay.

Speaker Change: And.

Our next question comes from the line of Aaron Rakers from Wells Fargo your question please

Speaker Change: Our next question comes from the line.

Speaker Change: Aaron Rakers from Wells Fargo. Your question. Please.

Yeah, thanks for taking the question. I have to as well real quick, you know, first building on the HBM comment that you said you're basically sold out for the year. I know that you referenced in your prepared remarks that you're qualified in with the G H 200 and the H 200.

Aaron Rakers: Yes, thanks for taking the question I have two as well real quick first building on the HBM comment.

Aaron Rakers: Likely sold out for the year I know that you referenced in your prepared remarks that you're qualified in with the GH 200, and the H 200.

I'm just curious, when you get called in on HBM3E, how does that market work in terms of

Aaron Rakers: At Nvidia I'm just curious.

When you get quality and on <unk> III E. How does how does that market work in terms of.

You know, do these customers dual qualified? Do you have line of sight and kind of your share position within those products used? I'm just curious how the qualifications work and the visibility that you have to basically kind of, you know, double down on the fact that you expect to be kind of, you know, comparable market share and HBM as DRAM in total as you look out in the 25.

Aaron Rakers: Do these customers dual qualify do you have line of sight and kind of your share position.

Aaron Rakers: Within those product Skus I'm, just curious to how the qualification work and the visibility that you have.

So basically kind of double down and the fact that you expect to be kind of.

Aaron Rakers: Comparable market share in HBM as DRAM in total as you look out into 'twenty five.

So our product is in qualification, as we noted in our comments here, and qualification is progressing well, and post-qualification, we expect to be lamping production volumes as well as shipments to our customers. And that's what we'll do.

Aaron Rakers: So our product is in qualification as we noted in our comments here and.

Aaron Rakers: <unk> is progressing well and force qualification, we expect to be ramping production volumes as well as shipments.

Aaron Rakers: Our customers and Thats, what will yield through several hundred millions of dollars of revenue for us in fiscal year 'twenty four again that revenue will be more back half of our fiscal year.

to several hundred millions of dollars of revenue for us in fiscal year 24, again that revenue will be more back half of our fiscal year.

More so in the in the back half, but that volume ramp and that revenue opportunity will continue to build up as we go into 25 it will continue to increase in our fiscal year as well as calendar year 25.

Aaron Rakers: More so in the back half, but that volume ramp and that our revenue opportunity will continue to build up as we go into 2005, it will continue to increase.

Our fiscal year as well as calendar year 2005, and as we have said that sometime in calendar year 'twenty five we expect to be able to get to a level of our share in the HCM market that would align with our share in DRAM. So this is an exciting opportunity for us and as you know HBM.

And as we have said, that sometime in calendar year 25, we expect to be able to get to a level of our share in the HBM market that would align with our shares in DLM. So this is an exciting opportunity for us. And as you know, HBM has higher revenue per gigabyte. It is also higher profitability per gigabyte. So this is, and it's one of the biggest growth markets.

Aaron Rakers: Higher revenue per gigabyte is also higher profitability per gigabyte. So this is and it's one of the biggest growth markets.

In memory today, so we are excited about this opportunity. And of course, you know, there's a very tight relationship. Tight integration with customers for calls on HBM and it takes longer than standard products.

Aaron Rakers: In memory today. So we are excited about the support unity and of course there is a.

Very tight relationship.

Aaron Rakers: Direct integration with customers for clause on HBM and it takes longer than standard products and these are all factors that will play a role in terms of.

<unk>.

the number of suppliers that customers would tend to have for any given platform for HVM.

Aaron Rakers: The number of suppliers that customers, who tend to have on any given platform for the HBM.

Yeah, and then there's a quick follow-up. I'm curious in the comment you had said that basically your leading edge inventory was very tight. And I think the follow-up comment was that you're really, you know, focusing on minimizing any pull-in in the midst of pricing increases materializing. Can you just help us appreciate what exactly you're able to do to minimize any pull-in or the visibility you have in whether any customers are taking strategic inventory? Just curious how you manage that.

Speaker Change: And then as a quick follow up I'm curious in the comment you had said that faithful year, leading edge inventory with very tight.

And I think the follow up comment was that you're really focusing on minimizing any pull in.

In the midst of pricing increases materializing can you just help us appreciate what exactly youre able to do to minimize any pull in or the visibility you have and whether any customers are taking strategic inventory just curious how you manage that.

So, with respect to strategic inventory, I think we have discussed in the past that we had made 13.

Speaker Change: So with respect to strategic inventory I think we have discussed in the past that we had may affect things.

Certain customers had built certain strategic purchases in our FQ4 time frame and those are completing in CQ4 here.

Speaker Change: Strategic certain customers had built up.

Speaker Change: The strategic purchases in our FQ4 timeframe and those are completing in CQ4 here.

And, of course, as we look ahead, we have very much focused on, you know, managing our supply, managing our demand, pricing environment is increasing, and we want to, in this environment, of course, make sure that we meet the requirements of our customers in a fashion that overall maintains, you know, healthy dynamics of our business. Beyond that, I don't think we are in a position to discuss further specifics here. Fair enough. Thank you.

Speaker Change: And of course as we look ahead, we are very much focused on.

Speaker Change: Managing our supply of managing our demand pricing environment is increasing and we want to in this environment of course make sure that we meet the requirements of our customers in a fashion that overall maintains.

Speaker Change: Healthy dynamics of our business beyond that I don't think we are in a position to discuss further specifics here.

Speaker Change: Fair enough. Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you one moment for our next question.

And our next question comes from the line of Tashihari from Goldman Sachs. Your question please.

Speaker Change: And our next question comes from the line of <unk> Hari from Goldman Sachs. Your question. Please.

Hari: Hi, Good afternoon, I had two questions as well.

Hi, good afternoon. I had two questions as well. One on gross margins, maybe for Mark and then my follow-ups for Sanjay. Mark, so the gross margin profiles improving from, you know, breakeven or 1% in the prior quarter to 13%, I was hoping you could sort of break that down. The sequential change for us in terms of pricing, I guess, lower underutilization charges and whatever else is happening from an inventory perspective. And beyond FED, as we sort of look out into May, you talked about pricing improving throughout 24, so that continues to be a tailwind. How should we think about some of the other dynamics that go into your gross margin math?

Hari: One on gross margins, maybe for Mark and then my follow Up's for Sanjay.

Hari: Mark So the gross margin profile is improving from breakeven or 1%.

Hari: In the prior quarter to 13% I was hoping you could sort of break that down the sequential change.

Hari: For us in terms of pricing.

Hari: I guess lower underutilization charges, and whatever else is happening from an inventory perspective, and beyond said as we sort of look out into may you talked about pricing improving throughout 24. So that continues to be a tailwind how should we think about some of the other dynamics that.

Hari: Going to your gross margin math.

Oh, excuse me, so.

Sure.

Excuse me so.

So, on the fourth quarter, the first quarter gross margin, we were up 10 points. Over half or about half of that was priced.

Hari: So on the.

Hari: On the fourth.

Hari: The fourth quarter, the first quarter gross margin.

Hari: We were up 10 points over half or about half of that was price.

The most of the remainder was mixed on the higher DRAM volumes. And then we did see some favorable costs. We had the lower cost inventories clear at $600 million. And then we had some reduced EIDL charges that we've talked about.

Most of the remainder was on me.

Hari: Mix on the higher DRAM volumes and then we did see some favorable costs.

Hari: We had the lower cost inventories clear at $600 million and then we had some reduced idle charges that we've talked about now.

Now if we move out to second quarter, as we mentioned, we're not seeing volume growth in the second quarter, but we are seeing.

Hari: Now if we if we move out to second quarter.

Hari: As we mentioned.

We're not seeing volume growth in the second quarter, but we are seeing.

It grows margins still up 12 points, so it's all driven by price or principally price. There is some mix shift within, you know, by customers and some seasonal effects, but again, it's largely a price-driven increase.

Hari: Gross margin still up 12 points, so, it's all driven by price or principally price.

Hari: There is some mix shift.

Hari: Within.

Hari: By customers and some seasonal effects, but again, it's largely a price driven increase.

you know while while we have lower benefits from

Hari: While while we have lower benefits from.

The low cost inventory clearing will have 400 clear or 400 to benefit in the second quarter when we had 600 in the first quarter, we are seeing some cost declines occurring with the increase.

The low cost inventory clearing we will have 400 Claire.

Our 401 benefit in the second quarter, when we had 600 in the first quarter.

Hari: We are saying.

Hari: Some cost declines occurring with increase.

of leading node production. And then, again, with the lower wafer starts and the higher utilization, what we've talked about before, we start to see idle charges dropping as we've discussed. So, again, principally price.

Leading node production and then again with the.

Hari: Lower wafer starts and the higher utilization, while we've talked about before we start to see idle charges dropping as we've discussed so again principally price.

in the second quarter, but then beginning to see some cost benefits, even though we're losing the benefit of that lower cost inventory.

Hari: In the second quarter, but then beginning to see.

Hari: Some cost benefits, even though we're losing the benefit of that of that lower cost inventory.

We will see price appreciation through the year or going to, we don't expect there to be volume growth in the third quarter either, but good price appreciation, which will drive gross margins up.

Hari: We'll see.

Hari: Price appreciation through the year.

We're going to we don't expect there to be.

Hari: Volume growth in the third quarter either.

Hari: But good price appreciation, which will drive gross margins up and then in the fourth quarter, we would expect to see volume and price.

And then in the fourth quarter we would expect to see volume

and price, and again, some lower utilization charges. So, again, we would expect the margin expansion second to third quarter, and then again, third to fourth quarter.

Hari: And again, some lower utilization charges. So again, we would expect to see margin expansion.

Hari: Second to third quarter, and then again third to fourth quarter.

Okay, great. That's super helpful. And then as my follow up for Sanjay, you know, you guys had presented

Speaker Change: Okay, Great. That's Super helpful. And then as my follow up for Sanjay.

You guys had presented.

Sanjay Mehrotra: Our cross cycle financial model at your Investor Day, I think it was last may.

Clearly, the environment has changed quite a bit, but when you sort of, you know, talk about necessary ROI for your business as you guys debate when to increase production, when to increase CAPEX, should we look at the model from last May still as a reference point, you know, through cycle operating margins of 30%, free taxable margins of 10% or higher, is that still the model that's relevant in your view or have things changed since? Thank you. Yes, that model is very much relevant once we get past this down to

Sanjay Mehrotra: Clearly the environment has changed quite a bit.

Sanjay Mehrotra: When you sort of talk about necessary ROI for your business as you guys debate when to increase production went to increase Capex should should we look at the model from last may still as a reference point through cycle operating margins of 30% free.

Sanjay Mehrotra: Free cash flow margins of 10% or higher is that still the model that is relevant in your view or type.

Sanjay Mehrotra: If things change.

Thank you.

Sanjay Mehrotra: Yes.

Yes, that model is very much relevant. Once we get past this downturn and the recovery from this downturn as well. And I think we just have to recognize that this downturn has been steep. This has been driven by once in a hundred year pandemic as well as all the other related factors, which we have talked about customer inventories and demand pull in and demand normalization and all of the things that have impacted, severely impacted the industry environment over the course of last year.

Sanjay Mehrotra: Yes that model is very much relevant once we get past this downturn and the recovery from the downturn as well.

Sanjay Mehrotra: And I think we just have to recognize that this downturn has been Steve. This has been driven by once in 100 year pandemic as well as all of the related factors, which we have talked about customer inventories and demand for land and demand normalization and all of the things that have impacted severely impacted the industry environment over there.

Sanjay Mehrotra: Of course of last year, 2024, and we will be recovering and we have quality today, yet of recovery and we have talked about how do you see pricing continuing to increase through the year and of course profitability continuing to improve through the year as well as we look past. This recovery, we would definitely say that cross cycle model that we have this.

2024, we'll be recovering, and we have called it the year of recovery, and we have talked about how we see pricing continuing to increase through the year, and of course, profitability continuing to improve through the year as well. As we look past this recovery, we would definitely say that cross-cycle model that we have discussed in the past definitely would hold, and that's what we target for. Thank you.

Sanjay Mehrotra: Because in the past definitely going forward and that's what we target for.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Okay.

Speaker Change: And.

Speaker Change: Our next question comes from the line of Timothy Arcuri from UBS. Your question. Please.

Our next question comes from the line of Timothea Curry from UBS. Your question, please.

Timothy Arcuri: Thanks, a lot I had a question on these prepays that you are getting that $600 million, that's a pretty big number.

Timothy Arcuri: So is that more of a one time deal or should we expect these pre pace to continue and as part of that is that mostly related to say HBM or a particular vertical like datacenter or is that across most of your end markets and then I had a follow up as well.

So, obviously, due to the confidential nature of this agreement, we cannot provide any specifics around these prepayments.

Speaker Change: So obviously due to the confidential nature of this AGM and we cannot provide any specifics around these prepayments, but what I would like to point out is that it does reflect the importance of our technology, our products and our delivery capabilities. It also reflects.

But what I would like to point out is that it does reflect the importance of our technology, our products and our delivery capabilities. It also reflects our close relationships with our partners and, you know,

Speaker Change: Our close relationships with our partners and.

Speaker Change: Commitments.

from both sides, from a good example of commitment from customers as well as from Micron. Beyond that, I'm not able to really provide any specifics here, and again, honoring the confidentiality.

For from both sides from our good.

A good example of commitment from our customers as well as.

Speaker Change: Some micron, but beyond that I'm, not able to really provide any specifics here.

Speaker Change: Game honoring the confidentiality.

Speaker Change: Okay, Okay got that.

Okay, okay, got that. I guess then, can you talk just about limiting the bit shipments? I think you said you're limiting the bit shipments to prevent poll ins ahead of price increases. Sounds like bits are flat sequentially for fiscal Q2 and fiscal Q3. Can you talk about the logistics of that? Are you just kind of holding back on volumes to regain some, you know, pricing leverage? I guess if your competitors don't match that approach, you might risk losing some shares. So can you just talk about the logistics of that?

Speaker Change: Then can you talk Sanjay just about limiting the bit shipments I think you said you are limiting the bit shipments to prevent pull ins ahead of price increases it sounds like bits are flat sequentially for fiscal Q2 and fiscal Q3 can you talk about the logistics of that are you just kind of holding back on volumes to regain some pricing leverage I guess, if your competitors don't match that approach.

Sanjay Mehrotra: You might risk, losing some share. So can you just talk about the logistics of that thanks.

Then as we noted that leading edge supply is already tight.

Sanjay Mehrotra: And as we noted that leading edge supply is already tight.

And that certainly impacts in our SQ2, some of the shipments. SQ2, of course, is also impacted by seasonality.

Sanjay Mehrotra: And so that certainly impacts in our <unk>.

Sanjay Mehrotra: Q2.

Sanjay Mehrotra: Some of the shipments FQ2 of course is also impacted by seasonality and.

And so supply is managing supply given the tight environment of supply on the leading nodes, nodes is really the main consideration in terms of us guiding you to this profile. And of course, as we manage, as we allocate that supply across the customers, we want to make sure that we are managing our shipments to our customers carefully. Okay.

Sanjay Mehrotra: So supply is managing supply given the tight environment of supply on the leading node nodes is really the main consideration in terms of guiding you to this profile and of course as we manage as we allocate that supply across the customers. We want to make sure that we are managing our shipments to our customers carefully.

Speaker Change: Okay. Thank you so much.

Speaker Change: Yes.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And.

Our next question comes from the line of Mahadi Hussaini from Cheshawanna Financial. Your question, please.

Speaker Change: Our next question comes from the line of a heady husseini from <unk> financial your question. Please.

Yes. Thanks for taking my question. Two follow-ups. Sanjay, historically memory industry tends to gravitate towards higher margin products.

Heady Husseini: Yes, Thanks for taking my question two follow ups.

Heady Husseini: Jay.

Heady Husseini: Historically memory industry tends to gravitate towards.

Heady Husseini: Higher margin products.

which has historically led to margin erosion. Why is HBM any different? And what are your thoughts, anything you can share with us as to what can preserve the higher margin associated with these high-end products? And I have a follow-up.

Heady Husseini: Which has historically led to.

Heady Husseini: Margin erosion was HBM any different and whether your thoughts or anything you can share with us as to.

Heady Husseini: What can preserve.

Heady Husseini: Higher margin associated with these high end products and I have a follow up.

So, I think, you know, AI is in very early innings. Gen AI is barely starting, and these are great growth opportunities ahead. You know, this is, you know, biggest evolution since Internet, and recently you have heard industry estimates of data center AI accelerator, TAM, CAGR, of being about 70% over the course of next few years.

Speaker Change: Well I think.

Speaker Change: AI is in very early innings journey II is barely starting and these are great growth opportunities ahead.

Speaker Change: This is.

Speaker Change: Biggest evolution.

Speaker Change: Internet and recently you have heard industry estimates of data center AI accelerator Tam CAGR of being about 70% over the course of next few years.

Of course, as those opportunities grow with data center accelerators, you know, from various suppliers, of course, the whole infrastructure grows, and it's about AI,

Speaker Change: Of course, as those opportunities grow with data center accelerators.

Speaker Change: From various suppliers of course, the whole infrastructure grows.

Speaker Change: And it's about.

and gen AI applications from training to inferencing and really proliferating all across, you know, the data center environment. And that's where, and along with the growth in data center AI accelerators, the rest of the infrastructure including HBM will continue to grow. So we project that HBM Kaggle will be over 50% over the course of

AI engine AI applications from training to inferencing, and really proliferating all across the data center environment and Thats, where.

Speaker Change: Along with the growth in.

Speaker Change: Data center AI accelerators, the rest of the infrastructure, including HBM.

Speaker Change: For you to grow so we project that HBM CAGR.

Speaker Change: <unk>.

Speaker Change: Over 50% over the course of next few years and when you think about that as more than three times of the DRAM industry CAGR that we are talking about and still we are very are in the very very early innings 'twenty to 'twenty three is the first year of.

next few years. And when you think about it, that is more than three times of the DRAM industry CAGR that we are talking about. And still, we are in the very, very early innings. 2023 is the first.

Speaker Change: A meaningful shipments of HBM and the industry and that too corresponds to.

Low single digit percentage in terms of bits shipped in <unk> this year, but a much higher pricing much higher revenue opportunity. So as we look ahead, we see HBM are continuing to grow strongly in the industry.

Speaker Change: Is demand will grow it will be a key enabler of gen AI applications and training as well as in influencing because more and more data is acquired as you look at more and more larger and larger large language models and more training on more data adjusted drives more demand for high bandwidth high.

It's more demand for high bandwidth, high performance, no powered memory. So this is the very beginning. It has long ways to go. And the other important factor with HVM, as we have discussed, is that it really takes more than two times as many wafers to produce the same number of bits as D5. So it really has a headwind to the supply growth in the DRAM industry. And it has the effect of helping strengthen the supply demand balance of the industry as well. So I think these are some of the important aspects. Of course, the important thing is that this has to be looked at as a long term opportunity, long term growth opportunity. And of course,

Speaker Change: Performance low power memory. So this is the very beginning it has long ways to go and.

No, father, memory.

So this is the very beginning. It has long ways to go. And the other important factor with HPM, as we have discussed is.

Speaker Change: The other important factor with <unk> as we have discussed is that it really takes more than two times as many defers to produce the same numbers number of beds is <unk>. So it really had it as a headwind to the supply growth in the DRAM industry and it has the effect of <unk>.

that it really takes more than two times as many baffers to produce the same number of baffers as D5. So it really has a headwind to the supply growth in the DRAM industry and it has the effect of

helping strengthen the supply demand balance of the industry as well.

Speaker Change: Helping strengthening of strengthen that supply demand balance of the industry as well.

So I think these are, you know, some of the important aspects, of course, when it's so important thing is that this has to be looked at as a long term opportunity, long term growth opportunity. And of course, you know, we are excited about getting our HBM shares.

Speaker Change: So I think these are some of the important aspects of course.

Speaker Change: Important thing is that this has to be looked at in the long term opportunity long term growth opportunity and of course.

Speaker Change: We're excited about getting our ATM share.

Speaker Change: Two.

Speaker Change: Aligned with our DRAM share sometime in 2025 and of course as we look at any large opportunity.

Speaker Change: Over time, it will certainly have some ebb and flow in terms of demand and supply and we will prudently manage this and maintaining flexibility in managing this is absolutely key and you've seen us manage this well over time.

manage this and maintaining flexibility and managing this is absolutely key and you have seen us manage this well over time in our overall industry for DRAM as well as for DAND on part of Micron and we'll continue to manage it in that fashion. It is an exciting opportunity. We are well positioned with our product and we look forward to continuing to grow revenue and profit contribution with this product line over the course of the next few years. Great. Thanks for detail. Just a quick follow-up for Mark, is there a normalized capital intensity that we should think of especially as we come off this kind of nuclear winter in memory? Is there any?

Speaker Change: Overall.

Speaker Change: Industry for DRAM as well as for NAND on part of Micron and will continue to manage it in that fashion. It is an exciting opportunity we are well positioned with our product and we look forward to continuing to grow revenue and profit contribution, but this product line over the course of next few years.

Great. Thanks for detail. Just a quick follow up for Mark. Is there a normalized capital intensity that we should think of, especially as we come off this kind of nuclear winter in memory? If you don't have a normalized capital intensity, what else out there that could help us better forecast recache flow?

Speaker Change: Great. Thanks for detail just a quick follow up for Mark is there a normalized capital intensity that we should think of especially as we come off the <unk>.

Speaker Change: Just kind of nuclear winter.

Speaker Change: In memory.

Speaker Change: Is there any if you don't have a normalized capital intensity what else out there that could help us better forecast free cash flows.

Yeah, no update, many, to the cross-cycle model that we've provided, so I think the best way to think about CAPEX is just over time as a percent of revenue, which we've given mid-thirties percent over time. Of course, as the, you know, for example, HBM, you know, requires more CAPEX, but it also yields a price premium.

Speaker Change: Yeah, No update many of those cross cycle model that we've provided so I think the best way to think about Capex is just over time as a percent of revenue, which means given mid <unk> percent.

Speaker Change: Over time of course as said.

For example, HBM.

<unk> requires more capex, but it also yes.

Speaker Change: Yields.

Speaker Change: Rice.

Speaker Change: <unk>.

And a creative margin. So we believe that at this time that capital intensity model that we've provided before is still intact. Thank you.

Speaker Change: And accretive margin. So we believe that at this time that capital intensity model that we provided before is still intact.

Speaker Change: Thank you.

Speaker Change: Yes.

Speaker Change: Thank you one moment for our next question.

And our next question comes from the line of Harlan Sir from JPMort.

Speaker Change: And our next question comes from the line of Harlan sur from Jpmorgan.

Good afternoon, thanks for taking my question. As you mentioned, your leading edge DRAM and NAND supply output is oversubscribed for the full year. Does you factor in your CapEx plans, conversion of capacity from mature nodes to leading edge nodes?

Harlan: Good afternoon. Thanks for taking my question as you mentioned, leading edge DRAM and NAND supply output is oversubscribed for the full year.

Harlan: After in your Capex plans conversion of capacity from mature notes to leading edge nodes.

When you guys see your ability to fully supply to your customers the man profile is that looking more likely now calendar year 25 and what end markets or applications are you seeing the largest demand supply gap as you move through the fiscal year.

Harlan: When do you guys see your ability to fully supply to your customers demand profile is that looking more likely now calendar year 'twenty five and what end markets or applications are you seeing the largest demand supply gap as you move through the fiscal year.

So as we move to the fiscal year, of course, you know, leading edge nodes being in tight supply, you know, leading edge nodes are, you know, driver of demand and PCs and smartphones and data center applications and we have a strong portfolio that is well positioned with these nodes and.

Harlan: So as we move through the fiscal year and of course, leading edge nodes being in tight supply leading edge nodes.

Driver of demand.

Harlan: Pcs and smartphones and data center.

Harlan: Vacations, and we have a strong portfolio that is well positioned.

Harlan: With these nodes.

Harlan: And.

So, I mean, basically, this is important for us to maintain the supply discipline and the industry is still not at the profitability levels for investments to be made, and we'll manage our supply very, very prudently as we work ahead. And of course, we'll continue to focus on driving the pricing as well as driving the profitability of our business to bring and return on investment.

Harlan: So I mean basically this is.

Harlan: Important for us to maintain the supply discipline and.

Harlan: The industry is still not at the profitability levels for <unk>.

Investments, we made and we will manage our supply very very prudently as we work ahead and of course, we will continue to focus on driving the pricing as well as driving the profitability of our business and return on investment on our Capex.

on our CAPEX that is needed.

Harlan: Capex.

Harlan: That is needed.

Harlan: <unk>.

do our best to manage and allocate the demands across our markets and customers.

Harlan: And do our best to manage and allocate the demand across our end markets and customers.

Harlan: Yeah.

Great. Thanks for that. And again, you mentioned this beef leaner. Prepare to mark, but if you look at some of the third party research estimates, September quarter.

Speaker Change: Great. Thanks for that and again you mentioned this briefly in your prepared remarks, but if you look at some of the third party research estimates September quarter.

second consecutive quarter where the team had, I think somewhere about 10 to 12% market share in data center NVMe SSDs. If I look back historically like your share has been more in the sort of three to five percent range so obviously strong recent market share performance you've got a strong lineup of data center SSDs. What's been the big differentiator for the team here and and how do you guys continue to grow your share going forward?

Speaker Change: Was the second consecutive quarter, where the team had I think somewhere about 10% to 12% market share in datacenter Nvme Ssds.

Look back historically like your share has been more in the sort of 3% to 5% range. So obviously strong recent market share performance, you've got a strong lineup of data Center Ssds.

Speaker Change: The big differentiator for the team here and how do you guys continue to grow your share going forward.

So thank you for acknowledging that. I mean, our team has done a great job with data center SSD product portfolio over the course of the years. And now we have a strong set of product offerings for data center SSDs.

Speaker Change: So thank you for acknowledging that our team has done a great job with data center SSD product portfolio over the course of the years and now we have a strong set of product offerings for.

Speaker Change: Data Center Ssds.

NVMe SSDs, and we now achieve record data center market share in SSDs for two consecutive

Nvme Ssds and <unk> now achieved record.

Speaker Change: <unk> centre market share in ssds for two consecutive quarters and for the calendar Q3, our data center SSD share now is in line with our NAND share in the industry and this is really.

Speaker Change: The benefit there and youre seeing the full benefit the full followed a vertical integration playing out here, where our team has worked together from device.

Speaker Change: To design to foreign where two system implementation to understanding of customer application working closely with customers in qualifications and really across a wide range of customers.

to firmware, to system implementation, to understanding of customer application, working closely with customers in qualifications, and really across a wide range of customers over the course of time have really developed very robust industry leading strong product portfolio with greater opportunities ahead as well. So this is the transformation that we began to drive in the company going from selling components in the past to value add solutions and really very pleased how data-centered SSD recognition is being provided to our team in terms of revenue opportunities by our customers and certainly reflected in the share gains that we have made in this market. And of course another big factor that has been a key contributor to the success here is you may recall we transitioned some time ago from floating gates

Speaker Change: Over the course of time have really.

Speaker Change: Developed very robust industry, leading.

Speaker Change: Strong product portfolio with greater opportunities ahead as well. So this is the transition transformation that we began to drive in the company going from.

Speaker Change: Selling components in the past.

Speaker Change: <unk> solutions.

And really, very pleased how data-centered FSB recognition is being provided to our team in terms of revenue opportunities by our customers.

Speaker Change: And really very pleased how data center SSD.

Speaker Change: Recognize sheehan is being provided to our team in terms of revenue opportunities by our customers and certainly reflected in the share gains that we have made in this market and of course, another big factor that has been a key contributor to the success. Here is you may recall, we transitioned some time ago from floating gate to the placement.

And, you know, they are certainly reflected in the share gains that we have made in this market. And of course, another big factor that has been a key contributor to the success here is, you may recall, we transitioned some time ago from Floating Gate to the Placement Gate Technology in NAND. And that has definitely been a key factor, strong, successful, timely execution on that has played an important role in our data center SSD.

Speaker Change: <unk> gate technology in NAND and that has definitely been a key factor strong successful timely execution on that has played an important role in our data center ssds trend. So.

So we are very excited about a micron market position in this market and our future opportunities here.

Speaker Change: So we are very excited about.

Speaker Change: Microns.

Speaker Change: <unk> position in this market and are the future opportunities here.

Speaker Change: Thank you Sanjay.

Sanjay Mehrotra: Thank you. This does conclude the question and answer session as well as today's program. Thank you everyone for participation in today's program you may now disconnect good day.

But this does conclude the question and answer session as well as today's program. Thank you everyone for participating. In today's program, you may now disconnect. Good day.

Sanjay Mehrotra: Yes.

And.

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Sanjay Mehrotra: [music].

Thank you for standing by and welcome to Micron Technologies' first quarter 2024 financial results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session.

Sanjay Mehrotra: Okay.

Sanjay Mehrotra: Thank you for standing by and welcome to Micron Technology's first quarter 2024 financial results Conference call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone to remove yourself from the queue simply press star.

To ask a question during the session, you'll need to press star11 on your telephone. To remove yourself from the queue, simply press star11 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Satya Kumar in Festivalations. Please go ahead.

Speaker Change: Our one one again as a reminder, today's program is being recorded and now I'd like to introduce your host for today's program Satya Kumar of Investor Relations. Please go ahead.

Thank you and welcome to Micron Technologies fiscal first quarter 2024 financial conference call.

Satya Kumar: Thank you and welcome to Micron technologies fiscal first quarter 2020 financial conference call.

On the call with me today are Sanjay Marotra, our President and CEO , and Mark Murphy, our CFO .

Satya Kumar: On the call with me today are Sanjay Mehrotra.

<unk> and CEO and Mark Murphy, our CFO.

Today's call is being webcast from an investor relation site at investors.micron.com, including audio and slides.

Satya Kumar: Today's call is being webcast from our Investor Relations site at investors thought micron dot com, including audio and slides.

In addition, the press release detailing quarterly results has been posted on the website, along with the prepared remarks for this call.

Satya Kumar: In addition, the press release detailing our quarterly results has been posted on the website along with the prepared remarks for this call.

Today's discussion of financial results is presented on a non- GAAP financial basis unless otherwise specified.

Satya Kumar: Today's discussion of financial results as presented on a non-GAAP financial basis, unless otherwise specified.

A reconciliation of GAAP to non-GAAP financial measures can be found on our website.

Satya Kumar: A reconciliation of GAAP to non-GAAP financial measures can be found on our website.

We encourage you to visit our website at micron.com throughout the quarter for the most current information on the company, including information on financial conferences that we may be attending. You can also follow us on X.

We encourage you to visit our website at micron dot com throughout the quarter for the most current information on the company, including information on financial conferences that we may be attending.

Satya Kumar: You can also follow us on X at Micron Tech.

As a reminder, the matters we are discussing today include forward looking statements regarding market demand and supply, market trends and drivers, our expected results and guidance and other matters.

Satya Kumar: As a reminder, the matters. We're discussing today include forward looking statements.

Satya Kumar: Market demand and supply market trends and drivers our expected results and guidance and other matters.

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

Satya Kumar: Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today.

We refer you to the documents here we filed with the SEC, including our most recent Form 10-K and upcoming 10-Q for a discussion of risks that may affect our future results.

Satya Kumar: We refer you to the documents.

Satya Kumar: We filed with the SEC, including our most recent Form 10-K and upcoming 10-Q for a discussion of risks that may affect our future results.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievement.

Satya Kumar: Although we believe that the expectations reflected in the forward looking statements are reasonable we can.

Satya Kumar: Cannot guarantee future results levels of activity performance or achievements.

We are under no duty to update any of the forward-looking statements to confirm these statements to actual results. I'll now turn to the next slide.

Satya Kumar: We are under no duty to update any of the forward looking statements to conform these statements to actual results.

Satya Kumar: I'll now turn the call over to Sanjay.

Thank you, Satya. Good afternoon, everyone. In fiscal Q1, Micron delivered revenue, gross margin, and EPS above the high end of the guidance ranges we provided at the last earnings call, reflecting Micron's strong execution combined with improved prices.

Sanjay Mehrotra: Thank you Cynthia good afternoon, everyone and fiscal Q1 Micron delivered revenue gross margin and EPS above the high end of the guidance ranges. We provided at the last earnings call, reflecting micron's strong execution combined with improved pricing.

We are in the very early stages of a multi-year growth phase catalyzed and driven by generative AI and this disruptive technology will eventually transform every aspect of business and society.

Sanjay Mehrotra: We are in the very early stages of a multiyear growth phase capitalized and driven by generator of AI and this disruptive technology will eventually transform every aspect of business and society.

Memory is at the heart of GPU enabled AI servers and we are already seeing strong demand driven by early deployment of AI solutions which will only accelerate over time.

Sanjay Mehrotra: <unk> is at the heart of GE GPU enabled AI servers, and we are already seeing strong demand driven by early deployment of AI solutions. This will only accelerate over time.

Micron is well positioned to leverage this growth, having executed the most robust set of new technology and product introductions in our 45-year history.

Sanjay Mehrotra: Micron is well positioned to leverage this growth having executed the most robust set of new technology and product introductions, and our 45 year history.

The improved supply demand environment in the current calendar quarter gives us additional confidence in the trajectory of our business.

Sanjay Mehrotra: The improved supply demand environment and the current calendar quarter gives us additional confidence in the trajectory of our business we.

We have given a strong inflection in industry pricing this calendar quarter, which will allow us to benefit from higher prices earlier in our fiscal year compared to our prior plan.

Sanjay Mehrotra: We have driven a strong inflection in industry pricing this calendar quarter, which will allow us to benefit from higher prices earlier in our fiscal year compared to our prior plans.

We intend to stay very disciplined with our supply and capacity investments as our pricing is still far from level associated with necessary ROI.

Sanjay Mehrotra: We intend to stay very disciplined with our supply and capacity investments as our pricing is still far from level associated with necessary Ottawa.

We expect our pricing to continue to strengthen through the course of calendar 2024.

Sanjay Mehrotra: We expect our pricing to continue to strengthen through the course of calendar 2024.

We expect improved margins and financial performance throughout 2024 and record industry time in calendar 2025.

Sanjay Mehrotra: We expect improved margins and financial performance throughout 2024 and record industry Tam in calendar 2025.

We have made significant progress with our industry-leading technology roadmap. Micron is at the forefront of ramping the industry's most advanced technology nodes in both DRAM and NAND.

Sanjay Mehrotra: We have made significant progress with our industry, leading technology roadmap.

Sanjay Mehrotra: <unk> is at the forefront of ramping the industry's most advanced technology nodes in both DRAM and NAND.

The vast majority of our bits are on leading edge nodes, one alpha and one beta in DRAM and one 76th layer and 232th layer in LAN.

Sanjay Mehrotra: As the majority of our bets are on leading edge nodes, one alpha and one beta in DRAM and 196 layer and 232 layer in NAND.

As previously stated, both 1-beta D-RAM and 232-layered NAND nodes have reached maturials faster than the prior nodes.

Sanjay Mehrotra: As previously stated both one beta DRAM and 232 layer <unk> NAND nodes have least mature yields faster than the prior nodes.

We expect fiscal 2024 front-end cost reductions to track in line with our long-term expectations of mid to high single digits in DRAM and low teens in NAM.

Sanjay Mehrotra: We expect fiscal 2020 for front end cost reductions to track in line with our long term expectations of mid to high single digits in DRAM and low teens in NAND we.

We are on track for volume production in one gamma DRAM using EUV in calendar 2025.

Sanjay Mehrotra: We are on track for volume production and one gamma DRAM using UV in calendar 2025.

Sanjay Mehrotra: Now turning to our end markets.

Inventories for memory and storage are at or near normal levels for most customers across PC, mobile, auto and industrial end markets.

Sanjay Mehrotra: Inventories for memory and storage are at or near normal levels for most customers across PC mobile auto and industrial end markets.

Consequently, the demand that we see from customers in these markets is closer to their end market demand.

Consequently, the demand that we see from customers in these markets is closer to the end market demand.

Data center customer inventory of memory and storage is improving and we continue to expect customer inventory to approach normal levels in this market sometime in the first half of calendar 2024.

Sanjay Mehrotra: Data center customer inventory of memory and storage is improving and we continue to expect customer inventory to approach normal levels in this market sometime in the first half of calendar 2024.

Across our data center and PC markets, we are ahead of the industry in our transition to D5 and we expect to cross over our D5 volume from D4 in early calendar 2024.

Sanjay Mehrotra: Across our data center and PC markets. We're ahead of the industry and our transition to <unk> five and we expect to crossover our <unk> volume from before in early calendar 2024.

Generative AI use cases are expanding from the data center to the edge with several recent announcements of AI-enabled PCs, smartphones with on-device AI capabilities, as well as embedded AI in the auto and industrial end markets.

Sanjay Mehrotra: Generally the AI use cases that expanding from the data center to the edge with several recent announcements of AI enabled Pcs smartphones with on device AI capabilities as well as embedded AI in the auto and industrial end markets.

The proliferation of on-device AI at the edge offers a host of benefits such as enhanced privacy, lower latency, improved performance, greater personalization, and competitive costs for a wide range of use cases from content creation to productivity.

Sanjay Mehrotra: The proliferation of on device AI at the edge offers a host of benefits such as enhanced privacy lower latency improved performance greater personalization and competitive costs for a wide range of use cases from content creation to productivity.

We see a rapid evolution in our customer product roadmap enabling and leveraging this AI market expansion which in turn is driving higher capacity, lower power and increased performance requirements for memory storage.

Sanjay Mehrotra: We see a rapid evolution and our customer product roadmaps, enabling and leveraging this AI market expansion, which in turn is driving higher capacity lower Fowler and increased performance requirements for memory and storage.

We expect to increasingly benefit from content growth as these trends in AI gain momentum.

Sanjay Mehrotra: We expect to increasingly benefit from content growth as these trends in the AI gained momentum.

In data center, total server unit shipments are expected to increase by a mid single digit percentage in calendar 2024, following a year of low double digit percentage decline in calendar 2023.

Sanjay Mehrotra: In data Center total server unit shipments are expected to increase by a mid single digit percentage in calendar 2024, following a year of low double digit percentage decline in calendar 2023.

Demand for AI servers has been strong as data center infrastructure operators shift budgets from traditional servers to more content-rich AI servers.

Sanjay Mehrotra: Demand for AI servers has been strong as datacenter infrastructure operators shift budget from traditional servers to more content rich AI servers.

Also, in response to AI-driven data center demand, several customers have announced aggressive roadmaps for new GPU and AI accelerator ASIC product introductions with increasing requirements for HBM capacity, performance, and power.

Sanjay Mehrotra: Also in response to the AI driven data center demand several customers have announced aggressive roadmaps for new GPU and AI accelerator effect product introductions with increasing requirements with HBM capacity performance and power.

Micron is addressing these exciting opportunities brought on by the proliferation of AI with an industry-leading portfolio of data center solutions, including HBM-3E, D5, several types of high-capacity server memory modules, LPD RAM, and data center SSDs.

Sanjay Mehrotra: Micron is addressing these exciting opportunities brought on by the proliferation of AI with an industry, leading portfolio of data center solutions, including <unk> <unk> five several types of high capacity server memory modules.

Sanjay Mehrotra: DRAM and data Center Ssds.

We have received very positive customer feedback on our HBM3E, which has approximately 10% better performance and about 30% lower power consumption compared to competitive offerings of HBM3E.

Sanjay Mehrotra: We have received very positive customer feedback on our <unk>, which is approximately 10% better performance and about 30% lower power consumption compared to competitive offerings of <unk>.

In fiscal Q1, we shipped samples of HVM3E to a number of key partners and are making good progress in our qualification.

Sanjay Mehrotra: In fiscal Q1, we shipped samples of <unk> through a number of key partners and are making good progress in our qualifications.

Micron is in the final stages of qualifying our industry-leading HBMCE to be used in NVIDIA's next-generation Grace Hopper GH200 and H200 platforms.

Sanjay Mehrotra: <unk> is in the final stages of qualifying our industry, leading <unk> to be used in Nvidia next generation Grasshopper, GE, H 200, and H 200 platforms.

In addition, our LP5S is being used for the GRACE CPU, driving a new use case for LP memory in the data center for accelerated computing.

Sanjay Mehrotra: In addition, our LP <unk> is being used for degrees CPU driving a new use case for LP memory in the data center for accelerated computing.

We are on track to begin our HBM-3E volume production ramp in early calendar 2024 and to generate several hundred millions of dollars of HBM revenue in fiscal 2024.

Sanjay Mehrotra: We are on track to begin our <unk> volume production ramp in early calendar 2024 and to generate several hundred millions of dollars of <unk> revenue in fiscal 2024.

We expect continued HBM revenue growth in 2025, and we continue to expect that our HBM market share will match our overall DRAM bid share sometime in calendar 2025.

Sanjay Mehrotra: We expect continued <unk> revenue growth in 2025, and we continue to expect that our HBM market share will match, our overall DRAM bit share sometime in calendar 2025.

Last month we introduced the industry's fastest and lowest latency 128GB high capacity modules built on our industry leading one beta node and using a monolithic die which does not require 3D stacking and thus enables a simpler process flow for assembly.

Sanjay Mehrotra: Last month, we introduced the industry's fastest and lowest latency 128 gigabyte high capacity modules built on our industry, leading one beta node and using a monolithic die, which does not require td's stacking and thus enables a simpler process flow for assembly.

Featuring best in class performance, our solution will support customers' memory-intensive data center workloads today and into the future.

Sanjay Mehrotra: Featuring best in class performance, our solution will support customers memory intensive data center workloads today and into the future.

Additionally, leading CPU vendors have confirmed validation support for our monolithic dive-based 128GB modules on existing platforms released in 2022 and 2023, as well as upcoming new platforms.

Sanjay Mehrotra: Additionally, leading CPU vendors have confirmed validation support for our monolithic die based 128 gigabyte modules on existing platforms released in 2022, and 2023 as well as upcoming new platforms.

This ensures that our offering has a significant time that we can address immediate

Sanjay Mehrotra: This ensures that our offering has a significant tam that we can address immediately.

We expect volume production to start next quarter with significant growth in fiscal 2025 and beyond.

Sanjay Mehrotra: We expect volume production to start next quarter with significant growth in fiscal 2025 and beyond.

A testament to our solid execution and superior offerings, Micron ended the third calendar quarter with a record high revenue share in data-centered SLDs based on independent industry assessment.

Sanjay Mehrotra: A testament to our solid execution and superior offerings Micron ended the third calendar quarter with record high revenue share and data center Ssds based on independent industry assessments.

This marks the second consecutive quarter of record revenue share in data-centered SSDs, and we look to build on this revenue momentum through fiscal 2024.

Sanjay Mehrotra: This marks the second consecutive quarter of record revenue share in data Center Ssds, and we look to build on this revenue momentum through fiscal 2024.

In PCs, we forecast unit volumes to grow by a low to mid-single-digit percentage in calendar 2024, after two years of double-digit percentage PC unit volume decline.

Sanjay Mehrotra: In PC, we forecast unit volumes to grow by a low to mid single digit percentage in calendar 2024. After two years of double digit percentage PC unit volume declines.

We expect PCOMs to start ramping AI on device PCs in the second half of calendar 2024 with an additional capacity of 4 to 8 GB of DRAM per unit, and we see average SSD capacities increasing as well.

We expect PC Oems to start ramping AI on device <unk> in the second half of calendar 2024, with an additional capacity of four to eight gigabyte of DRAM per unit and we see average SSD capacities, increasing as well.

We also completed qualifications for our industry-leading one beta-based 16-gigabit D5 at several PC customers in fiscal Q1.

Sanjay Mehrotra: We also completed qualifications with our industry, leading one beta based 16 gigabit <unk> five at several PC customers in fiscal Q1.

In fiscal Q1, we achieved record-bid shipments in both client and consumer SLDs as customers adopted our industry-leading solution.

Sanjay Mehrotra: In fiscal Q1, we achieved record <unk> shipments in both client and consumer ssds as customers adopted our industry leading solutions.

Building upon our QLC leadership, our client SLD QLC bit shipments also reached a new record in fiscal Q1.

Sanjay Mehrotra: Building upon our <unk> leadership, our client SSD EQM <unk> shipments also reached a new record in fiscal Q1.

QLC now comprises the majority of our bit shipments max for both client and consumer SLD.

Sanjay Mehrotra: <unk> now comprises the majority of our bit shipment mix for both client and consumer SSD.

This month, we also announced that we are shipping the Micron 3500 NVME SSD, the world's first performance client SSD with 200 plus clear neck.

Sanjay Mehrotra: This month, we also announced that we are shipping the micron 3500, Nvme SSD. The words forest performance client SSD with 200, plus layer NAND built on our industry, leading $2 32 layer NAND. The 3500 will help our customers handle demanding workloads for.

Built on our industry-leading 232-layer NAND, the 3500 will help our customers handle demanding workloads for business applications, scientific computing, gaming, and content creation.

Sanjay Mehrotra: Business applications scientific computing gaming and content creation.

In mobile, smartphone demand is showing signs of recovery and we forecast smartphone unit shipments to grow modestly in calendar 2024.

Sanjay Mehrotra: And mobile smartphone demand is showing signs of recovery and we forecast the smartphone unit shipments to grow modestly in calendar 2024.

Leading chipset vendors have announced powerful new products supporting on-device large language models with 10 billion or more parameters.

Sanjay Mehrotra: Leading chipset vendors have announced powerful new products supporting on device large language models with $10 billion or more parameters, we expect smartphone Oems to start ramping AI enabled smartphones in 2024 with an additional capacity of four to eight gigabyte of DRAM per unit.

We expect smartphone OEMs to start ramping AI-enabled smartphones in 2024 with an additional capacity of 4 to 8 GB of D-LAMP per unit.

Longer term, many popular generated AI applications will be on smartphones and our leading product portfolio is poised to capture this memory and storage opportunity.

Sanjay Mehrotra: Longer term many popular generator of AI applications will be on smartphones and our leading product portfolio is poised to capture this memory and storage opportunity.

Our new industry-leading 9.6 Gbps LP5X will address the bandwidth requirements of the most demanding AI-based mobile applications.

Sanjay Mehrotra: Our new industry, leading nine gigabit per second LP feedbacks and address the bandwidth requirements of the most demanding <unk> mobile applications.

We also began sampling our next-generation 232-layer NAND, UFS 3.1, and our 1-beta DRAM, 24-gigabit LP5X, to support the memory needs of emerging AI foundational models.

Sanjay Mehrotra: We also began sampling our next generation 232 layer NAND Uff's three one and our one beta DRAM 24 gigabit LTE <unk> to support the memory needs of emerging AI foundational models.

Last, I'll cover auto and industrial, which are end markets we value as part of the portfolio due to their relatively more predictable revenue and profitability and long-term growth opportunities.

Sanjay Mehrotra: Last I'll cover auto and industrial which are the end markets, we value as part of the portfolio due to the relatively more predictable revenue and profitability and long term growth opportunity.

The proliferation of AI at the edge continues to increase in the industrial and auto market.

Sanjay Mehrotra: The proliferation of AI at the edge continues to increase and the industrial and auto markets.

For memory, this translates to content growth in a host of AI-enabled edge devices.

Sanjay Mehrotra: For memory this translates to content growth and a host of AI enabled edge devices.

For example, AI-enabled industrial PCs have 3 to 5x more memory than standard PCs and there is an 8x increase in memory content for AI-enabled edge video security cameras compared to standard non-AI video cameras.

Sanjay Mehrotra: For example, AI enabled industrial Pcs have three to five X more memory than standard Pcs and there isn't the apex <unk> and memory content for AI enabled edge video security cameras compared to standard non AI video cameras.

Our automotive business achieved a new quarterly revenue record in fiscal Q1, driven by better demand and volume lamps of new vehicle platforms.

Sanjay Mehrotra: Our automotive business achieved a new quarterly revenue record in fiscal Q1, driven by better demand and volume ramps of new vehicle platforms.

As a leader in automotive market share and quality, Micron will benefit from memory and storage content growth as automotive OEMs expand features in ADAF and in-cabin applications. Our automotive design been treasured

Sanjay Mehrotra: As a leader in automotive market share in quantity micron will benefit from memory and storage content growth as automotive Oems expand features in Adas and in cabin application.

Sanjay Mehrotra: Our automotive design win trajectory remains strong.

Our industrial business saw double-digit sequential growth in fiscal Q1 as the industrial market continued to recover.

Sanjay Mehrotra: Our industrial business saw double digit sequential growth in fiscal Q1, as the industrial market continued to recover invent.

Inventory levels for memory and storage continue to improve as distribution partners and are at normal levels at the majority of our customers.

Sanjay Mehrotra: Inventory levels for memory and storage continue to improve at distribution partners and are at normal levels at the majority of our customers.

Industry fundamentals remain strong for memory and storage as a widespread adoption of IoT, AI, and machine learning solutions create new growth opportunities for us.

Sanjay Mehrotra: Industry fundamentals remain strong for memory and storage as a widespread adoption of Iot AI and machine learning solutions create new growth opportunities for us.

Now turning to our market outlook, starting with demand.

We expect calendar 2023 D-RAM bid demand to grow in the high single digit percentage range up from prior expectations for mid single digit growth.

Sanjay Mehrotra: We expect calendar 2023, DRAM bit demand to grow in the high single digit percentage range up from prior expectations for mid single digit growth.

In NAND, we continue to expect calendar 2023 bit demand growth in the high teams' percentage range.

Sanjay Mehrotra: In NAND, we continue to expect calendar 2023 bits of demand growth in the high teens percentage range.

Looking forward, over the next few years, we expect bit-demand growth Kaggers of mid-teens in DRAM and low 20s percentage range in NAM.

Sanjay Mehrotra: Looking forward over the next few years, we expect bit demand growth CAGR of mid teens in DRAM and low 20 percentage range and NAND.

We forecast calendar 2024 batch demand growth for the industry to be near the long-term cagger for DRAM and somewhat below the long-term cagger for NAND.

Sanjay Mehrotra: We forecast calendar 2024 bit demand growth for the industry to be near the long term CAGR for DRAM and somewhat below the long term CAGR for NAND.

Sanjay Mehrotra: Turning to supply Cigna.

Significant supply reductions across the industry have enabled the recovery that is now underway.

Sanjay Mehrotra: Significant supply reductions across the industry have enabled that a company that is now underway.

an extended period of supply growth less than demand growth would strengthen the base of recovery.

Sanjay Mehrotra: And extended period of supply growth less than demand growth, what strengthen the pace of recovery.

Micron will continue to exercise supply and CapEx discipline, aligned with our strategy to maintain our long-term bid market share for DRAM and NAND.

Sanjay Mehrotra: <unk> will continue to exercise supply and capex discipline aligns with our strategy to maintain our long term bit market share for DRAM and NAND.

Mitron's Fiscal 2024 CAPEX is projected to be between $7.5 billion and $8 billion.

Sanjay Mehrotra: Micron's fiscal 2020 for Capex is projected to be between $7 5 billion and $8 billion.

slightly higher than last year's levels and trial plans, primarily to support the HBM-3E production ramp.

Sanjay Mehrotra: Slightly higher than last year's levels and client plans, primarily to support the HB MTBE production ramp.

We continue to expect WFP CAPEX in fiscal 2024 to be down year over year.

Sanjay Mehrotra: We continue to expect <unk> capex in fiscal 2024 to be down year over year.

As we have discussed previously, the ramp of HVM production will constrain supply growth in non-HVM products and will help improve the overall DRAM industry supply demand balance.

Sanjay Mehrotra: As we have discussed previously the ramp of HBM production will constrain supply growth in non <unk> products and will help improve the overall DRAM industry supply demand balance.

Across the industry, the HVNCE dye is roughly twice the size of equivalent capacity D5.

Sanjay Mehrotra: Across the industry. The <unk> CE di is roughly twice the size of equivalent capacity D. Five.

Additionally, the HVM product includes a logic interface die and has a substantially more complex packaging stack that impacts years.

Sanjay Mehrotra: Additionally, the HBM project includes a logic interface die and has a substantially more complex packaging stack that impacts us.

These factors result in HVM consuming more than two times the wafer supply as D5 to produce a given number of deaths.

Sanjay Mehrotra: These factors result in HBM consuming more than two times, the wafer supply <unk> to produce a given number of beds.

In last quarter's earnings call, we communicated that we strategically diverted underutilized equipment toward ramping new technology nodes, which will help us increase in leading edge production in a capital efficient manner.

Sanjay Mehrotra: In last quarter's earnings call, we communicated that we strategically diverted underutilized equipment towards ramping new technology nodes, which will help us increase in leading edge production in a capital efficient manner.

Since the number of wafer processing steps is higher for leading edge nodes, this approach of diverting underutilized tools to the leading edge meaningfully reduces our overall wafer capacity.

Sanjay Mehrotra: The number of wafer processing steps is higher for leading edge nodes. This approach are diverting underutilized tools to the leading edge meaningfully reduces our overall wafer capacity.

Thus, underutilization in our fabs early this fiscal year transitions to structurally lower wafer capacity at higher utilization rates as we move through the fiscal year.

Sanjay Mehrotra: Thus under utilization in our Fabs early this fiscal year transitions to structurally lower wafer capacity at higher utilization rates as we move through the fiscal year.

Reports indicate that this redeployment of underutilized tools at the leading edge is an industry-wide practice that is likely to constrain industry supply in 2024.

Sanjay Mehrotra: Reports indicate that this redeployment of underutilized tools at the leading edge is an industry wide practice that is likely to constrain industry supply in 2024.

Taking all these factors into account, microns bits supply growth in fiscal 2024 is planned to be well below demand growth for both DRAM and NAND and we expect to decrease our days of inventory in fiscal year 2024.

Sanjay Mehrotra: Taking all these factors into account micron's bit supply growth in fiscal 2024 is planned to be well below demand growth for both DRAM and NAND and we expect to decrease our days of inventory in fiscal year 2024.

We expect calendar 2024 industry supply to be below demand for both DNAM and NAMD, which will result in a contraction of industry inventory levels.

Sanjay Mehrotra: We expect calendar 2024, the industry supply to be below demand for both DRAM and NAND, which will result in a contraction of industry inventory levels.

As we have highlighted before, we continue to work with the U.S. government and CHIPS grants are assumed in our CAPEX plans for fiscal 2024.

Sanjay Mehrotra: As we have highlighted before we continue to work with the U S government and chips grants are assumed in our Capex plans for fiscal 2024.

The viability and global competitiveness of our Idaho and New York projects depends on micro receiving CHIPS grants to address the cost difference compared to overseas expansion.

Sanjay Mehrotra: The liability and global competitiveness of our Idaho, and New York projects depends on Micron, receiving chips grants to address the cost difference compared to overseas expansion.

To better support our customers around the globe, we have opened state-of-the-art assembly and test facilities in Malaysia and Taiwan.

Sanjay Mehrotra: To better support our customers around the globe. We have opened a state of the art Assembly and test facilities in Malaysia and Taiwan.

We are proceeding with our previously announced expansion of our Xi'an facility, having received approval from Chinese authorities for our planned investment.

Sanjay Mehrotra: We are proceeding with our previously announced expansion of our Xi'an facility, having received approval from Chinese authorities for our planned investment.

In fiscal Q1, we achieved the first mobile customer qualification of LPD RAM assembled at our Xi'an site, furthering our strong commitment to serve our mobile customers in China.

Sanjay Mehrotra: In fiscal Q1, we achieved our first mobile customer qualification of LTE DRAM assembled at our Xi'an site furthering our strong commitment to serve our mobile customers in China.

Our broad, diverse network of global operations remains a key element of our strategy to address customer demand in a reliable and resilient fashion.

Sanjay Mehrotra: Our broad diverse network of global operations remains a key element of our strategy to address customer demand in a reliable and resilient fashion.

Our leading technology, strengthening product portfolio, strong manufacturing capabilities, and our dedicated team members position us well to capture the opportunities ahead.

Sanjay Mehrotra: Our leading technology strengthening product portfolio and strong manufacturing capabilities and our dedicated team members positioned us well to capture the opportunities ahead.

I will now turn it over to Mark for our financial results and outlook.

Sanjay Mehrotra: I will now turn it over to Mark for our financial results and outlook.

Mark Murphy: Thanks, Sanjay and good afternoon, everyone.

Micron delivered strong results in fiscal Q1 with revenue, gross margin, and EPS higher than the upper end of the guidance range we provided in our last earnings call.

Mark Murphy: Micron delivered strong results in fiscal Q1 with revenue gross margin and EPS higher than the upper end of the guidance range. We provided in our last earnings call.

During the quarter, an improving supply-demand environment and our team's strong execution resulted in higher prices across DRAM and NAND.

Mark Murphy: During the quarter and improving supply demand environment, and our team's strong execution resulted in higher prices across DRAM and NAND.

The current pricing trajectory has improved our financial outlook for the second quarter and full fiscal year.

Mark Murphy: The current pricing trajectory has improved our financial outlook for the second quarter and full fiscal year.

Total fiscal Q1 revenue is approximately $4.7 billion.

Mark Murphy: Total fiscal Q1 revenue was approximately $4 $7 billion.

up 18 percent sequentially and up 16 percent year over year.

Mark Murphy: Up 18% sequentially and up 16% year over year.

Fiscal Q1 DRAM revenue was $3.4 billion, representing 73% of total revenue.

Mark Murphy: Fiscal Q1, DRAM revenue was $3 4 billion.

Representing 73% of total revenue.

DRAM revenue increased 24 percent sequentially, with bit shipments increasing in the low 20s percentage range, and prices increasing in the low single-digit percent.

DRAM revenue increased 24% sequentially with bit shipments increasing in the low 20 percentage range and prices increasing in the low single digit percentage range.

Robust bookings entering the quarter, including customer strategic buys that occurred in prior quarters for fiscal Q1 shipments.

Mark Murphy: Robust bookings entering the quarter.

Including customers strategic buys that occurred in prior quarters for fiscal Q1 shipment.

Limited are reported fiscal Q1 DRAM price increases despite Micron's strong execution on CQ4 price

Mark Murphy: <unk> limited our reported fiscal Q1, DRAM price increases despite micron's strong execution on key Q4 pricing.

Our strong calendar Q4 price execution contributes to our solid sequential growth and fiscal Q2, even with the effective seasonality.

Mark Murphy: Our strong calendar Q4 price execution contributes to our solid sequential growth in fiscal Q2.

Mark Murphy: Even with the effect of seasonality.

Fiscal Q1 NAN revenue was $1.2 billion, representing 26 percent of Micron's total revenue.

Mark Murphy: Fiscal Q1, NAND revenue was $1 2 billion, representing 26% of Micron's total revenue.

NAND revenue increased 2% sequentially, with pricing more than offsetting an expected and communicated decline in volume.

Mark Murphy: NAND revenue increased 2% sequentially with pricing more than offsetting an expected and communicated decline in volumes.

Fit shipments declined in the mid-teens percentage range after record shipments in the prior quarter, and prices increased by approximately 20%.

Bit shipments declined in the mid teens percentage range after record shipments in the prior quarter and.

Mark Murphy: <unk> prices increased by approximately 20%.

portfolio mix improvements in NAND contributed to the increase.

Mark Murphy: Portfolio mix improvements in NAND contributed to the increase.

Mark Murphy: Now turning to revenue by business unit.

Compute and networking business unit revenue was $1.7 billion, up 45 percent sequentially.

Mark Murphy: Compute and networking business unit revenue was $1 7 billion up 45% sequentially.

Mark Murphy: Data center and client shipments strengthened in the quarter.

AI related shipments increased in the data center market and normalized inventory at client customers, enabled bit shipment growth.

Mark Murphy: AI related shipments increased in the data center market and normalized inventory at client customers enabled bit shipment growth.

Revenue for the mobile business unit was $1.3 billion, up 7 percent sequential.

Mark Murphy: Revenue for the mobile business unit was $1 3 billion up 7% sequentially.

Mobile revenue continued to show strength as customer inventories normalized and smartphone units and average memory and storage capacity growth at customers drove demand.

Mark Murphy: Mobile revenue continued to show strength as customer inventories normalized and smartphone units and average memory and storage capacity growth at customers drove demand.

Our mobile fiscal Q1 revenue almost doubled from year ago levels.

Our mobile fiscal Q1 revenue almost doubled from year ago levels.

Embedded business unit revenue is $1 billion, up 21 percent sequentially.

Mark Murphy: Embedded business unit revenue was $1 billion up 21% sequentially.

Mark Murphy: Growth was strong across most end markets.

Revenue for the storage business unit was $653 million.

Mark Murphy: Revenue for the storage business unit was $653 million down.

down 12% sequentially due to sharply lower consumer component sales partially offset by strong growth in SSD revenue.

Mark Murphy: Down 12% sequentially due to sharply lower consumer component sales, partially offset by strong growth in SSD revenue.

The consolidated gross margin for fiscal Q1 was near 1%, improving 10 percentage points sequentially and driven by higher prices and a greater mix of DRAM products.

Mark Murphy: Our consolidated gross margin for fiscal Q1 was near 1%, improving 10 percentage points sequentially and driven by higher prices and a greater mix of DRAM products.

Operating expenses in fiscal Q1 were $992 million, up $150 million sequentially, and in line with our late November update.

Mark Murphy: Operating expenses in fiscal Q1 were $992 million up $150 million sequentially and in line with our late November update.

OPEX increased on higher R&D expenditures and the reinstatement of certain compensation programs suspended in the prior fiscal year, including short-term incentive compensation.

Mark Murphy: Opex increased on higher R&D expenditures and the reinstatement of certain compensation programs suspended in the prior fiscal year, including short term incentive compensation.

We had an operating loss of $955 million in fiscal Q1, resulting in an operating margin of negative 20%, improved from negative 30% in the prior quarter.

Mark Murphy: We had an operating loss of $955 million in fiscal Q1, resulting in an operating margin of negative 20% improved from negative 30% in the prior quarter.

Fiscal Q1 taxes were $59 million, lower than the anticipated $80 million.

Mark Murphy: Fiscal Q1 taxes were $59 million lower than anticipated at $80 million.

based on an updated view of projected taxes across the year, driven by our improved fiscal

Mark Murphy: Based on an updated view of projected taxes across the year.

Driven by our improved fiscal 2020 for outlook.

The non-gap loss for share in fiscal Q1 was 95 cents.

Mark Murphy: The non-GAAP loss per share in fiscal Q1 was 95.

compared to a non-gap loss per share of $1.07 in the prior quarter.

Mark Murphy: Compared to a non-GAAP loss per share of $1 seven in the prior quarter.

and a non-gap loss for share of four cents in the year ago.

Mark Murphy: On a non-GAAP loss per share of <unk> in the year ago quarter.

Currently the cash flows and capital spending are operating cash flows for approximately one point four billion dollars in fiscal Q1 representing 30%

Mark Murphy: Turning to cash flows and capital spending our operating cash flows were approximately $1 4 billion in fiscal Q1 rep.

Mark Murphy: Representing 30% of revenue.

During the quarter, we received $600 million in customer prepayments to secure supply for leading-edge memory products.

Mark Murphy: During the quarter, we received $600 million in customer prepayments to secure supply for leading edge memory products.

Capital expenditures were $1.7 billion during the quarter, resulting in free cash flow of negative $333 million in the quarter.

Mark Murphy: Capital expenditures were $1 $7 billion during the quarter, resulting in free cash flow of negative $333 million in the quarter.

Our fiscal Q1 ending inventory was $8.3 billion, or 159 days, down from 170 days in the prior.

Mark Murphy: Our fiscal Q1, ending inventory was $8 3 billion or 159 days down from 170 days in the prior quarter.

As mentioned in prior quarters, we hold strategic inventory stock associated with build ahead of products for cost optimization and risk mitigation.

Mark Murphy: As mentioned in prior quarters, we hold strategic inventory stock associated with build ahead of products for cost optimization and risk mitigation.

Excluding strategic stock, our fiscal Q1 ending inventory days would be approximately 142 days, only 22 days higher than our target inventory.

Mark Murphy: Excluding strategic stock our fiscal Q1, ending inventory days would be approximately 142 days only 22 days higher than our target inventory level.

On the balance sheet, we held $9.8 billion of cash and investments at quarter end.

On the balance sheet, we held nine $8 billion of cash and investments at quarter end.

and maintain $12.3 billion of liquidity when including our untapped credit.

Mark Murphy: And maintain $12 $3 billion of liquidity, when including our untapped credit facility.

We ended the quarter with $13.5 billion in total debt, low net leverage, and a weighted average maturity on our debt of 2030.

Mark Murphy: We ended the quarter with $13 $5 billion in total debt.

Low net leverage and a weighted average maturity on our debt of 2030.

Mark Murphy: Now turning to our outlook for the fiscal second quarter.

while we remain mindful of macroeconomic risks.

Mark Murphy: While we remain mindful of macroeconomic risks.

The memory and storage market environment is improving.

Mark Murphy: Our memory and storage market environment is improving.

We expect supply-demand balance to tighten in both DRAM and NAN throughout 2024.

Mark Murphy: We expect supply demand balance to tighten in both DRAM and NAND throughout 2024.

Our leading edge DRAM and NAND nodes are oversubscribed for the full year.

Mark Murphy: Our leading edge DRAM and NAND nodes are oversubscribed for the full year.

Consequently, we expect prices to increase through calendar 2024, driving improvements

Mark Murphy: Consequently, we expect prices to increase through calendar 2024.

Mark Murphy: Driving improvements in our financial performance.

Our leading edge inventory is very tight.

Mark Murphy: Our leading edge inventory is very tight.

And we are also working to minimize pull-in of customer demand in response to higher prices.

Mark Murphy: And we are also working to minimize Poland of customer demand and response to higher pricing.

As a result, our sequential growth in the near term will be driven primarily by pricing rather than a sequential increase in bit ship.

As a result, our sequential growth in the near term will be driven primarily by pricing rather than a sequential increase in bit shipments.

Both DRAM and NAN bit shipments are expected to decline somewhat in the fiscal second quarter.

Mark Murphy: Both DRAM and NAND bit shipments are expected to decline somewhat in the fiscal second quarter.

We expect our fiscal Q2 gross margin to benefit from sequential price increases and reduced impact from underutilization.

We expect our fiscal Q2 gross margin to benefit from sequential price increases and reduced impact from under utilization.

We project the balance of previously written down inventories to clear and fiscal acute

Mark Murphy: We project the balance of previously written down inventories declare in fiscal Q2.

We forecast operating expenses to decline in the fiscal second quarter on lower R&D program expenses and an asset sale previously expected to occur in the first quarter.

Mark Murphy: We forecast operating expenses to decline in the fiscal second quarter on lower R&D program expenses and an asset sale previously expected to occur in the first quarter.

For the fiscal year, due to some higher R&D expenses, including what we saw in Q1,

Mark Murphy: For the fiscal year due to some higher R&D expenses, including what we saw in Q1.

and higher short-term incentive compensation from an improved outlook.

Mark Murphy: And higher short term incentive compensation from an improved outlook.

We now project OPEX to be over $3.9 billion.

Mark Murphy: We now project opex to be over $3 9 billion.

We forecast a much reduced operating loss in fiscal Q2.

Mark Murphy: We forecast a much reduced operating loss in fiscal Q2.

and project a return to operating income in Q3.

Mark Murphy: And project a return to operating income in Q3.

Our tax forecast for the year has increased from under $200 million to over $300 million based on an updated taxable income out.

Mark Murphy: Our tax forecast for the year has increased from under $200 million to over $300 million based on an updated taxable income outlook.

We project the allocation of tax expense across the year to be heaviest in the fourth quarter, driven by profitability and other factors.

Mark Murphy: We project the allocation of tax expense across the year to be heaviest in the fourth quarter driven by profitability and other factors.

Mark Murphy: As we've mentioned previously.

At current levels of profitability, tax estimates and the distribution of taxes across the year are highly sensitive to changes in the outlook.

Mark Murphy: At current levels of profitability tax estimates in the distribution of taxes across the year are highly sensitive to changes in the outlook.

We plan fiscal Q2 capital expenditures to be in line with first quarter levels.

Mark Murphy: We plan fiscal Q2 capital expenditures to be in line with first quarter levels.

We see operating cash flows improving substantially in the second half of the fiscal year and are now forecasting positive free cash flow in the fiscal fourth quarter.

Mark Murphy: We see operating cash flows improving substantially in the second half of the fiscal year and are now forecasting positive free cash flow in the fiscal fourth quarter.

With all these factors in mind, our non-gap guidance for fiscal Q2 is as follows.

Mark Murphy: With all these factors in mind.

Mark Murphy: Our non-GAAP guidance for fiscal Q2 is as follows.

We expect revenue to be $5.3 billion, plus or minus $200 million. Gross margin to be in the range of 13 percent.

Mark Murphy: We expect revenue to be $5, 3 billion, plus or minus $200 million.

Mark Murphy: Gross margin to be in the range of 13%.

Mark Murphy: Plus or minus 150 basis points.

and operating expenses to be approximately $950 million plus or minus $15 million.

Mark Murphy: And operating expenses to be approximately $950 million plus or minus $15 million.

We expect tax expenses of approximately $45 million.

Mark Murphy: We expect tax expenses of approximately $45 million.

Based on a share account of approximately $1.1 billion shares, we expect a loss of $0.28 per share, plus or minus $0.07.

Mark Murphy: Based on a share count of approximately $1 1 billion shares we expect a loss of 28 per share plus or minus seven.

In closing, the industry environment is improving and our financial outlook has strengthened for the fiscal year and beyond.

In closing the.

The industry environment is improving and our financial outlook has strengthened for the fiscal year and beyond.

We will continue to take a disciplined approach to managing the business and remain focused on optimizing price, driving productivity, and controlling capital spend.

Mark Murphy: We will continue to take a disciplined approach to managing the business and remain focused on optimizing price driving productivity and controlling capital spend.

With high levels of liquidity and low net leverage, we continue to operate from a position of balance sheet strength as we forecast return to profitability and positive free cash flow. I will now

Mark Murphy: With high levels of liquidity and low net leverage we continue to operate from a position of balance sheet strength as we forecast a return to profitability and positive free cash flow.

I will now turn it back over to Sanjay.

Thank you, Mark. Over the last year, our world-class technology, business, and manufacturing teams ensured ongoing leadership in foundational memory technologies and the expansion of our industry-leading product portfolio. We are encouraged by the progress we have made on pricing, and we are on track to restore profitability more commensurate with the great value our solutions provide to our customers.

Sanjay Mehrotra: Thank you Mark over the last year, our World class technology business and manufacturing teams ensured ongoing leadership and foundational memory technologies and the expansion of our industry leading product portfolio.

Sanjay Mehrotra: We are encouraged by the progress we have made on pricing and we are on track to restore profitability more commensurate with the great value our solutions provide to our customers.

We expect 2024 to be a year of recovery and can see the path towards a healthy supply demand environment along with strong growth in critical new technologies like HBM-3E.

Sanjay Mehrotra: We expect $1 24 to be a year of recovery and can see the path towards a healthy supply demand environment, along with strong growth in critical new technologies like <unk>.

From the data center to the edge, AI has emerged as a significant secular driver that will further bolster the industry towards record revenue time in 2025 and drive growth for years to come.

Sanjay Mehrotra: From the latest center to the edge AI has emerged as a significant secular driver that will further bolster the industry towards record revenue Tam in 2025 and drive growth for years to come.

microns broad and growing suite of leading edge products positions as well to capitalize on the immense opportunities ahead. Thank you for joining us today. We will now

Sanjay Mehrotra: Micron's broad and growing suite of leading edge products positions us well to capitalize on the immense opportunities ahead. Thank.

Speaker Change: Thank you for joining us today, we will now open for questions.

Certainly, ladies and gentlemen, as a reminder, if you do have a question at this time, please press star 11 on your telephone. One moment for our first question.

Speaker Change: Certainly ladies and gentlemen, as a reminder, if you do have a question at this time. Please press star one on your telephone one moment for our first question.

Speaker Change: And.

Our first question comes from the line of Chris Schenker from.

Speaker Change: Our first question comes from the line.

Chris Schenker: Chris Schenker from.

Chris Schenker: Yes.

Chris Schenker: TD Cowen your question please.

Yeah, hi. Thanks for taking my question. Sanjay or Mark, the first question I had is kind of you spoke about sustainability of pricing in calendar 24. I'm kind of curious if you can feel the onion one layer below and say how we think about pricing through calendar 24 for DRAM and NAND, and if you can extrapolate into 2025, that'd be very helpful. And then add a follow up.

Yes, hi, Thanks for taking my question Sanjay Mark.

TD Cowen: The first question I had is kind of you spoke about question with your pricing in calendar 'twenty four I'm kind of curious if you can peel the onion, one layer below and say how do we think about pricing through calendar 'twenty for DRAM and NAND and if you can extrapolate into 2025 that would be very helpful. And then I had a follow up.

Thanks Grish for the question and with respect to the pricing, we of course expect pricing to continue to strengthen during calendar 2024 and this is because of the healthy demand supply balance as we discussed in the context of our script. As you've seen, there have been significant cuts in supply growth in the industry, customer inventories have normalized, supplier inventories are improving as we have discussed our own inventory here as well.

Thanks, Chris for the question with respect to the pricing.

Chris Schenker: We of course expect pricing to continue to strengthen during calendar 2024, and this is because of the healthy demand supply balance as we discussed in the context of our script as you have seen.

Chris Schenker: There have been significant cuts in supply growth in the industry customer inventories have normalized supply of inventory is that improving as we have discussed our own inventory here as well and pricing will continue to improve as a result through the course of the year and of course, the demand trends overall because of improvement of <unk>.

and pricing will continue to improve as a result through the course of the year. And of course, you know, the demand trends overall because of improvement of customer inventories are in PCs, in smart phones, automotive and industrial. The demand trend will continue and in sometime in first half of 24, calendar 24, we expect data center inventory that customers

Chris Schenker: <unk> inventories are.

Chris Schenker: In.

Chris Schenker: In Pcs and smartphones automotive and industrial.

Chris Schenker: The demand trend will continue in sometime in first half of 'twenty for calendar 'twenty four we expect data center.

Chris Schenker: Inventories at customers to get normalized as well and beyond that point, we would expect data center to become another boost in demand in 2024. So we expect pricing to continue to increase both in NAND and in DRAM as well.

to get normalized as well and beyond that point you would expect data center to become another boost in demand in 2020.

So we expect pricing to continue to increase both in NAND and in BNAM as well. And we expect a healthy demand supply environment in 2025, as well as a healthy pricing environment in 2025, too.

Chris Schenker: And we expect a healthy demand supply environment in 2025, as well as a healthy pricing environment in 2005 two.

And I just want to point out that as we noted, we have tightness on our leading-edge nodes. They are already in short supply, and inventories have been continued to improve for us, and all of this results in overall healthy dynamics for pricing improvements, profitability improvements, and revenue opportunity growth, in the backdrop of demand drivers, AI being a dominant demand driver across the end market.

Speaker Change: And I just want to point out that.

We noted we have tightness on our leading edge nodes.

Speaker Change: They are already in short supply and inventories will continue to improve for us and all of this the Wilson.

The healthy dynamics for pricing improvement profitability improvements and revenue opportunity growth in the backdrop of demand drivers AI being a dominant demand driver across the end markets.

got it. That's very helpful. And then just a quick follow up on capex. I understand a lot of the capex is going towards HBM and AWC is going to be down year over year. Is there a way of quantifying how much of the capex for next year is for HBM? And at what is the catalyst for you to start investing in NAND? Is it price? Is it gross margin any such catalyst for NAND? That'd be very helpful. Thank you.

Got it that's very helpful. And then just a quick follow up on Capex.

Speaker Change: I understand a lot of the Capex is going towards <unk> is going to be down year over year is there any way of quantifying how much of the capex for next year both HBM.

Speaker Change: And at what is the catalyst for you to start investing in NAND is it price is the gross margin any such catalyst for non that'd be very helpful. Thank you.

So we are not breaking down the gap between HVM and other parts of the business, but we have noted that our WFPE

Speaker Change: So we are not breaking down the capex.

Speaker Change: Between HBM and other parts of the business, but we have noted that our W. FTE is down and of course, we are very much focused on supporting the growth of our <unk> business. We are very excited about our leading edge product <unk>, which is the most advanced HCM CE offering and Linda.

is down. And of course, we are very much focused on supporting the growth of our HBM business. We are very excited about our leading edge product, HBM-3E, which is the most advanced HBM-3E offering in the industry. And we are, as we noted in our remarks, post the qualification, we are going to be starting production ramp early in calendar 24 and driving revenue growth. There will be more back half loaded for us.

And as we noted in our remarks.

Speaker Change: Both the qualification.

Can be starting production ramp early calendar 'twenty four and are driving revenue growth will be more back half loaded for us.

So, I mean, we will, of course, make the necessary investments to support the demand for our HBM in 24. I would just point out that our HBM supply is basically in calendar year 24 is sold out at this point.

Speaker Change: So I mean, we will of course make the necessary investments to support the demand for our HBM in 'twenty four I would just point out that our HBM supply is basically in calendar year 'twenty floor is sorted out at this point.

And, you know, in terms of, you know, NAND and CAPEX,

Speaker Change: And.

Speaker Change: In terms of.

NAND and Capex, whether NAND or DRAM, what's most important is that the profitability returns to the levels that are really needed in order to justify Ottawa and increasing any capex investments. So this is what we are focused on and will remain extremely.

Whether in NAND or in DRAM, what's most important is that the profitability returns to the level.

that are really needed in order to justify ROI in increasing any CAPEX investments. So this is what we are focused on and we'll remain extremely disciplined with respect to any CAPEX, with respect to any supply growth considerations. And you know that the profitability in the industry is still far from the levels that are needed to get ROI on the investments and we plan to remain extremely disciplined in the future.

Speaker Change: Our plans with respect to any capex with respect to any supply growth considerations and you know that the profitability in the industry is still far from the levels that are needed to get our ROI on the investments and.

Speaker Change: We plan to remain extremely disciplined in this regard.

Speaker Change: Thanks Sanjay.

Thank you one moment for our next question.

Speaker Change: Thank you one moment for our next question.

Okay.

And.

Our next question comes from the line of Aaron Rakers from Wells Fargo your question please

Speaker Change: Our next question comes from the line.

Speaker Change: Aaron Rakers from Wells Fargo. Your question. Please.

Yeah, thanks for taking the question. I have to as well real quick, you know, first building on the HBM comments that you said you're basically sold out for the year. I know that you referenced in your prepared remarks that you're qualified in with the G H 200 and the H 200.

Aaron Rakers: Yes, thanks for taking the question I have two as well real quick first building on the HBM comment you are basically sold out.

Aaron Rakers: For the year I know that you referenced in your prepared remarks that you're qualified in with the GH 200, and the H 200.

at NVIDIA. I'm just curious, when you get called in on HBM3E, you know, how does that market work in terms of...

Aaron Rakers: At Nvidia I'm, just curious when you get quality in on <unk>.

Aaron Rakers: How does that market work in terms of.

You know, do these customers dual qualified? Do you have line of sight and kind of your share position within those products used? I'm just curious how the qualifications work and the visibility that you have to basically kind of, you know, double down on the fact that you expect to be kind of, you know, comparable market share and HBM as DRAM in total as you look out in the 25.

Aaron Rakers: Do these customers dual qualify do you have line of sight and kind of your share position within those product Skus I'm just curious how the qualification work and the visibility that you have to.

Aaron Rakers: Basically kind of double down on the fact that you expect to be kind of.

Comparable market share in HBM as DRAM in total as you look out into 'twenty five.

So our product is in qualification as we noted in in our comments here and qualification is progressing well and post qualification we expect to be lamping production volumes as well as shipments to our customers and that's what will be

Aaron Rakers: So our product is in qualification as we noted in our comments here and qualification.

Aaron Rakers: Qualification is progressing well and force qualification, we expect to be ramping production volumes as well as a shift.

To our customers and Thats what level yield through several hundred millions of dollars of revenue for us in fiscal year 'twenty four again that revenue will be more back half of our fiscal year.

to several hundred millions of dollars of revenue for us in fiscal year 24, again that revenue will be more back half of our fiscal year.

More so in the in the back half, but that volume ramp and that revenue opportunity will continue to build up as we go into 25 it will continue to increase in our fiscal year as well as calendar year 25.

Aaron Rakers: More so in the back half, but that volume ramp and that revenue opportunity will continue to build up as we go into 2005, it will continue to increase.

Aaron Rakers: Our fiscal year as well as calendar year, 'twenty five and as we have said that sometime in calendar year 'twenty five we expect to be able to get to a level of our share in the HCM market that would align with our share in DRAM. So this is an exciting opportunity for us and as you know HBM.

And as we have said, that sometime in calendar year 25, we expect to be able to get to a level of our share in the HBM market that would align with our shares indeed. So, this is an exciting opportunity for us. And as you know, HBM has higher revenue per gigabyte, it is also higher profitability per gigabyte. So, this is, and it's one of the biggest growth markets.

As a higher revenue per gigabyte. It is also higher profitability per gigabyte. So this is and it's one of the biggest growth markets.

in memory today. So we are excited about this opportunity. And of course, you know, there's a very tight relationship, tight integration with customers for Quals on HBM. And it takes longer than standard products.

Aaron Rakers: In memory today. So we are excited about the supports unity and of course there is a.

Aaron Rakers: Very tight relationship.

Aaron Rakers: Direct integration with customers for clause on HBM and it takes longer than standard products and these are all factors that will play a role in terms of.

And, you know, these are all factors that will play a role in terms of, you know,

the number of suppliers that customers would tend to have for any given platform for HPM.

Aaron Rakers: <unk>.

Aaron Rakers: The number of suppliers that customers will tend to have on any given platform for the HBM.

Yep. And then as a quick follow-up, I'm curious in the comment, you had said that basically your leading-edge inventory was very tight. And I think the follow-up comment was that you're really, you know, focusing on minimizing any pull-in in the midst of pricing increases materializing. Can you just help us appreciate what exactly you're able to do to minimize any pull-in or the visibility you have in whether any customers are taking strategic inventory? Just curious how you manage that.

Speaker Change: And then as a quick follow up I'm curious on the comment you had said that basically year, leading edge inventory with very tight.

Speaker Change: And I think the follow up comment was that you're really focusing on minimizing any pull in.

Speaker Change: In the midst of pricing increases materializing can you just help us appreciate what exactly youre able to do to minimize any pull in or the visibility you have and whether any customers are taking strategic inventory just curious how you manage that.

So, with respect to strategic inventory, I think we have discussed in the past that we had made certain.

Speaker Change: So with respect to strategic inventory I think we have discussed in the past that we had may 13th.

strategic, certain customers that build certain strategic purchases in our FQ4 time frame and those are completing in CQ4 here.

Speaker Change: Strategic certain customers had built up.

Speaker Change: The strategic purchases in our FQ4 timeframe and doors are completing in CQ4 here.

And of course, as we look ahead, we have very much focused on, you know, managing our supply, managing our demand, pricing environment is increasing, and we want to, in this environment, of course, make sure that we meet the requirements of our customers in a fashion that overall maintains, you know, healthy dynamics of our business. Beyond that, I don't think we are in a position to discuss further specifics here. Fair enough. Thank you.

Speaker Change: And of course as we look ahead, we are very much focused on.

Managing our supplier managing our demand pricing environment is increasing and we want to in this environment of course make sure that we meet the requirements of our customers in a fashion that overall maintains.

Speaker Change: Healthy dynamics of our business beyond that I don't think we are in a position to discuss further specifics here.

Speaker Change: Fair enough. Thank you.

Speaker Change: Sure.

Speaker Change: Thank you one moment for our next question.

And our next question comes from the line up to Shihari from Goldman Sachs. Your question please.

Speaker Change: And our next question comes from the line of <unk> Hari from Goldman Sachs. Your question. Please.

Hi, good afternoon. I had two questions as well. One on gross margins, maybe for Mark and then my follow-ups for Sanjay. Mark, so the gross margin profiles improving from, you know, breakeven or 1% in the prior quarter to 13%. I was hoping you could sort of break that down. The sequential change for us in terms of pricing, I guess, lower underutilization charges and whatever else is happening from an inventory perspective. And beyond FED, as we sort of look out into May, you talked about pricing improving throughout 24, so that continues to be a tailwind. How should we think about some of the other dynamics that go into your gross margin math?

Hari: Hi, Good afternoon, I had two questions as well.

Hari: One on gross margins, maybe for Mark and then my follow Up's for Sanjay.

Hari: Mark So the gross margin profile is improving from breakeven or 1%.

Hari: In the prior quarter to 13% I was hoping you could sort of break that down the sequential change for us in terms of pricing.

I guess lower underutilization charges, and whatever else is happening from an inventory perspective.

Beyond fab as we sort of look out into May you talked about pricing improving throughout 24. So that continues to be a tailwind how should we think about some of the other dynamics that Tom.

Hari: Going to your gross margin Matthew.

Excuse me so.

Hari: Sure.

Speaker Change: Excuse me so.

So on the fourth quarter, the first quarter gross margin, you know, we were up 10 points over half or about half of that was price.

Speaker Change: So on the.

Speaker Change: On the fourth.

Speaker Change: The fourth quarter, the first quarter gross margin.

Speaker Change: We were up 10 points over half or about half of that was price.

The most of the remainder was mixed on the higher DRAM volumes. And then we did see some favorable costs. We had the lower cost inventories clear at $600 million. And then we had some reduced idle charges that we've talked about.

Speaker Change: Hi.

Most of the remainder was on.

Speaker Change: Mix on the higher DRAM volumes and then we did see some favorable costs.

Speaker Change: We had the lower cost inventories clear at $600 million and then we had some reduced idle charges that we've talked about now.

Now, if we if we move out to second quarter, as we mentioned, we're not seeing volume growth in the second quarter, but we are seeing.

Speaker Change: Now if we if we move out the second quarter.

Speaker Change: As we mentioned.

Speaker Change: We're not seeing volume growth in the second quarter, but we are seeing.

It grows margins still up 12 points, so it's all driven by price or principally price. There is some mix shift within, you know, by customers and some seasonal effects, but again, it's largely a price-driven increase.

Speaker Change: Gross margin still up 12 points, so, it's all driven by price or principally price.

Speaker Change: There is some mix shift.

Speaker Change: Within.

Speaker Change: By customers and some seasonal effects, but again, it's largely a price driven increase.

you know while while we have lower benefits from

Speaker Change: While while we have lower benefits from.

The low cost inventory clearing will have 400 clear or 400 of benefit in the second quarter when we had 600 in the first quarter we are saying some cost declines occurring with the increase in the second quarter.

Speaker Change: Low cost inventory clearing we will have 400 Claire.

Speaker Change: Our 401 benefit in the second quarter, when we had 600 in the first quarter.

We are saying.

Speaker Change: Some cost declines occurring with increase.

of leading node production. And then, again, with the lower wafer starts and the higher utilization, what we've talked about before, we start to see idle charges dropping as we've discussed. So, again, principally priced.

Leading node production and then again with the.

Speaker Change: Lower wafer starts and a higher utilization, while we've talked about before we start to see idle charges dropping as we've discussed so again principally price.

in the second quarter, but then beginning to see some cost benefits, even though we're losing the benefit of that lower cost inventory.

Speaker Change: In the second quarter, but then beginning to see.

Speaker Change: Some cost benefits, even though we're losing the benefit of that of that lower cost inventory.

We will see price appreciation through the year or going to, we don't expect there to be volume growth in the third quarter either, but good price appreciation, which will drive gross margins up.

Speaker Change: We'll see.

Price appreciation through the year.

Speaker Change: We're going to we don't expect there to be <unk>.

Speaker Change: Volume growth in the third quarter either.

Speaker Change: But good price appreciation, which will drive gross margins up and then in the fourth quarter, we would expect to see vol.

And then in the fourth quarter, we would expect to see volume

and price and, again, some lower utilization charges. So, again, we would expect the margin expansion second to third quarter and then, again, third to fourth quarter.

Speaker Change: Volume.

Speaker Change: And price.

Speaker Change: And.

Speaker Change: And again, some lower utilization charges. So again, we would expect to see margin expansion.

Second to third quarter, and then again third or fourth quarter.

Okay, great. That's super helpful. And then as my follow-up for Sanjay, you know, you guys had presented

Speaker Change: Okay, Great. That's Super helpful. And then as my follow up for Sanjay.

Speaker Change: You guys had presented.

Sanjay Mehrotra: Our cross cycle financial model at your Investor Day, I think it was last may.

Clearly the environment has changed quite a bit, but when you sort of talk about necessary ROI for your business as you guys debate when to increase production, when to increase CapEx, should we look at the model from last May still as a reference point, through cycle operating margins of 30%, free taxable margins of 10% or higher, is that still the model that's relevant in your view or have things changed since? Thank you. Yes, that model is very much relevant. Once we get past this down to

Sanjay Mehrotra: Clearly the environment has changed quite a bit.

Sanjay Mehrotra: When you sort of talk about necessary ROI for your business as you guys debate when to increase production went to increase Capex should should we look at the model from last may still as a reference point through cycle operating margins of 30%.

Sanjay Mehrotra: Free cash flow margins of 10% or higher is that still the model that is relevant in your view or.

Thank you.

Sanjay Mehrotra: Have things changed.

Sanjay Mehrotra: Yes.

Yes, that model is very much relevant. Once we get past this downturn and the recovery from this downturn as well. And I think we just have to recognize that this downturn has been steeped. This has been driven by once in a hundred year pandemic as well as all the other related factors which we have talked about customer inventories and demand pulling and demand normalization and all of the things that have impacted, severely impacted the industry environment over the course of that.

Sanjay Mehrotra: Yes that model is very much relevant once we get past this downturn and the recovery from the downturn as well.

Sanjay Mehrotra: And I think we just have to recognize that this downturn has been Steve. This has been driven by once in 100 year pandemic as well as all the related factors, which we have talked about customer inventories and demand for land and demand normalization and all of the things that have impacted severely impacted the industrial environment over there.

Sanjay Mehrotra: Of course of last year, 2024 will be recovering and we have quality today, yet of recovery and we have talked about how do you see pricing continuing to increase through the year and of course profitability continuing to improve through the year as well as we look past. This recovery, we would definitely say that cross cycle model that we have this.

2024, we will be recovering and we have called it the year of recovery and we have talked about how we see pricing continuing to increase through the year and of course profitability continuing to improve through the year as well. As we look past this recovery, we would definitely say that cross-cycle model that we have discussed in the past definitely would hold and that's what we target for. Thank you.

Because in the past definitely good hold and that's what we target for.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Okay.

Speaker Change: And.

Our next question comes from the line of Timothea Curry from UBS. Your question, please.

Speaker Change: Our next question comes from the line of Timothy Arcuri from UBS. Your question. Please.

Thanks a lot. I had a question on these prepays that you're getting, that $100 million, that's a pretty big number. So is that more of a one-time deal or should we expect these prepays to continue? And as part of that, is that mostly related to, say, HBM or a particular vertical like data center? Or is that across most of your markets? And then I had a follow up as well.

Timothy Arcuri: Thanks, a lot I had a question on these prepays that you are getting that $600 million, that's a pretty big number.

Timothy Arcuri: So is that more of a one time deal or should we expect these pre pace to continue and as part of that is that mostly related to say HBM or a particular vertical like datacenter or is that across most of your end markets and then I had a follow up as well.

So obviously, due to the confidential nature of this agreement, we cannot provide any specifics around these prepayments.

Speaker Change: So obviously due to the confidential nature of this AGM and we cannot provide any specifics around these prepayments, but what I would like to point out is that it does reflect the importance of our technology, our products and our delivery capabilities. It also reflects.

But what I would like to point out is that it does reflect the importance of our technology, our products, and our delivery capabilities. It also reflects our close relationships with our partners and, you know,

Speaker Change: Our close relationships with our partners and.

Speaker Change: Commitments.

from both sides, from a good example of commitment from customers as well as from Micron. Beyond that, I'm not able to really provide any specifics here, and again, honoring the confidentiality.

Speaker Change: For from both sides from our.

Speaker Change: A good example of commitment from our customers as well as.

Speaker Change: From micron or beyond that I'm, not able to really provide any specifics here.

Again honoring the confidentiality.

Okay, okay, got that. I guess then, can you talk, Sanjay, just about limiting the bid shipments? I think you said you're limiting the bid shipments to prevent pollins ahead of price increases. Sounds like bids are flat sequentially for fiscal Q2 and fiscal Q3. Can you talk about the logistics of that? Are you just kind of holding back on volumes to regain some, you know, pricing leverage? I guess if your competitors don't match that approach, you might risk losing some shares. So can you just talk about the logistics of that?

Speaker Change: Okay. Okay got that I guess, then can you talk Sanjay just about limiting the bit shipments I think you said you are limiting the bit shipments to prevent pull ins ahead of price increases it sounds like bits are flat sequentially for fiscal Q2 and fiscal Q3 can you talk about the logistics of that are you just kind of holding back on volumes to regain some pricing leverage.

Speaker Change: I guess, if your competitors don't match that approach you might risk, losing some share. So can you just talk about the logistics of that thanks.

And as we noted, that leading edge supply is already tight.

Speaker Change: And as we noted that leading edge supply is already tight.

And so that certainly impacts in our SQ2, some of the shipments, SQ2, of course, is also impacted by seasonality.

Speaker Change: And so that certainly impacts in our FQ2.

Speaker Change: Some of the shipments FQ2 of course is also impacted by seasonality and.

And so supply is managing supply given the tight environment of supply on the leading nodes, nodes is really the main consideration in terms of us guiding you to this profile. And of course, as we manage, as we allocate that supply across the customers, we want to make sure that we are managing our shipments to our customers carefully. Okay.

Speaker Change: So supply is managing supply given the tight environment of supply in the leading nodes nodes is really the main concentration in terms of us guiding you to this profile and of course as we manage as we allocate that supply across the customers. We want to make sure that we are managing our shipments to our customers carefully.

Speaker Change: Okay. Thank you so much.

Speaker Change: Okay.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And.

Our next question comes from the line of Mahadi Hussaini from Cheshawanna Financial. Your question, please.

Speaker Change: Our next question comes from the line of <unk> <unk> from <unk> financial your question. Please.

Yes, thanks for taking my question two follow-ups. Sanjay, historically memory industry tends to gravitate towards a higher margin products

Yes, Thanks for taking my question two follow ups.

Speaker Change: Jay.

Speaker Change: Historically memory industry tends to gravitate towards higher margin products.

which has historically led to margin erosion. Why is HBM any different? And what are your thoughts, anything you can share with us as to what can preserve the higher margin associated with these high-end products? And I have a follow-up.

Speaker Change: <unk> has historically led to.

Speaker Change: Margin erosion.

Speaker Change: Is HBM any different and whether your thoughts or anything you can share with us as to why.

Speaker Change: What can preserve.

Speaker Change: The higher margin associated with these high end products and I have a follow up.

So I think AI is in very early innings. Gen AI is barely starting, and these are great growth opportunities ahead. This is the biggest revolution since internet. And recently, you have heard industry estimates of data center AI accelerator, TAM, Kaggle, of being about 70% over the course of next few years.

Speaker Change: So I think.

AI is in very early innings journey II is barely starting and these are great growth opportunities ahead.

Speaker Change: This is.

Speaker Change: Biggest evolutions.

Speaker Change: Internet and recently you have heard industry estimates of data center AI accelerator Tam CAGR of being about 70% over the course of next few years.

Of course, as those opportunities grow with data center accelerators, you know, from various suppliers, of course, the whole infrastructure grows, and it's about AI,

Speaker Change: Of course as those opportunities grow their data center accelerators.

Speaker Change: From various suppliers of course, the whole infrastructure grows.

Speaker Change: And it's about.

and gen AI applications from training to inferencing and really proliferating all across, you know, the data center environment. And that's where – and along with the growth in data center AI accelerators, the rest of the infrastructure, including HBM, will continue to grow. And so, we project that HBM, CAGR, will be over 50 percent over the course of next year.

Speaker Change: AI engine AI applications from training to inferencing, and really proliferating all across the data center environment and Thats, where.

Speaker Change: Along with the growth in.

Speaker Change: Data Center, AI accelerators, and the rest of the infrastructure, including HBM will continue to grow so we project that HBM CAGR will be.

Speaker Change: Over 50% over the course of next few years and when you think about that as more than three times.

Speaker Change: DRAM industry CAGR that we are talking about and still we are very are in the very very early innings of 2023 is the first year.

Speaker Change: Of.

Speaker Change: Meaningful shipments of <unk> in the industry and that too corresponds to.

Speaker Change: Low single digit percentage in terms of bits shipped in <unk> this year, but a much higher pricing much higher revenue opportunity. So as we look ahead, we see HBM.

So, as we look ahead, we see HBM continuing to grow strongly in the industry. Its demand will grow. It will be a key enabler of Gen AI applications in training as well as in influencing because more and more data is required as you look at more and more larger and larger large language models and more training on more data just to drive more demand for high bandwidth, high performance, low powered memory. So this is the very beginning. It has long ways to go and the other important factor with HBM as we have discussed is that it really takes more than two times as many bifers to produce the same number of bifers as D5. So it really has a headwind to the supply growth in the DRAM industry and it has the effect of helping, strengthening the supply demand balance.

Speaker Change: Continuing to grow strongly and the industry.

Speaker Change: Is demand will grow it will be a key enabler of gen AI applications and training as well as influencing because more and more data is acquired as you look at more and more larger and larger large language models and more training on more data adjusted drive more demand for high bandwidth high pro.

No powered memory.

Speaker Change: <unk> low power memory. So this is the very beginning it has long ways to go and.

So this is the very beginning. It has long ways to go. And the other important factor with HVM, as we have discussed, is.

Speaker Change: The other important factor with <unk> as we have discussed is that it really takes more than two times as many vehicles to produce the same numbers number of beds is <unk>. So it really has it as a headwind to the supply growth in the DRAM industry and it has the effect of us helping.

that it really takes more than two times as many wafers to produce the same number of bits as D5. So it really has – it is a headwind to the supply growth in the DRAM industry, and it has the effect of –

helping strengthen the supply demand balance of the industry as well.

Speaker Change: Strengthening our strengthened the supply demand balance of the industry as well.

So I think these are some of the important aspects. Of course, the important thing is that this has to be looked at as a long-term opportunity, long-term growth opportunity. And of course, we are excited about getting our HBM shares.

So I think these are some of the important aspects of course.

Speaker Change: Morten thing is that this has to be looked at as a long term opportunity long term growth opportunity and of course, we are.

Speaker Change: We're excited about getting our ATM share.

Speaker Change: Two.

Speaker Change: Aligned with our DRAM share sometime in 2025 and of course as we look at any large opportunity.

Speaker Change: Over time, it will certainly have some ebb and flow in terms of demand and supply and we will prudently manage this and maintaining flexibility in managing this is absolutely key and you've seen us manage this well overtime and.

manage this and maintaining flexibility and managing this is absolutely key and you have seen us manage this well over time in our overall industry for DRAM as well as for DAND on part of Micron and we'll continue to manage it in that fashion. It is an exciting opportunity, we are well positioned with our product and we look forward to continuing to grow revenue and profit contribution with this product line over the course of next few years. Great. Thanks for detail. Just a quick follow-up for Mark. Is there a normalized capital intensity that we should think of, especially as we come off this kind of nuclear winter in memory?

Overall.

Speaker Change: Industry for DRAM as well as for NAND on part of Micron and will continue to manage it in that fashion. It is an exciting opportunity we are well positioned with our product and we look forward to continuing to grow revenue and profit contribution with this product line over the course of next few years.

Great. Thanks for detail. Just a quick follow-up for Mark. Is there a normalized capital intensity that we should think of, especially as we come off this kind of nuclear winter in memory? Is there any, if you don't have a normalized capital intensity, what else out there that could help us better forecast recache flows?

Speaker Change: Great. Thanks for detail and just a quick follow up for Mark is there a normalized capital intensity that we should think of especially as we come off the <unk>.

Speaker Change: Is kind of a nuclear winter.

Speaker Change: In memory.

Speaker Change: Is there any if you don't have a normalized capital intensity what else out there that could help us better forecast free cash flows.

Yeah, no update many to the cross-cycle model that we've provided, so I think the best way to think about CAPEX is just over time as a percent of revenue, which we've given mid 30s percent over time. Of course, as a, you know, for example, HBM requires more CAPEX, but it also yields a price premium.

Yeah, No update many of those cross cycle model that we've provided so I think the best way to think about Capex is just over time as a percent of revenue, which means given mid 30%.

Speaker Change: Over time of course as you know.

Speaker Change: For example, HBM.

Speaker Change: Yes, it requires more capex, but it also yes.

Speaker Change: Yields up.

Speaker Change: Rice.

and accretive margins. So we believe that at this time, that capital intensity model that we've provided before is still intact. Thank you.

Speaker Change: <unk>.

Speaker Change: And accretive margin. So we believe that at this time that capital intensity Mala we've provided before is still intact.

Thank you.

Speaker Change: Okay.

Speaker Change: Thank you one moment for our next question.

And our next question comes from the line of Harlitzer from JPMort.

And our next question comes from the line of Harlan sur from Jpmorgan.

Good afternoon. Thanks for taking my question. As you mentioned, your leading edge DRAM and then supply output is oversubscribed for the full year. Does you factor in your CAPEX plans, conversion of capacity from mature nodes to leading edge nodes?

Harlan: Hey, good afternoon. Thanks for taking my question as you mentioned your leading edge DRAM and NAND supply output is oversubscribed for the full year. So as you factor in your Capex plans conversion of capacity from mature nodes to leading edge nodes. When do you guys see your ability to fully supply tier.

When you guys see your ability to fully supply to your customers the man profile is that looking more likely now calendar year 25 and what end markets or applications are you seeing the largest demand supply gap as you move through the fiscal year.

Harlan: Customers demand profile is that looking more likely now calendar year, 'twenty five and what end markets or applications are you seeing the largest demand supply gap as you move through the fiscal year.

So as we move to the fiscal year, of course, you know, leading edge nodes being in tight supply, you know, leading edge nodes are, you know, driver of demand in PCs and smartphones and data center applications and we have a strong portfolio that is well positioned with these nodes and.

Harlan: So as we move through the fiscal year and of course, leading edge nodes being in tight supply leading edge nodes.

Harlan: Driver of demand.

Harlan: Pcs and smartphones and data center applications, and we have a strong portfolio that is well positioned with.

Harlan: With these nodes.

Harlan: And.

So, I mean, basically, this is important for us to maintain the supply discipline and the industry is still not at the profitability levels for investments to be made, and we'll manage our supply very, very prudently as we work ahead. And of course, we'll continue to focus on driving the pricing as well as driving the profitability of our business to bring and return on investment.

Harlan: So I mean basically this is.

Harlan: And important for us to maintain the supply discipline and.

Harlan: Industrial is still not at the profitability levels for <unk>.

Harlan: Investments, we made and we will manage our supply very very prudently as we work ahead and of course, we'll continue to focus on driving the pricing as well as driving the profitability of our business and return on investment on our Capex.

on our capex that is needed.

Capex.

Harlan: That is needed.

do our best to manage and allocate the demand across our markets and customers.

Harlan: <unk>.

Harlan: Do our best to manage and allocate the demand across our end markets and customers.

Great. Thanks for that. And again, you mentioned this beef leaner, but if you look at some of the third party research estimates, September quarter.

Yes.

Speaker Change: Great. Thanks for that and again you mentioned this briefly in your prepared remarks, but if you look at some of the third party research estimates September quarter.

second consecutive quarter where the team had, I think somewhere about 10 to 12% market share in data center NVMe SSDs. If I look back historically, like your share has been more in the sort of 3% to 5% range. So obviously strong recent market share performance. You've got a strong lineup of data center SSDs. What's been the big differentiator for the team here and how do you guys continue to grow your share going forward?

Speaker Change: Was the second consecutive quarter, where the team had I think somewhere about 10% to 12% market share in datacenter Nvme Ssds.

Speaker Change: Look back historically like your share has been more in the sort of 3% to 5% range. So obviously strong recent market share performance, you've got a strong lineup of data Center Ssds.

Speaker Change: The big differentiator for the team here and how do you guys continue to grow your share going forward.

So thank you for acknowledging that. I mean, our team has done a great job with data center SSD product portfolio over the course of the years. And now we have a strong set of product offerings for data center SSDs.

Speaker Change: So thank you for acknowledging that our team has done a great job with data center SSD product portfolio over the course of the years and now we have a strong set of product offerings for.

Speaker Change: Data Center Ssds.

NVME SSDs and we now achieve record data center market share in SSDs for two consecutive

Speaker Change: EMEA Ssds and <unk> now achieved record datacenter market share in ssds for two consecutive quarters and for the calendar Q3, our data center SSD share now is in line with our NAND share in the industry and this is really.

Speaker Change: Yes.

Speaker Change: Benefit the end Youre seeing.

Speaker Change: The full benefit the full power of vertical integration playing out here, where our team has worked together from device to design to foreign where two system implementation to understanding of customer application working closely with customers in qualifications nvme.

to firmware, to system implementation, to understanding of customer application, working closely with customers in qualifications, and really across a wide range of customers over the course of time have really developed very robust industry leading strong product portfolio with greater opportunities ahead as well. So this is the transition that we began to drive in the company going from selling components in the past to value add solutions, and really very pleased how data-centered SSD recognition is being provided to our team in terms of revenue opportunities by our customers. And they're certainly reflected in the shared games that we have made in this market. And of course, another big factor and the quality of the product. So we're really looking forward to it.

Speaker Change: Across.

Speaker Change: Wide range of customers over the course of time have really developed very robust industry leading.

Speaker Change: Our strong product portfolio with greater opportunities ahead as well. So this is the transition transformation that we began to drive in the company.

going from selling components in the past to evaluate solutions.

<unk> from.

Selling components in the past.

Speaker Change: Value added solutions and.

And really, very pleased how data-centered SSD recognition is being provided to our team in terms of revenue opportunities by our customers.

Speaker Change: Really very pleased at how data center SSD.

Speaker Change: Recognize sheehan is being provided to our team in terms of revenue opportunities by our customers and certainly reflected in the share gains that we have made in this market and of course, another big factor that has been a key contributor to the success. Here is you may recall, we transitioned some time ago from floating gate to replacement.

And, you know, they're certainly reflected in the share gains that we have made in this market. And of course, another big factor that has been a key contributor to the success here is, you may recall, we transitioned some time ago from Floating Gate to Replacement Gate, Technology in NAND, and that has definitely been a key factor, strong, successful, timely execution on that has played an important role in our data center SSD.

<unk> gate technology in NAND and that has definitely been a key factor strong successful timely execution on that has played an important role in our data center ssds trend. So.

So we are very excited about Micron's market position in this market and our future opportunities here.

So we are very excited about.

Microns.

Speaker Change: <unk> position in this market and are the future opportunities here.

Speaker Change: Thank you Sanjay.

Thank you. This does conclude the question and answer session as well as today's program. Thank you everyone for participation in today's program you may now disconnect good day.

This does conclude the question and answer session as well as today's program. Thank you everyone for participating. In today's program, you may now disconnect. Good day.