Micron Technology Inc Post Earnings Analyst Call

June 26, 2024

Operator: --and answer session. To ask a question during this session, you'll need to press *11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press *11 again. As a reminder, today's program is being recorded. And now I'd like to hand the program over to Satya Kumar, Investor Relations.

Satya Kumar: Thank you and welcome to Micron Technology's Fiscal Third Quarter 2024 Post-Earnings Analyst Call. On the call with me today are Sumit Sadana, Micron's Chief Business Officer, Manish Bhatia, EVP of Global Operations, and Mark Murphy, our CFO. As a reminder, the matters we're discussing today include forward-looking statements regarding market demand and supply, market trends and drivers, and our expected results and guidance on 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: As a reminder, the matters we're discussing today include forward-looking statements regarding market demand and supply, market trends and drivers, and 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. We refer you to documents we have filed with the SEC, including our most recent Form 10-Q and upcoming 10-Q for a discussion of risks that may affect our results. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, and achievements. We are under no duty to update any of the forward-looking statements to confirm these statements to actual results. We can now open the call up for Q&A.

Satya Kumar: We refer you to documents we have filed with the SEC, including our most recent Form 10-Q and upcoming 10-Q for a discussion of risks that may affect our results. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, and achievements. We are under no duty to update any of the forward-looking statements to confirm these statements to actual results. We can now open the call up for Q&A.

Satya Kumar: We can now open the call up for Q&A.

Operator: Certainly. One moment for our first question. And our first question comes from the line of C.J. Muse from Cantor Fitzgerald. Your question, please.

C.J. Muse: Good afternoon. Thanks for taking the question. First question, you're ramping CAPEX significantly here in fiscal '25, but it certainly sounds like Greenfield is only coming fiscal '27 at the earliest. So, I guess, how do we think about you getting to your DRAM market share for HBM in '25? Is that all just conversions from DDR5? And then I guess with DDR5 supply, it would appear that will be significantly undersupplied by you guys if that's kind of the plan into '25 for you guys.

Operator: Transcribed by https://otter.ai

Manish H. Bhatia: Hi C.J., it's Manish. I'll take that and then Mark can add some comments. But yes, the new U.S. projects both will provide DRAM bit growth only towards the latter half of the decade, we said Idaho, starting in meaningful supply in '27, and New York '28 or later. So, our big growth in the near-term in DRAM is going to come from the technology transitions that we have in both Taiwan and Japan. And we're still ramping our 1-beta, which is the industry's best node right now, and we expect to begin production ramp of our 1-gamma and actually implement that both in Taiwan and then eventually in Japan as well. We announced last year that we're going to be enabling EUV in Japan so that we can ramp the One Gamma node there as well. So our big growth in the intervening period before we get to the new U.S. manufacturing sites will be driven by technology transitions in our existing footprint. And we have space and everything lined up to be able to do that.

Manish Bhatia: Hi C.J., it's Manish. I'll take that and then Mark can add some comments. But yes, the new U.S. projects both will provide DRAM bit growth only towards the latter half of the decade, we said Idaho, starting in meaningful supply in '27, and New York '28 or later. So, our big growth in the near-term in DRAM is going to come from the technology transitions that we have in both Taiwan and Japan. And we're still ramping our 1-beta, which is the industry's best node right now, and we expect to begin production ramp of our 1-gamma and actually implement that both in Taiwan and then eventually in Japan as well. We announced last year that we're going to be enabling EUV in Japan so that we can ramp the 1-gamma node there as well. So, our big growth in the sort of intervening period before we get to the new U.S. manufacturing sites will be driven by technology transitions in our existing footprint. And we have space and everything lined up to be able to do that.

Manish H. Bhatia: But yes, the the new US projects both will, you know, provide DRAM bit growth only towards the latter half of the decade, we said Idaho, starting in meaningful supply in 27. And, and New York, 28 or later. So our big growth in the near term in DRAM is going to come from the technology transitions that we have in both Taiwan and Japan. And we're still ramping our One Beta, which is the industry's best node right now.

Manish H. Bhatia: And we expect to begin production ramp of our One Gamma and actually implement that both in Taiwan and then eventually in Japan as well. We announced last year that we're going to be enabling EUV in Japan so that we can ramp the One Gamma node there as well. So our big growth in the intervening period before we get to the new U.S. manufacturing sites will be driven by technology transitions in our existing footprint. And we have space and everything lined up to be able to do that.

And we expect to begin production ramp of our One Gamma and actually implement that both in Taiwan and then eventually in Japan as well.

We announced last year that we're going to be enabling EUV in Japan so that we can ramp the One Gamma node there as well. So our big growth in the intervening period before we get to the new U.S. manufacturing sites will be driven by technology transitions in our existing footprint. And we have space and everything lined up to be able to do that.

Manish Bhatia: We announced last year that we're going to be enabling EUV in Japan so that we can ramp the 1-gamma node there as well. So, our big growth in the sort of intervening period before we get to the new U.S. manufacturing sites will be driven by technology transitions in our existing footprint. And we have space and everything lined up to be able to do that.

Manish H. Bhatia: We announced last year that we're going to be enabling EUV in Japan so that we can ramp the 1-gamma node there as well. So, our big growth in the sort of intervening period before we get to the new U.S. manufacturing sites will be driven by technology transitions in our existing footprint. And we have space and everything lined up to be able to do that.

Mark Murphy: And C.J., I would only add that, we did say that through '25, and we would expect that to continue into '26, that we would be at approaching our target levels of inventory by end of '25, we'll be lean on inventories as we see it in '26. We are already sort of prioritizing bits to higher value markets now, which, is driving interesting customers for longer-term agreement discussions are earlier than they typically would and behavior like that.

Manish Bhatia: And I think this goes out to say, I mean, our goal is to maintain our, our market share to grow our HBM share and sometime in calendar year '25, we'll get our HBM share to match our DRAM overall bit share and then maintain our market share from there.

C.J. Muse: Very helpful. Just a quick follow-up on HBM3E, obviously not a mature product from a yield perspective. I guess when you're setting out pricing early in a yield ramp, how does that work? Do you set higher pricing knowing that you're going to have worse yields, and as that improves, you share that benefit with your customers? Or is that something that you hold yourselves? How should we think about that?

Mark Murphy: Yes. So, this is Sumit here. We have these pricing agreements done for 2024, as well as most of 2025 pricing is also all done. We are sold out for '25 from a volume perspective pricing almost done for all of 2025 as well. And the pricing is set at a level where we expect the overall gross margin to be at robust levels, consistent with the value this product provides to our costumers. And it is obviously the most complex product that the industry has ever done. So the pricing also contemplates that. way across time. And obviously, as the product ramps, the costs come down, the yields improve, then the gross margin improves over time. That's typically how it works for pretty much all the products. And the early level of gross margin is lower than what the mature yield gross margin ends up being. Despite that, and us being very early in the yield ramp of HPM, we have said that our first full quarter of production with over $100 million of revenue already achieved HBM margins that were accreted to the company margins as well as to the company's DRAM margins.

Sumit Sadana: Yes. So, this is Sumit here. We have these pricing agreements done for 2024, as well as most of 2025 pricing is also all done. We are sold out for '25 from a volume perspective pricing almost done for all of 2025 as well. And the pricing is set at a level where we expect the overall gross margin to be at robust levels, consistent with the value this product provides to our costumers. And it is obviously the most complex product that the industry has ever done. So, the pricing also contemplates that. way across time. And obviously, as the product ramps, the costs come down, the yields improve, then the gross margin improves over time. That's typically how it works for pretty much all the products. And the early level of gross margin is lower than what the mature yield gross margin ends up being. Despite that, and us being very early in the yield ramp of HPM, we have said that our first full quarter of production with over $100 million of revenue already achieved HBM margins that were accreted to the company margins as well as to the company's DRAM margins.

Mark Murphy: way across time. And obviously, as the product ramps, the costs come down, the yields improve, then the gross margin improves over time. That's typically how it works for pretty much all the products. And the early level of gross margin is lower than what the mature yield gross margin ends up being. Despite that, and us being very early in the yield ramp of HPM, we have said that our first full quarter of production with over $100 million of revenue already achieved HBM margins that were accreted to the company margins as well as to the company's DRAM margins.

Sumit Sadana: And of course, the pricing is done in a fairly consistent way across time. And obviously, as the product ramps, the costs come down, the yields improve, then the gross margin improves over time. That's typically how it works for pretty much all the products. And the early level of gross margin is lower than what the mature yield gross margin ends up being. Despite that, and us being very early in the yield ramp of HBM, we have said that our first full quarter of production with over $100 million of revenue already achieved HBM margins that were accretive to the company margins as well as to the company's DRAM margins.

Operator: Thank you, very much.And our next question comes from the line of Aaron Rakers from Wells Fargo. Your question, please.

C.J. Muse: Thank you very much.

Operator: much. And our next question comes from the line of Aaron Rakers from Wells Fargo. Your question, please.

Operator: much.

Operator: And our next question comes from the line of Aaron Rakers from Wells Fargo. Your question, please.

Aaron Rakers: Yeah, thanks for doing the after call and let me ask a question. So, going on the HBM discussion a little bit further, I guess two quarters ago, I think you guys reported some prepayments, given the agreements that you're establishing on HBM. I'm curious, is there any update to the prepayments? I think it was $600 million previously, these last two quarters. And then, I guess, as part of that, how do I think about the capacity footprint of HBM? How that's evolved over the course of this last quarter? Is there any flexibility to move that higher? Or are you just pretty much completely set for fiscal '25 at this point?

Sumit Sadana: Yeah, I'll take the prepayment question and then I'll turn it over to Manish to talk about the HBM manufacturing footprint. In terms of prepayments, you know, we have had, like you said, some level of prepayment. And we continue to have these discussions with customers about their goals and desires to enter into these agreements with us and use prepayments as appropriate as part of the discussion and value from both sides in terms of the puts and takes on the various terms in the agreement. And so we'll continue to evaluate these sort of opportunities. Of course, as you know, in 2023, We have had a tough downturn in the industry, so as we were coming out of it, we were definitely open to some of these discussions. We remain open to some of these discussions, however, you know, as Mark and Sanjay have provided to you in the earlier call and in the prepared remarks, our expectation is that we will fund a lot of the capital investments for next year and the growth in those capital investments for next year through our operating cash flow and still have, you know, robust growth in our free cash flow for next year.

Sumit Sadana: Yeah, I'll take the prepayment question and then I'll turn it over to Manish to talk about the HBM manufacturing footprint. In terms of prepayments we have had, like you said, some level of prepayment. And we continue to have these discussions with customers about their goals and desires to enter into these agreements with us and use prepayments as appropriate as part of the discussion and value from both sides in terms of the puts and takes on the various terms in the agreement.

Sumit Sadana: And so we'll continue to evaluate these sort of opportunities. Of course, as you know, in 2023, we have had a tough downturn in the industry, so as we were coming out of it, we were definitely open to some of these discussions. We remain open to some of these discussions, however, you know, as Mark and Sanjay have provided to you in the earlier call and in the prepared remarks, our expectation is that we will fund a lot of the capital investments for next year and the growth in those capital investments for next year through our operating cash flow and still have robust growth in our free cash flow for next year. So we are going to continue to rely on that, but there can be opportunities to enter into certain unique types of arrangements with customers, and we continue to evaluate those on a case-by-case basis. And I'll turn it over to Manish to talk about the footprint. Sure.

Mark Murphy: And so we'll continue to evaluate these sort of opportunities. Of course, as you know, in 2023, We have had a tough downturn in the industry, so as we were coming out of it, we were definitely open to some of these discussions. We remain open to some of these discussions, however, you know, as Mark and Sanjay have provided to you in the earlier call and in the prepared remarks, our expectation is that we will fund a lot of the capital investments for next year and the growth in those capital investments for next year through our operating cash flow and still have, you know, robust growth in our free cash flow for next year.

Sumit Sadana: So, we are going to continue to rely on that, but there can be opportunities to enter into certain unique types of arrangements with customers, and we continue to evaluate those on a case-by-case basis. And I'll turn it over to Manish to talk about the footprint.

Mark Murphy: So we are going to continue to rely on that, but there can be opportunities to enter into certain unique types of arrangements with customers, and we continue to evaluate those on a case-by-case basis. And I'll turn it over to Manish to talk about the footprint. Sure.

Manish H. Bhatia: Sure. So--and you know that we're coming from a very low base installed capacity for HBM, given our decision to skip HBM3E and really focus on our HBM3E, where we felt we would have product differentiation capability, which our technology and product team have really delivered and our customers are really appreciating. So our goal, and we set the target to intercept our normal DRAM market share with our HBM share to match our overall DRAM market share in calendar year '25. And that's what we're marching towards. And so our investments in the unique HBM equipment, our investments in clean room space are all marching towards that. And we're on that ramp trajectory and confident in achieving that. Just keep in mind a couple of things, you know, the clean room space that we're enabling for this HBM ramp is more complex than standard assembly, clean room space. So, you know, that's, that's one element of what we're working towards to be able to reach that, reach that goal.

Manish Bhatia: Sure. So--and you know that we're coming from a very low base installed capacity for HBM, given our decision to skip HBM3E and really focus on our HBM3E, where we felt we would have product differentiation capability, which our technology and product team have really delivered and our customers are really appreciating. So our goal, and we set the target to intercept our normal DRAM market share with our HBM share to match our overall DRAM market share in calendar year '25. And that's what we're marching towards. And so, our investments in the unique HBM equipment, our investments in clean room space are all marching towards that. And we're on that ramp trajectory and confident in achieving that. Just keep in mind a couple of things, you know, the clean room space that we're enabling for this HBM ramp is more complex than standard assembly, clean room space. So, that's one element of what we're working towards to be able to reach that goal.

Manish H. Bhatia: And so, our investments in the unique HBM equipment, our investments in clean room space are all marching towards that. And we're on that ramp trajectory and confident in achieving that. Just keep in mind a couple of things, you know, the clean room space that we're enabling for this HBM ramp is more complex than standard assembly, clean room space. So, that's one element of what we're working towards to be able to reach that goal.

Manish Bhatia: And so, our investments in the unique HBM equipment, our investments in clean room space are all marching towards that. And we're on that ramp trajectory and confident in achieving that. Just keep in mind a couple of things, you know, the clean room space that we're enabling for this HBM ramp is more complex than standard assembly, clean room space. So, that's one element of what we're working towards to be able to reach that goal. But the ramp is significant given where we're starting from, but, we're confident we're going to be able to achieve that goal. And do so with world-class quality, world-class yield, and excellent cost structure.

Manish H. Bhatia: And that's what we're marching towards. And so our investments in the unique HBM equipment, our investments in clean room space are all marching towards that. And we're on that ramp trajectory and confident in achieving that. Just keep in mind a couple of things, you know, the clean room space that we're enabling for this HBM ramp is more complex than standard assembly, clean room space. So, you know, that's, that's one element of what we're working towards to be able to reach that, reach that goal.

And that's what we're marching towards.

And so our investments in the unique HBM equipment, our investments in clean room space are all marching towards that. And we're on that ramp trajectory and confident in achieving that. Just keep in mind a couple of things, you know, the clean room space that we're enabling for this HBM ramp is more complex than standard assembly, clean room space. So, you know, that's, that's one element of what we're working towards to be able to reach that, reach that goal.

Manish H. Bhatia: But the ramp is significant given where we're starting from, but, we're confident we're going to be able to achieve that goal. And do so with world-class quality, world-class yield, and excellent cost structure.

Manish Bhatia: But the ramp is significant given where we're starting from, but, we're confident we're going to be able to achieve that goal. And do so with world-class quality, world-class yield, and excellent cost structure.

Aaron Rakers: Thank you. And Mark, just a quick follow-up. How do you think about operating expenses as the fundamentals improve from here? I know you gave this quarter's guidance, but just curious of how you would think about the glide path beyond this quarter.

Mark Murphy: Yeah, we did well in the quarter on OPEX, demonstrating control. Again, we're at the lower end of the of the guide on our OPEX. It's up in fourth quarter as we said, and that's driven really by primarily R&D program expenses, but we also had in the third quarter, which was built into our guidance, a land sale that was about a third of would be responsible for about 1/3 of the increase from third to fourth quarter. In November quarter, we do see OPEX picking up again, again, driven principally by R&D program expenses. You know, great work on the NAN front. Also, a number of DRAM related activities, including HBM development. Um, so we would expect, um... You know, OPEX to be up sort of mid single digits, um 4q to 1q over over 1.1 billion and then some, Yeah, some modest increase sequentially through the year in 25.

Mark Murphy: In November quarter, we do see OPEX picking up again, again, driven principally by R&D program expenses. You know, great work on the NAN front. Also, a number of DRAM related activities, including HBM development. Um, so we would expect, um... You know, OPEX to be up sort of mid single digits, um 4q to 1q over over 1.1 billion and then some, Yeah, some modest increase sequentially through the year in 25.

Mark Murphy: In November quarter, we do see OPEX picking up again. Again, driven principally by R&D program expenses. Great work on the NAND front, also, a number of DRAM related activities, including HBM development. So, we would expect OPEX to be up sort of mid-single digits, 4Q to 1Q over $1.1 billion and then some modest increase sequentially through the year in '25.

Operator: And our next question comes from the line of Srini Pajjuri from Raymond James. Your question, please.

Unknown Executive: Yeah, thank you guys. My question is on inventories that your customers maybe, just looking at your PC and smartphone customers, there's some talk that some of the customers pre-built some inventory ahead of the price increases. If you can talk about, what your view based on your visibility as to how much inventory they are holding? And then on the data center, it looks like the inventory correction is mostly done.

Srini Pajjuri: Yeah, thank you guys. My question is on inventories that your customers maybe, just looking at your PC and smartphone customers, there's some talk that some of the customers pre-built some inventory ahead of the price increases. If you can talk about, what your view based on your visibility as to how much inventory they are holding? And then on the data center, it looks like the inventory correction is mostly done. And I'm just curious, you talked about some optimism about even standard server demand picking up a bit. So I was wondering if you can comment on that as well.

Unknown Executive: And then on the data center, it looks like the inventory correction is mostly done. And I'm just curious, you talked about some optimism about even standard server demand picking up a bit. So I was wondering if you can comment on that as well.

Srini Pajjuri: And then on the data center, it looks like the inventory correction is mostly done. And I'm just curious, you talked about some optimism about even standard server demand picking up a bit. So I was wondering if you can comment on that as well.

Unknown Executive: And, you know, I'm just curious, you know, you talked about, you know, some optimism about even standard server demand picking up a bit. So I was wondering if you can, you know, comment on that as well.

Sumit Sadana: Yeah, I mean, I'll comment on the data center first, and then we'll go to PCs and smartphones. On the data center side, we had been saying for some time that we expect the data center demand to start returning in the first half of calendar '24, and that has been pretty much on target. And as the second calendar quarter or third fiscal quarter continued, we saw a strengthening of that demand in the data center. And that strong trend has continued, mainly driven by AI. It started with a lot of the demand coming from AI, and then we are starting to see, and we had mentioned this earlier, we had started to see some early signs of improvement in demand in traditional servers, and that kind of demand improvement is continuing. So that's a positive sign overall in the data center, beyond just the AI servers as well.

Sumit Sadana: It started with a lot of the demand coming from AI, and then we are starting to see, and we had mentioned this earlier, we had started to see some early signs of improvement in demand in traditional servers, and that kind of demand improvement is continuing. So, that's a positive sign overall in the data center, beyond just the AI servers as well. And the inventory is pretty normalized in the data center, and a lot of the demand comes with a level of urgency, and we have been trying to chase that supply because the leading-edge nodes are tight. Now, we had mentioned in terms of the shape of the recovery of the industry for certain end markets, that coming out of the 2023 downturn that PCs and smartphones would pick up in terms of volume before data center and that has been exactly how it transpired. We started seeing strength in those segments late in calendar 24 and then that strength continued into calendar Q1, etc.

Sumit Sadana: And the inventory is pretty normalized in the data center, and a lot of the demand comes with a level of urgency, and we have been trying to chase that supply, because the leading-edge nodes are tight. Now, we had mentioned in terms of the shape of the recovery of the industry for certain end markets, that coming out of the 2023 downturn that PCs and smartphones would pick up in terms of volume before data center and that has been exactly how it transpired. We started seeing strength in those segments late in calendar 24 and then that strength continued into calendar Q1, etc.

Sumit Sadana: And the inventory is pretty normalized in the data center, and a lot of the demand comes with a level of urgency, and we have been trying to chase that supply because the leading-edge nodes are tight. Now, we had mentioned in terms of the shape of the recovery of the industry for certain end markets, that coming out of the 2023 downturn that PCs and smartphones would pick up in terms of volume before data center and that has been exactly how it transpired. We started seeing strength in those segments late in calendar 24 and then that strength continued into calendar Q1, etc.

Sumit Sadana: Now, we had mentioned in terms of the shape of the recovery of the industry for certain end markets, that coming out of the 2023 downturn that PCs and smartphones would pick up in terms of volume before data center and that has been exactly how it transpired. We started seeing strength in those segments late in calendar '24 and then that strength continued into calendar Q1, etc. And so, yes, those customers have purchased and built some inventory because of, you know, three important factors. One relates to obviously the price trend that was being discussed with customers in terms of the trajectory of pricing. We have also articulated that we expect pricing to continue to increase throughout calendar 2024. And so that has been an incentive for some customers to purchase some of the volume ahead. The second factor relates to customers' own expectations of demand growth in their business as they launch AI PCs and AI smartphones. These obviously come with higher average capacities. We have spoken about that quite a bit in our prepared remarks.

Sumit Sadana: And so, yes, those customers have purchased and built some inventory because of, you know, three important factors. One relates to obviously the price trend that was being discussed with customers in terms of the trajectory of pricing. We have also articulated that we expect pricing to continue to increase throughout calendar 2024. And so that has been an incentive for some customers to purchase some of the volume ahead. The second factor relates to customers' own expectations of demand growth in their business as they launch AI PCs and AI smartphones. These obviously come with higher average capacities. We have spoken about that quite a bit in our prepared remarks.

Sumit Sadana: And so, yes, those customers have purchased and built some inventory because of three important factors. One relates to obviously the price trend that was being discussed with customers in terms of the trajectory of pricing. We have also articulated that we expect pricing to continue to increase throughout calendar 2024. And so that has been an incentive for some customers to purchase some of the volume ahead. The second factor relates to customers' own expectations of demand growth in their business as they launch AI PCs and AI smartphones. These obviously come with higher average capacities. We have spoken about that quite a bit in our prepared remarks.

Sumit Sadana: The second factor relates to customers' own expectations of demand growth in their business as they launch AI PCs and AI smartphones. These obviously come with higher average capacities. We have spoken about that quite a bit in our prepared remarks. And if you look at the expectations of, Replacement Cycle Driven Unit Volume Increases. We have fairly modest assumptions in terms of unit volume growth this year, only low single digit percentage in PCs, mid single digit percentage in smartphones, and even next year, our expectations are fairly modest, but there could be upsides. Some of our customers are expecting higher levels of unit volume growth next year than what we are modeling, and so there could be upsides.

Sumit Sadana: And if you look at the expectations of, Replacement Cycle Driven Unit Volume Increases. We have fairly modest assumptions in terms of unit volume growth this year, only low single digit percentage in PCs, mid single digit percentage in smartphones, and even next year, our expectations are fairly modest, but there could be upsides. Some of our customers are expecting higher levels of unit volume growth next year than what we are modeling, and so there could be upsides.

Sumit Sadana: And if you look at the expectations of replacement cycle unit volume increases, we have fairly modest assumptions in terms of unit volume growth this year, only low single-digit percentage in PCs, mid-single-digit percentage in smartphones. And even next year, our expectations are fairly modest, but there could be upsides. Some of our customers are expecting higher levels of unit volume growth next year than what we are modeling, and so there could be upside. And that could be driven by a stronger replacement cycle driven by these AI capabilities in smartphones and PCs.

Sumit Sadana: And even next year, our expectations are fairly modest, but there could be upsides. Some of our customers are expecting higher levels of unit volume growth next year than what we are modeling, and so there could be upside. And that could be driven by a stronger replacement cycle driven by these AI capabilities in smartphones and PCs. So that brings us to the third portion of their drive to build some buffer, which is that, you know, some of these customers are getting concerned about their ability to get their hands on supply next year. And this is part of what is driving some of these earlier than usual discussions on LTAs, these long-term agreements for 2025 calendar year supply, because the growth in the data center continues at a pretty robust pace.

Sumit Sadana: And that could be driven by, you know, a stronger replacement cycle driven by these AI capabilities and smartphones and PCs. So that brings us to the third portion of their drive to build some buffer, which is that, you know, some of these customers are getting concerned about their ability to get their hands on supply next year. And this is part of what is driving some of these earlier than usual discussions on LTAs, these long-term agreements for 2025 calendar year supply, because the growth in the data center continues at a pretty robust pace.

And that could be driven by, you know, a stronger replacement cycle driven by these AI capabilities and smartphones and PCs.

Sumit Sadana: So, that brings us to the third portion of their drive to build some buffer, which is that some of these customers are getting concerned about their ability to get their hands on supply next year. And this is part of what is driving some of these earlier than usual discussions on LTAs, these long-term agreements for 2025 calendar year supply, because the growth in the data center continues at a pretty robust pace. The HBM growth, as we have said earlier, with that three to one trade ratio displaces a lot of wafers. And between HBM, HiCAD, DIMMs, et cetera, on the DRAM side, AI server growth, return of traditional server growth. And, you know, if you get any of this. Growth in the PC and smartphone space, pretty soon, you know, you get to a very, very quickly a scenario where the supply growth in the industry is unable to keep up with the demand growth. And that is causing customers to pull in some of these discussions about supply and and you know, they're carrying some extra inventory to guard against that. So that's sort of the high level perspective on that.

So that brings us to the third portion of their drive to build some buffer, which is that, you know, some of these customers are getting concerned about their ability to get their hands on supply next year. And this is part of what is driving some of these earlier than usual discussions on LTAs, these long-term agreements for 2025 calendar year supply, because the growth in the data center continues at a pretty robust pace.

Sumit Sadana: The HBM growth, as we have said earlier, with that 3:1 trade ratio displaces a lot of wafers. And between HBM, high-cap, DIMMs, et cetera, on the DRAM side, AI server growth, return of traditional server growth. And if you get any of this growth in the PC and smartphone space, pretty soon, you get to a very, very quickly a scenario where the supply growth in the industry is unable to keep up with the demand growth. And that is causing customers to pull in some of these discussions about supply and they're carrying some extra inventory to guard against that. So that's sort of the high level perspective on that.

Sumit Sadana: The HBM growth, as we have said earlier, with that three to one trade ratio displaces a lot of wafers. And between HBM, HiCAD, DIMMs, et cetera, on the DRAM side, AI server growth, return of traditional server growth. And, you know, if you get any of this. Growth in the PC and smartphone space, pretty soon, you know, you get to a very, very quickly a scenario where the supply growth in the industry is unable to keep up with the demand growth. And that is causing customers to pull in some of these discussions about supply and and you know, they're carrying some extra inventory to guard against that. So that's sort of the high level perspective on that.

Srini Pajjuri: Great. Sumit, maybe one quick follow-up on that. You mentioned the high-cap DIMMs, as one of the strong areas in the quarter. Just curious, I mean, how does high-cap DIMM, I guess, compare versus HBM in terms of the proprietary nature of the product and the complexity? And also given that it's higher margin seems like--than in DDR, is it as good a margin as HBM? And also, do you think that sustains? And also, if you could put that into some context as to how big the SAM is, what the applications are for this particular product. Thank you.

Sumit Sadana: Yeah, I think, first, I'll just mentioned that--and this is an important clarification, and we define high-cap DIMMs as anything that is more than 64 gigabyte of DIMM capacity. So 96 gigabytes, 128 gigabytes and higher, right? So, anything that is 96 gigabytes or higher, we classify that as high-cap DIMMs. Now, when it comes to high-cap DIMMs, you know, we were one of the first ones to introduce 96-gigabyte DIMMs in the industry. And when you look at 128-gigabyte DIMMs, Micron was the first company to introduce a monolithic 32-gigabit dye-based 128-gigabyte DIMM. So I know that's a mouthful, but essentially, it's a DIMM hit without use of TSV, right?

Sumit Sadana: So anything that is 96 gigabytes or higher, we classify that as high-cap DIMMs. Now, when it comes to high-cap DIMMs, you know, we were one of the first ones to introduce 96-gigabyte DIMMs in the industry. And when you look at 128-gigabyte DIMMs, Micron was the first company to introduce a monolithic 32-gigabit dye-based 128-gigabyte DIMM. So I know that's a mouthful, but essentially, it's a DIMM hit without use of TSV, right?

So anything that is 96 gigabytes or higher, we classify that as high-cap DIMMs.

Sumit Sadana: Now, when it comes to high-cap DIMMs, we were one of the first ones to introduce 96-gigabyte DIMMs in the industry. And when you look at 128-gigabyte DIMMs, Micron was the first company to introduce a monolithic 32-gigabit die-based 128-gigabyte DIMM. So, I know that's a mouthful, but essentially, it's a DIMM hit without use of TSV, right? So, it is extraordinarily cost-efficient product. And we were able to demonstrate that this product actually has lower latency than TSV-based DIMM and higher performance. And, and so it's a very, very good world class product. And Micron is, you know, really one of the first ones in the market with this. And, and we have a very compelling cost structure on this.

Now, when it comes to high-cap DIMMs, you know, we were one of the first ones to introduce 96-gigabyte DIMMs in the industry. And when you look at 128-gigabyte DIMMs, Micron was the first company to introduce a monolithic 32-gigabit dye-based 128-gigabyte DIMM. So I know that's a mouthful, but essentially, it's a DIMM hit without use of TSV, right?

Sumit Sadana: And we were able to demonstrate that this product actually has lower latency than TSV-based DIMM and higher performance. And so it's a very, very good world-class product. And Micron is really one of the first ones in the market with this. And we have a very compelling cost structure on this. Now, these products going to AI servers, I've mentioned before, these AI server growth has been very robust, and the demand has been strong for these high-cap DIMMs. And we have definitely, you know, very accretive margins on these products compared to the company margins. And both HPM and high-cap DIMM have some of the stronger margin profiles in the DRAM portfolio, very accretive to the overall company level. But I'll also mention that obviously the rest of the company product pricing is increasing quarter on quarter, and that rest of the company portfolio pricing keeps improving the margins of the rest of the company portfolio. So that's a positive too, but these two products are very, very robust margins.

Sumit Sadana: So it is extraordinarily cost-efficient product. And we were able to demonstrate that this product actually has lower latency than TSV-based DIMM and higher performance. And, and so it's a very, very good world class product. And Micron is, you know, really one of the first ones in the market with this. And, and we have a very compelling cost structure on this.

So it is extraordinarily cost-efficient product.

And we were able to demonstrate that this product actually has lower latency than TSV-based DIMM and higher performance. And, and so it's a very, very good world class product. And Micron is, you know, really one of the first ones in the market with this. And, and we have a very compelling cost structure on this.

Sumit Sadana: Now, these products going to AI servers, I've mentioned before, these AI server growth has been very robust, and the demand has been strong for these high-cap DIMMs. And we have definitely, you know, very accretive margins on these products compared to the company margins. And both HPM and high-cap DIMM have some of the stronger margin profiles in the DRAM portfolio, very accretive to the overall company level. But I'll also mention that obviously the rest of the company product pricing is increasing quarter on quarter, and that rest of the company portfolio pricing keeps improving the margins of the rest of the company portfolio. So that's a positive too, but these two products are very, very robust margins.

Sumit Sadana: Now, these products going to AI servers, I've mentioned before, these AI server growth has been very robust, and the demand has been strong for these high-cap DIMMs. And we have definitely, very accretive margins on these products compared to the company margins. And both HBM and high-cap DIMM have some of the stronger margin profiles in the DRAM portfolio, very accretive to the overall company level. But I'll also mention that obviously the rest of the company product pricing is increasing quarter on quarter, and that rest of the company portfolio pricing keeps improving the margins of the rest of the company portfolio. So that's a positive too, but these two products are very, very robust margins.

Sumit Sadana: But I'll also mention that obviously the rest of the company product pricing is increasing quarter on quarter, and that rest of the company portfolio pricing keeps improving the margins of the rest of the company portfolio. So, that's a positive too, but these two products are very, very robust margins.

Operator: Thank you. And our next question comes from the line of Brian Chin. From Stifel, your question please.

Srini Pajjuri: Thank you.

Operator: Thank you. And our next question comes from the line of Brian Chin from Stifel. Your question, please.

Brian Chin: Yeah, it's Brian Chin here. Thanks for taking a few questions. Maybe just one kind of nearer term first. The--I know you give sort of detailed P&Ls between DRAM and NAND, but maybe just kind of in terms of a crossover, was your NAND business profitable in fiscal 3Q? Or if not, do you expect it to be in fiscal 4Q? And is that low single-digit bit shipment growth guidance in NAND reflecting more of the pull forward of smartphone demand? Or is that somewhat reflective of your increasing bit shipment constraint as utilization rates there fully recover?

Brian Edward Chin: Maybe just one kind of nearer term first, the, I know, you know, give sort of detailed P&Ls between DRAM and NAND, but maybe just kind of in terms of a crossover, but was your NAND business profitable in fiscal 3Q? Or if not, do you expect it to be in fiscal 4Q? And is that low single digit bid shipment growth guidance in NAND reflecting more of the pull forward of smartphone demand or, Is that somewhat reflective of your increasing bit shipment constraint as utilization rates there fully recover?

Mark Murphy: Yeah, Brian, what we disclose, you'll see the Q tomorrow, I can I can say that, the NAND business overall gross margins improved in the third quarter. And then at the segment level, probably the best proxy for that business is the storage business unit. And that business did deliver operating profit in the quarter, which was substantially improved, substantially improved from the prior quarter.

Brian Chin: And then just that part about the forward guidance for bid shipment growth, low single digits, and NAND?

Mark Murphy: Yeah, I think in terms of the growth in NAND, on a quarter-to-quarter basis, look, there are always, all kinds of ebbs and flows between quarters. And the important thing that we are trying to do is to shift our mix towards the data center. And that is obviously a lot of demand that we are chasing at very good prices and margins compared to, the rest of the land portfolio. So, that's what we are doing. And, All of the changes that we reported in terms of our revenue, like for example, our mobile business, you referred to the smartphone volumes, our mobile business was down 1% in FQ3. That was all, you know, planned changes in volume and mixed changes happening in our business. The overall trends for 2024 calendar year for the mobile business have been fairly stable and consistent with what we have been mentioning for several quarters now that our expectation has been in that sell-through of mobile phones to be in that mid-single-digit percentage unit volume growth for calendar 24.

Mark Murphy: And all of the changes that we reported in terms of our revenue, like for example, our mobile business, you referred to the smartphone volumes. Our mobile business was down 1% in F Q3. That was all planned, changes in volume and mixed changes happening in our business. The overall trends for 2024 calendar year for the mobile business have been fairly stable and consistent with what we have been mentioning for several quarters now that our expectation has been in that sell-through of mobile phones to be in that mid-single-digit percentage unit volume growth for calendar '24. If anything, calendar 2024 Q1 numbers that were reported out of the industry in terms of sell-through are better than what the overall full year expectation would suggest, but we are not changing our outlook at this time.

Mark Murphy: And, All of the changes that we reported in terms of our revenue, like for example, our mobile business, you referred to the smartphone volumes, our mobile business was down 1% in FQ3. That was all, you know, planned changes in volume and mixed changes happening in our business. The overall trends for 2024 calendar year for the mobile business have been fairly stable and consistent with what we have been mentioning for several quarters now that our expectation has been in that sell-through of mobile phones to be in that mid-single-digit percentage unit volume growth for calendar 24.

Mark Murphy: If anything, calendar 2024 Q1 numbers that were reported out of the industry in terms of sell-through are better than what the overall full year expectation would suggest, but we are not changing our outlook at this time.

Brian Chin: And maybe just for a follow-up, I think other folks have maybe tried to get at this somewhat as well. At the expected level of CAPEX you're currently communicating now for fiscal '25 and understanding that more than half of that increases for construction CAPEX. Is it reasonable to expect Micron will be able to increase bit supply in that mid-teens for DRAM, maybe high-teens for NAND next year, or would more investment be needed to grow in line with the market, if bit demand is at that level or even stronger next year?

Manish Bhatia: So, Brian, just trying to parse your question out, a couple of just clarifications, we said that more than the half or more of the increase in CAPEX between--expected increase in CAPEX between fiscal '24 and '25 will be for the U.S. construction CAPEX, right? And so, we do have some other ongoing facilities and work around the rest of our footprint in Asia, as I mentioned on the call earlier, to be able to enable our technology transitions. And that's really the answer is that our technology transitions for DRAM in Japan and Taiwan, again, one beta continuing to ramp, and then one gamma being introduced in calendar year 25, penetration of HBM for us to be able to maintain our market share in that mid-teens range. And we believe we can achieve the long-term category with that. As technology transitions become, you know, less efficient, as demand continues to grow and HBM penetration grows, we do, as we've said for many years, expect greenfield wafer capacity growth to be needed. And that's timed with these US projects, which will be towards the latter half of the decade.

Manish Bhatia: And that's really the answer, is that our technology transitions for DRAM in Japan and Taiwan, again, 1-beta continuing to ramp, and then 1-gamma being introduced in calendar year '25, those are going to be sufficient even with the growing penetration of HBM for us to be able to maintain our market share in that mid-teens range. And we believe we can achieve the long-term category with that. As technology transitions become less efficient, as demand continues to grow and HBM penetration grows, we do, as we've said for many years, expect Greenfield wafer capacity growth to be needed. And that's timed with these U.S. projects, which will be towards the latter half of the decade.

Unknown Executive: And that's really the answer is that our technology transitions for DRAM in Japan and Taiwan, again, one beta continuing to ramp, and then one gamma being introduced in calendar year 25, penetration of HBM for us to be able to maintain our market share in that mid-teens range. And we believe we can achieve the long-term category with that. As technology transitions become, you know, less efficient, as demand continues to grow and HBM penetration grows, we do, as we've said for many years, expect greenfield wafer capacity growth to be needed. And that's timed with these US projects, which will be towards the latter half of the decade.

Sumit Sadana: Yeah, and just to build on that, the 2025 calendar year and fiscal year for us, we expect to have--we expect to maintain our bit share across both DRAM and NAND and part of that, part of those shipments will come from inventory. So you have heard Mark mention to you that our inventory will normalize by the end of 2025 and part of that inventory is going to be helping us ensure that we can maintain flat bit share next year.

Brian Chin: Okay, thanks. Very helpful.

Operator: Thank you. Our next question comes from the line of Harsh Kumar from Piper Sandler. Your question, please.

Harsh Kumar: Yeah, hey guys, when I kind of look at your long-term model, and I look back a little bit, I saw that your peak margins are somewhere in the 61.5% range. Now, you've got contracted pricing for HBM, sounds like for '24 and '25, but it's hard for me to think that your pricing would call for HBM gross margin to be in that range, in that 60% range, because that's what logic commands. Could you--I was wondering if you could give us an idea of what your aspirational gross margin is, and if you can, for HBM. And if you can't give us a number, maybe help us think about a framework so that we can try and get an idea of where you might be, what you might be planning for margins for HBM.

Sumit Sadana: Yeah, I mean, we are obviously not disclosing our HBM margin. But you can imagine that we, certainly have this view that the industry is in a tight place today. We expect to have continued price increases in '24 calendar year. And going into fiscal and calendar '25, we obviously continue to see tight and tightening industry conditions due to the growth of HBM data center growth. You know, all of the other segments going into AI driven growth mode. And so Obviously, when we think about, Fixing pricing, for all of calendar 2025 for HBM, we are going to do the pricing with that backdrop in mind, that, you know, we want to fix pricing at a level that we don't regret later. And of course, the industry is going to continue to strengthen in terms of financial performance and margins. We expect that for Micron for sure. But, you know, we are comfortable with our HBM margin profile, because of which we have been able to set these prices ahead of time. And this is a super complex product. And the margin profile justifies, you know, that level of value that it is creating for the ecosystem.

Sumit Sadana: And so Obviously, when we think about, fixing pricing, for all of calendar 2025 for HBM, we are going to do the pricing with that backdrop in mind, that we want to fix pricing at a level that we don't regret later. And of course, the industry is going to continue to strengthen in terms of financial performance and margins. We expect that for Micron for sure. But we are comfortable with our HBM margin profile, because of which we have been able to set these prices ahead of time. And this is a super complex product. And the margin profile justifies that level of value that it is creating for the ecosystem.

Unknown Executive: And so Obviously, when we think about, Fixing pricing, for all of calendar 2025 for HBM, we are going to do the pricing with that backdrop in mind, that, you know, we want to fix pricing at a level that we don't regret later. And of course, the industry is going to continue to strengthen in terms of financial performance and margins. We expect that for Micron for sure. But, you know, we are comfortable with our HBM margin profile, because of which we have been able to set these prices ahead of time. And this is a super complex product. And the margin profile justifies, you know, that level of value that it is creating for the ecosystem.

Harsh Kumar: Understood. And just a quick follow-up you've talked about pricing locked into '25 fiscal. Could you talk about your design visibility how many years? Is that also 2025 is an indication of design visibility with large GPU vendors? Or is your design visibility longer than that?

Unknown Executive: Yeah, I mean, we have customers that we have logged volumes with, and they are--some of those customers are starting purchases for their platforms in 2025. And those platforms are going to continue into 2026 and beyond. So, the discussion we have had earlier with you about launching with NVIDIA for 2024 and then multiple customers in 2025. Those multiple customers who we work with to launch the products in 2025 are actually going to continue into 2026 and beyond. Now, keep in mind, these all relate to the HBM3E product. The 3E product launches with 8 high. And then through the course of calendar 2025, we'll transition the mix over to 12th high. And then HBM4 comes in in 2026. And then you have, you know, HBM4 going on. And then following that, a while later, you'll get HBM4E. And, and so HBM4E will happen, will ship through the end of the decade, late in the decade and through the end of the decade. And so we are already in very deep engagements with customers on designing HBM4 and HBM4E.

Sumit Sadana: Yeah, I mean, we have customers that we have logged volumes with, and they are--some of those customers are starting purchases for their platforms in 2025. And those platforms are going to continue into 2026 and beyond. So, the discussion we have had earlier with you about launching with NVIDIA for 2024 and then multiple customers in 2025. Those multiple customers who we work with to launch the products in 2025 are actually going to continue into 2026 and beyond. Now, keep in mind, these all relate to the HBM3E product. The 3E product launches with 8 high. And then through the course of calendar 2025, we'll transition the mix over to 12th high. And then HBM4 comes in in 2026. And then you have, you know, HBM4 going on. And then following that, a while later, you'll get HBM4E. And, and so HBM4E will happen, will ship through the end of the decade, late in the decade and through the end of the decade. And so we are already in very deep engagements with customers on designing HBM4 and HBM4E.

Unknown Executive: And then through the course of calendar 2025, we'll transition the mix over to 12th high. And then HBM4 comes in in 2026. And then you have, you know, HBM4 going on. And then following that, a while later, you'll get HBM4E. And, and so HBM4E will happen, will ship through the end of the decade, late in the decade and through the end of the decade. And so we are already in very deep engagements with customers on designing HBM4 and HBM4E.

Sumit Sadana: And then through the course of calendar 2025, we'll transition the mix over to 12-high. And then HBM4 comes in, in 2026. And then you have, HBM4 going on. And then following that, a while later, you'll get HBM4E. And so HBM4E will happen, will ship through the end of the decade, late in the decade and through the end of the decade. And so, we are already in very deep engagements with customers on designing HBM4 and HBM4E. And so these are long partnerships with customers. They require long cycle time planning for IP. And as we get to HBM4E, there is going to be a very strong possibility of integration of customer IP into the base die. And that will make HBM4E more of a customized product, won't be the same product going to all customers, more of a customized HBM product. And because of that, it necessitates long-term planning and very deep R&D engagement with customers.

Sumit Sadana: And so, these are long partnerships with customers. They require long cycle time planning for IP. And as we get to HBM4E, there is going to be a very strong possibility of integration of customer IP into the base die. And that will make HBM4E more of a customized product, won't be the same product going to all customers, more of a customized HBM product. And because of that, it necessitates long-term planning and very deep R&D engagement with customers. And because of our leadership in HBM3E, where, as we have mentioned before, you know, 30% lower power consumption, leadership specs and performance, we have really great relationships with multiple HBM customers and we are firmly engaged in their long-term design.

Unknown Executive: And so these are long partnerships with customers. They require long cycle time planning for IP. And as we get to HBM4E, there is going to be a very strong possibility of integration of customer IP into the base die. And that will make HBM4E more of a customized product, won't be the same product going to all customers, more of a customized HBM product. And because of that, it necessitates long-term planning and very deep R&D engagement with customers.

Unknown Executive: And because of our leadership in HBM3E, where, as we have mentioned before, you know, 30% lower power consumption, leadership specs and performance, we have really great relationships with multiple HBM customers and we are firmly engaged in their long-term design.

Sumit Sadana: And because of our leadership in HBM3E, where, as we have mentioned before 30% lower power consumption, leadership specs and performance, we have really great relationships with multiple HBM customers and we are firmly engaged in their long-term design.

Harsh Kumar: Congratulations, guys, and super helpful. Thank you.

Operator: Thank you. And our next question, comes from the line of Quinn Bolton from Needham & Company. Your question, please.

Quinn Bolton: Thanks for taking our question. I guess I just want to come back, just to ability to maintain market share with the transition to HBM memory with the high-cap DIMM modules and the node transitions. I mean, I guess, I think, historically, no transitions, you typically, with the same equipment sets, see net wafer starts typically decline. And so, it feels like you've got a lot of factors that would sort of argue for a net reduction--continued net reduction in wafer starts. And so I just wonder if you could address, you know, over the next couple of years, what trends should we be thinking about in terms of your DRAM, you know, kind of wafer starts, you know, over that period?

Quinn Bolton: Thanks for taking our question. I guess I just want to come back, just to ability to maintain market share with the transition to HBM memory with the high-cap DIMM modules and the node transitions. I mean, I guess, I think, historically, no transitions, you typically, with the same equipment sets, see net wafer starts typically decline. And so, it feels like you've got a lot of factors that would sort of argue for a net reduction--continued net reduction in wafer starts. And so, I just wonder if you could address over the next couple of years, what trends should we be thinking about in terms of your DRAM, kind of wafer starts over that period?

Quinn Bolton: And so, I just wonder if you could address over the next couple of years, what trends should we be thinking about in terms of your DRAM, kind of wafer starts over that period?

Nathaniel Quinn Bolton: And so I just wonder if you could address, you know, over the next couple of years, what trends should we be thinking about in terms of your DRAM, you know, kind of wafer starts, you know, over that period?

Manish Bhatia: Sure, Quinn. So, we talked and have kind of given some color on what we think is an industry wide phenomenon out of the downturn in fiscal in calendar '23, and into calendar '24 now, where we, as well as others in the industry, we believe all others in the industry, did take advantage of this phenomenon that you mentioned, where, as we transition to newer technologies, we reduced wafer start capability structurally. So that did happen and for us and for others. Having said that, that's not something that is always going to be the case. Because we, as well as the rest of the industry, did it to be able to reduce CAPEX in the face of very, very weak demand, and still get the benefits in terms of performance and cost reduction from the technology transition. So, moving forward, obviously, you can imagine if every year you just keep structurally reducing, that's not--that's going to have impacts on both your bit supply and your costs.

Manish Bhatia: Having said that, that's not something that is always going to be the case. Because we, as well as the rest of the industry, did it to be able to reduce CAPEX in the face of very, very weak demand, and still get the benefits in terms of performance and cost reduction from the technology transition. So, moving forward, obviously, you can imagine if every year you just keep structurally reducing, that's not--that's going to have impacts on both your bit supply and your costs. So, you know, I would not be thinking as we head into this upturn that, you know, the industry will continue with that structural reduction year on year. You'll see investments more in line with a typical pre-downturn where we would, you know, maintain our wafer capacity, you know, while we make these transition investments. Now, over the, you know, as we go towards the second half of the decade and beyond, as technology transitions become more challenging, the big growth capability from the newer technologies is not as great as maybe previous generations.

Unknown Executive: Having said that, that's not something that is always going to be the case. Because we, as well as the rest of the industry, did it to be able to reduce CAPEX in the face of very, very weak demand, and still get the benefits in terms of performance and cost reduction from the technology transition. So, moving forward, obviously, you can imagine if every year you just keep structurally reducing, that's not--that's going to have impacts on both your bit supply and your costs.

Manish Bhatia: So, I would not be thinking as we head into this upturn that the industry will continue with that structural reduction year-on-year. You'll see investments more in line with a typical pre-downturn where we would maintain our wafer capacity, while we make these transition investments. Now, as we go towards the second half of the decade and beyond, as technology transitions become more challenging, the bit growth capability from the newer technologies is not as great as maybe previous generations. That's where we see the need for, and we've commented before, the need for greenfield wafer capacity growth for the entire DRAM industry. And HBM is and this trade ratio that we're talking about is just one aspect of that, that phenomena that maybe, you know, makes that more more that need for new wafer capacity as we go towards the second half of the decade more important. But again, to your quick question, you know, we feel good about, as we discussed, being able to maintain our DRAM market share, even as we grow our HBM share to be in line with our overall DRAM share.

Unknown Executive: So, you know, I would not be thinking as we head into this upturn that, you know, the industry will continue with that structural reduction year on year. You'll see investments more in line with a typical pre-downturn where we would, you know, maintain our wafer capacity, you know, while we make these transition investments. Now, over the, you know, as we go towards the second half of the decade and beyond, as technology transitions become more challenging, the big growth capability from the newer technologies is not as great as maybe previous generations.

Unknown Executive: That's where we see the need for, and we've commented before, the need for greenfield wafer capacity growth for the entire DRAM industry. And HBM is and this trade ratio that we're talking about is just one aspect of that, that phenomena that maybe, you know, makes that more more that need for new wafer capacity as we go towards the second half of the decade more important. But again, to your quick question, you know, we feel good about, as we discussed, being able to maintain our DRAM market share, even as we grow our HBM share to be in line with our overall DRAM share.

Manish Bhatia: That's where we see the need for, and we've commented before, the need for greenfield wafer capacity growth for the entire DRAM industry. And HBM is and this trade ratio that we're talking about is just one aspect of that, that phenomena that maybe, makes more that need for new wafer capacity as we go towards the second half of the decade more important. But again, to your quick question, you know, we feel good about, as we discussed, being able to maintain our DRAM market share, even as we grow our HBM share to be in line with our overall DRAM share.

Manish Bhatia: That's where we see the need for, and we've commented before, the need for Greenfield wafer capacity growth for the entire DRAM industry. And HBM is and this trade ratio that we're talking about is just one aspect of that, that phenomena that maybe, makes more that need for new wafer capacity as we go towards the second half of the decade more important. Your quick question, we feel good about, as we discussed, being able to maintain our DRAM market share, even as we grow our HBM share to be in line with our overall DRAM share.

Manish Bhatia: Your quick question, we feel good about, as we discussed, being able to maintain our DRAM market share, even as we grow our HBM share to be in line with our overall DRAM share.

Quinn Bolton: Got it. So, it sounds like you've got the facility space in Japan and Taiwan to kind of increase wafer starts to allow you to maintain share.

Unknown Executive: Basically, to be able to make technology transitions while broadly maintaining our wafer starts. Got it.

Manish Bhatia: Basically, to be able to make technology transitions while broadly maintaining our wafer starts.

Unknown Executive: Got it. And then just a follow-up on the HBM. Obviously, a lot of this is being driven today by the AI accelerators. But just wondering, do you see that proliferating to CPUs like the Grace CPU, obviously, in the Blackwell generation has some pretty significant HBM content with it. Do you see FPGAs or network switches, anything becoming more meaningful? Do you think this is largely AI accelerator, kind of GPU, AI accelerator driven in terms of the HBM demand drivers? Yeah, I mean, this is

Quinn Bolton: Got it. And then just a follow-up on the HBM. Obviously, a lot of this is being driven today by the AI accelerators. But just wondering, do you see that proliferating to CPUs like the Grace CPU, obviously, in the Blackwell generation has some pretty significant HBM content with it. Do you see FPGAs or network switches, anything becoming more meaningful? Do you think this is largely AI accelerator, kind of GPU, AI accelerator driven in terms of the HBM demand drivers?

Unknown Executive: a lot of this is being driven today by the AI accelerators. But just wondering, you know, do you see that proliferating to CPUs like the gray CPU, obviously, in the Blackwell generation has some pretty significant HBM content with it. Do you see FPGAs or network switches, anything becoming more meaningful? Do you think this is largely AI accelerator, you know, kind of GPU, AI accelerator driven in terms of the HBM? The Demand Driver. Yeah, I mean, this is

Unknown Executive: Yeah, I mean, this is

Sumit Sadana: Yeah, I mean, this is heavily based on the requirements of the system level performance, and the type of applications that require that high level of performance. If that performance level really dictates a level of processor memory bandwidth that cannot be met easily with traditional approaches, then, of course, HBM has to be considered. Thus far, it is AI servers, but there are other product categories and applications which are starting to investigate HBM, of course, not with these many placements. As you see around the GPU, because the GPU placements, you know, 6 placements, 8 placements, you know, 8 high, 12 high, et cetera, just a lot of memory. And other applications which may contemplate using HBM may not need that many placements. It is being contemplated in other places, but obviously the bar is high because HBM is a very expensive implementation of memory. But it is also one that is very power efficient.

Sumit Sadana: As you see around the GPU, because the GPU placements, you know, 6 placements, 8 placements, 8-high, 12-high, et cetera, just a lot of memory. And other applications which may contemplate using HBM may not need that many placements. It is being contemplated in other places, but obviously the bar is high because HBM is a very expensive implementation of memory. But it is also one that is very power efficient compared to doing it in other ways. . . . . And another way that companies are trying to figure out how this architecture evolves over time is to assess the mix of HBM versus DDR5 versus LP5. So LP, low power memory, it's starting to make its way into the data center. Then used to be the way, obviously, the RAS capabilities of LP, which is reliability, availability, and serviceability is not the same as DDR5 and consequently requires a lot of new architectural approaches.

Unknown Executive: As you see around the GPU, because the GPU placements, you know, 6 placements, 8 placements, you know, 8 high, 12 high, et cetera, just a lot of memory. And other applications which may contemplate using HBM may not need that many placements. It is being contemplated in other places, but obviously the bar is high because HBM is a very expensive implementation of memory. But it is also one that is very power efficient.

Unknown Executive: . . . . And another way that companies are trying to figure out how this architecture evolves over time is to assess the mix of HBM versus DDR5 versus LP5. So LP, low power memory, it's starting to make its way into the data center. Then used to be the way, obviously, the RAS capabilities of LP, which is reliability, availability, and serviceability is not the same as DDR5 and consequently requires a lot of new architectural approaches.

Sumit Sadana: And another way that companies are trying to figure out how this architecture evolves over time is to assess the mix of HBM versus DDR5 versus LP5. So LP, low power memory, it's starting to make its way into the data center. Then used to be the way, obviously, the RAS capabilities of LP, which is reliability, availability, and serviceability is not the same as DDR5 and consequently requires a lot of new architectural approaches. But you have seen leaders like NVIDIA show the way in terms of using LPDRAM in their servers. So, that trend is also starting as another approach. But overall, HBM usage will increase over time, but the volumes will be dominated by accelerators.

Unknown Executive: And another way that companies are trying to figure out how this architecture evolves over time is to assess the mix of HBM versus DDR5 versus LP5. So LP, low power memory, it's starting to make its way into the data center. Then used to be the way, obviously, the RAS capabilities of LP, which is reliability, availability, and serviceability is not the same as DDR5 and consequently requires a lot of new architectural approaches.

Unknown Executive: But you have seen leaders like NVIDIA show the way in terms of using LPD RAM in their servers. So that trend is also starting. As another approach, but overall, HBM usage will increase over time, but the volumes will be dominated by acceleration.

Operator: And our final question for today, comes from the line of Vivek Arya, from Bank of America Securities. Your question, please.

Vivek Arya: Thanks for the follow-up. Just a few clarifications on the CAPEX side. So, the mid-30s CAPEX intensity, is that gross or net of any chip funding? And are you assuming any depreciation benefits and gross margin benefits like Intel has been doing?

Mark Murphy: That's a net number, Vivek. And so we'll be providing you net numbers based on our latest assessment on when grants come in. And also when ITC is received, we will get the depreciation, benefits when it's put in service, but the cash reimbursement in the case of ITC, there may be a timing difference, or there will be a timing difference on that compared to grants.

Mark Murphy: Got it. So, the mid-30s is a net number and gross CAPEX could be higher than that. That's correct. Got it. And then on WFE, can you give us a sense, Mark, of what was sort of the mix in CapEx in fiscal, or what is the mix in fiscal 24? And how should we conceptually think about the mix in fiscal 25?

Vivek Arya: Got it. So, the mid-30s is a net number and gross CAPEX could be higher than that.

Mark Murphy: That's correct. Got it. And then on WFE, can you give us a sense, Mark, of what was sort of the mix in CapEx in fiscal, or what is the mix in fiscal 24? And how should we conceptually think about the mix in fiscal 25?

Mark Murphy: That's correct.

Vivek Arya: Got it. And then on WFE, can you give us a sense, Mark, of what was sort of the mix in CAPEX in fiscal, or what is the mix in fiscal '24? And how should we conceptually think about the mix in fiscal '25?

Mark Murphy: Yeah. We did say that WFE was down in fiscal '24, like it had been in fiscal--was down in fiscal '23, then down again in fiscal '24. We have said it'll be up in fiscal '25. However, we did say that Greenfield construction is a material part of the spend in fiscal 25. But beyond that, we've not given specific WFE.

Manish Bhatia: I'd say, Vivek, the one other thing to keep in mind is that, and we did try to provide more color, but this HBM ramp does--the equipment for the HBM ramps, EUV equipment there, does start to make up a bigger portion as we are embarking on this ramp to be able to go from very little share towards our natural market share next year. So that is, percentage-wise, in terms of equipment categories, HBM's unique equipment is obviously going to be the highest growth area.

Vivek Arya: And anything incremental for EUV? Sorry, please go ahead.

Manish Bhatia: I mean, we've already talked about, we've already made some EUV investments, and we've got a pretty efficient EUV implementation plan for 1-gamma. We are going to be implementing EUV in Japan, though, that is one thing we've guided. So, EUV is in the mix of our WFE plans for ramping 1-gamma and beyond.

Vivek Arya: Okay, I'll get back in the queue. Thank you.

Operator: Thank you. This does conclude the question-and-answer session of today's program. I'd now like to hand the program back to Mark Murphy for any further remarks.

Mark Murphy: I just wanted to provide a bit of housekeeping for your models. In the third quarter that we just reported, DRAM bit costs were flattish. NAND was down several percent sequentially. For FY '25, DRAM all-in cost, mid to high single digits, down--long term. But HBM mix in '25 will impact cost downs and, cost downs in '25 for DRAM will be down only modestly. Thank you all for joining today's call.

Mark Murphy: Thank you all for joining today's call.

Operator: Thank you, and thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

[music].

Operator: --question and answer session. To ask a question during the session you'll need to press star one, one on your telephone. If your question has been answered and you'd like to remove yourself from the queue simply press star one, one again. As a reminder, today's program is being recorded. Now I'd like to hand, the program over to Cynthia Kilmer Investor Relations.

Now I'd like to hand, the program over to Cynthia Kilmer Investor Relations.

Operator: And now, I'd like to hand the program over to Satya Kumar Investor Relations.

Satya Kumar: Thank you, and welcome to Micron Technology's Fiscal Third Quarter of 2024 Post Earnings Analyst Call. On the call with me today are Sumit Sadana; Micron's Chief Business Officer, Manish Bhatia; EVP of Global Operations, and Mark Murphy, our CFO. As a reminder, the matters. We're discussing today include forward looking statements regarding market demand and supply market trends and drivers and 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: As a reminder, the matters we're discussing today, include forward-looking statements regarding market demand and supply, market trends and drivers and 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. We refer you to documents, we have filed with the SEC, including our most recent Form 10-Q and upcoming 10-Q for a discussion of risks that may affect our results. Although we believe that the expectations reflected in the forward looking statements are reasonable we cannot guarantee future results levels of activity performance and achievements, we're under no duty to update any of the forward looking statements to conform the stay.

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

Cynthia Kilmer: We refer you to documents, we have filed with the SEC, including our most recent Form 10-Q and upcoming 10-Q for a discussion of risks that may affect our results. Although we believe that the expectations reflected in the forward looking statements are reasonable we cannot guarantee future results levels of activity performance and achievements, we're under no duty to update any of the forward looking statements to conform the stay.

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

Satya Kumar: Although we believe that the expectations reflected in the forward looking-statements are reasonable, we cannot guarantee future results levels of activity performance and achievements. We are under no duty to update any of the forward-looking statements to conform these statements to actual results.

Although we believe that the expectations reflected in the forward looking statements are reasonable we cannot guarantee future results levels of activity performance and achievements, we're under no duty to update any of the forward looking statements to conform the stay.

Speaker Change: <unk> actual results, we can now open the call up for Q&A.

<unk> actual results,

We can now open the call up for Q&A.

Operator: Certainly, one moment for our first question. And our first question comes from the line of C.J. Muse from Cantor Fitzgerald. Your question. Please.

Speaker Change: And our first question comes from the line of C. J Muse from Cantor Fitzgerald. Your question. Please.

C.J. Muse: Yes. Good afternoon, thanks for taking the question. First question, you're ramping CAPEX significantly here in fiscal '25, but it certainly sounds like Greenfield is only coming fiscal '27 at the earliest. So, I guess, how do we think about you getting to your DRAM market share for HBM in '25? Is that all just conversions from DDR5, and then I guess with DDR5 supply it would appear that, that will be significantly under supplied by you guys, if that's kind of the plan into '25 for you guys.

Speaker Change: Your first question, then Youre ramping capex significantly here in fiscal 'twenty five, but it certainly sounds like Greenfield is only coming fiscal 2017 at the earliest so I guess, how do we think about you getting to your DRAM market share for HBM and <unk> 25 is that all.

Speaker Change: Just conversions from DDR, five and then I guess with DDR five supply it would appear that that will be significantly under supplied by you guys or if that's kind of.

Speaker Change: The plan into 'twenty five for you guys.

Manish Bhatia: Hi, C.J., it's Manish. I'll take that, and then Mark can add some comments. But yes, the new U.S. projects both will provide DRAM bit growth only towards the latter half of the decade, we said Idaho starting in meaningful supply in '27 and New York '28 or later. So, our bit growth in the near-term in DRAM is going to come from the technology transitions that we have in both Taiwan and Japan. And we're still ramping our 1-beta, which is the industry's first node right now and we expect to begin production ramp of our 1-gamma. And actually implement that both in Taiwan, and then eventually in Japan as well. we announced last year that were going to be enabling UV in Japan. So that we can ramp through one gamma node there as well so our big growth. Sort of intervening period before we get to the new.

Speaker Change: And Mark can add some comments, but yes.

Speaker Change: The new U S projects.

Speaker Change: Projects both will provide.

Speaker Change: Provide DRAM bit growth only towards the latter half of the decade, we said Idaho.

Speaker Change: Starting in meaningful supply in 'twenty seven.

Speaker Change: <unk>. And New York 28 or later.

Speaker Change: And New York 28 or later.

Speaker Change: So our bit growth in the near term and DRAM is going to come from the technology transitions that we have in both Taiwan and Japan.

Speaker Change: Still ramping our one data, which is the industry's first node right now and we expect to begin production ramp of our one gamma.

Speaker Change: And actually implement that both in Taiwan, and then eventually in Japan as well, we announced last year that were going to be enabling UV in Japan. So that we can ramp through one gamma node there as well so our big growth. Sort of intervening period before we get to the new.

And actually implement that both in Taiwan, and then eventually in Japan as well,

Manish Bhatia: We announced last year that were going to be enabling EUV in Japan, so that we can ramp through 1-gamma node there as well. So, our big growth in sort of intervening period before we get to the new U.S. manufacturing sites will be driven by technology transitions in our existing footprint. And we have space and everything lined up to be able to do that. And C.J., I would only add that. Yes, we did say that yes through 'twenty five and we would expect that to continue that 'twenty into 'twenty six that we would we would be. Approaching our target levels of inventory by end of 'twenty five we'll be lean on inventories as we see it in 2006. We are already sort of prioritizing beds to higher value markets now, which.

we announced last year that were going to be enabling UV in Japan. So that we can ramp through one gamma node there as well so our big growth. Sort of intervening period before we get to the new.

Sort of intervening period before we get to the new.

Speaker Change: <unk>. U S manufacturing sites will be driven by technology transitions in our existing footprint and we have space and everything. Lined up to be able to do that and. T J I would only add that. Yes, we did say that yes through 'twenty five and we would expect that to continue that 'twenty into 'twenty six that we would we would be. Approaching our target levels of inventory by end of 'twenty five we'll be lean on inventories as we see it in 2006. We are already sort of prioritizing beds to higher value markets now, which.

Speaker Change: U S manufacturing sites will be driven by technology transitions in our existing footprint and we have space and everything.

Speaker Change: Lined up to be able to do that and.

Manish Bhatia: And C.J., I would only add that, we did say that, through '25 and we would expect that to continue into '26 that we would be approaching our target levels of inventory by end of '25. We'll be lean on inventories as we see it in '26. We are already sort of prioritizing bits to higher value markets now, which is driving interesting customers for longer term agreement discussions, or earlier than they typically would and behavior like that. And very quickly. And I think we've come to a favorable actually I mean, our goal is to maintain or our market share to grow our HBM share sometime in calendar year 'twenty five we'll get our share to match, our our DRAM overall good share in that maintain R. R.

Mark Murphy: And C.J., I would only add that, we did say that, through '25 and we would expect that to continue into '26 that we would be approaching our target levels of inventory by end of '25. We'll be lean on inventories as we see it in '26. We are already sort of prioritizing bits to higher value markets now, which is driving interesting customers for longer term agreement discussions, or earlier than they typically would and behavior like that.

T J: T J I would only add that.

Speaker Change: Yes, we did say that yes through 'twenty five and we would expect that to continue that 'twenty into 'twenty six that we would we would be.

Speaker Change: Approaching our target levels of inventory by end of 'twenty five we'll be lean on inventories as we see it in 2006.

Speaker Change: We are already sort of prioritizing beds to higher value markets now, which.

Speaker Change: It's driving. Yeah interesting customers for. Longer term agreement discussions are earlier than they typically would and behavior like that. And very quickly. And I think we've come to a favorable actually I mean, our goal is to maintain or our market share to grow our HBM share sometime in calendar year 'twenty five we'll get our share to match, our our DRAM overall good share in that maintain R. R.

Speaker Change: Yeah interesting customers for. Longer term agreement discussions are earlier than they typically would and behavior like that. And very quickly. And I think we've come to a favorable actually I mean, our goal is to maintain or our market share to grow our HBM share sometime in calendar year 'twenty five we'll get our share to match, our our DRAM overall good share in that maintain R. R.

Speaker Change: Longer term agreement discussions are earlier than they typically would and behavior like that.

Manish Bhatia: And I think this goes to what we're saying, our goal is to maintain our market share to grow our HBM share, and sometime in calendar year '25, we'll get our HBM share to match our DRAM overall bit share and then maintain our market share from there on.

Speaker Change: And very quickly.

Speaker Change: And I think we've come to a favorable actually I mean, our goal is to maintain or our market share to grow our HBM share sometime in calendar year 'twenty five we'll get our share to match, our our DRAM overall good share in that maintain R. R.

Speaker Change: Market share. From there on. Very helpful and just a quick follow up on <unk>. <unk>, obviously not mature product from a yield perspective, I guess when you are setting your pricing early in.

Market share. From there on.

From there on. Very helpful and just a quick follow up on <unk>. <unk>, obviously not mature product from a yield perspective, I guess when you are setting your pricing early in.

From there on.

Speaker Change: From there on. Very helpful and just a quick follow up on <unk>. <unk>, obviously not mature product from a yield perspective, I guess when you are setting your pricing early in.

C.J. Muse: Very helpful. And just a quick follow-up on HBM3E, obviously not mature product from a yield perspective. I guess when you are setting your pricing early in a yield ramp, how does that work? Do you set higher pricing knowing that you're going to have more yields and as that improves you share that benefit with your customers? Or is that something that you hold yourselves? How should we think about that.

Speaker Change: Very helpful and just a quick follow up on <unk>. <unk>, obviously not mature product from a yield perspective, I guess when you are setting your pricing early in.

<unk>, obviously not mature product from a yield perspective, I guess when you are setting your pricing early in.

Speaker Change: In a yield ramp how does that work do you set higher pricing knowing that youre going to have more yields as that improves your share that benefit with your customers or is that something that you hold yourselves, how should we think about that.

Speaker Change: Yes. So, this is Sumit here. We have these pricing agreements done for 2024. As well as most of 2025 pricing is also all done. We are sold out for '25 from a volume perspective pricing almost done for all of 2025 as well. And the pricing is set at a level, where we expect the overall gross margin to be at robust levels consistent with the value this product provides to our customers, MBM customers. And it is obviously the most complex product that the industry has ever done. So, the pricing also contemplates that. And of course, the pricing is done in a fairly consistent way across time. And obviously as the product ramps, the costs come down, the yields improve.

Sumit Sadana: Yes. So, this is Sumit here. We have these pricing agreements done for 2024. As well as most of 2025 pricing is also all done. We are sold out for '25 from a volume perspective pricing almost done for all of 2025 as well. And the pricing is set at a level, where we expect the overall gross margin to be at robust levels consistent with the value this product provides to our customers, MBM customers. And it is obviously the most complex product that the industry has ever done. So, the pricing also contemplates that. And of course, the pricing is done in a fairly consistent way across time. And obviously as the product ramps, the costs come down, the yields improve. And then the gross margin improves over time, that's typically how it works for pretty much all of the products. And the early level of gross margin is lower than what the maturity argin ends up being. Despite that and us being very early in the ramp of HBM. We have said that our first full quarter of production with over $100 million of revenue already achieved. <unk> margins that was accretive to the company margins as well as to the company's DRAM margin.

Simon: This is Simon here.

Speaker Change: We have these.

Pricing agreements done for 2024.

As well as.

Speaker Change: Most of the funding of 25 pricing has also done were sold off or quantify from a volume perspective pricing.

Speaker Change: Almost done for all of 2025 as well and the pricing is set at a level, where we expect the overall gross margin to be at.

Speaker Change: I'd robust levels consistent with the value of this product provides to our customers.

Speaker Change: <unk> customers and it is obviously the most complex product that the industry has ever done so.

Speaker Change: The pricing also contemplates that and of course, the pricing is has done enough.

Sumit Sadana: And of course, the pricing is done in a fairly consistent way across time. And obviously as the product ramps, the costs come down, the yields improve. And then the gross margin improves over time, that's typically how it works for pretty much all of the products. And the early level of gross margin is lower than what the maturity argin ends up being. Despite that and us being very early in the ramp of HBM. We have said that our first full quarter of production with over $100 million of revenue already achieved. <unk> margins that was accretive to the company margins as well as to the company's DRAM margin.

Speaker Change: And of course, the pricing is done in a fairly consistent way across time. And obviously as the product ramps, the costs come down, the yields improve. And then the gross margin improves over time, that's typically how it works for pretty much all of the products. And the early level of gross margin is lower than what the maturity argin ends up being. Despite that and us being very early in the ramp of HBM. We have said that our first full quarter of production with over $100 million of revenue already achieved. <unk> margins that was accretive to the company margins as well as to the company's DRAM margin.

Bailey. Consistent way across time, and obviously as the product ramps the costs come down the yields improve.

Speaker Change: Consistent way across time, and obviously as the product ramps the costs come down the yields improve.

Speaker Change: And then the gross margin improves over time, that's typically how it works for pretty much all of the products. And. The early level of gross margin is lower than what the mature. Margin ends up being. Despite that and us being very early in the ramp of HBM. We have said that our first full quarter of production with over $100 million of revenue already achieved. <unk> margins that was accretive to the company margins as well as to the company's DRAM margin.

Speaker Change: And. The early level of gross margin is lower than what the mature.

Speaker Change: The early level of gross margin is lower than what the mature.

Speaker Change: Margin ends up being.

Speaker Change: Despite that and us being very early in the ramp of HBM.

Speaker Change: We have said that our first full quarter of production with over $100 million of revenue already achieved.

Speaker Change: <unk> margins that was accretive to the company margins as well as to the company's DRAM margin.

Speaker Change: Thank you very much.

Speaker Change: Thank you and our next question.

Speaker Change: Comes from the line of Erin.

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

Aaron Rakers: Yes, thanks for doing the after call and let me ask a question so.

Speaker Change: On the HBM discussion a little bit further.

Speaker Change: I guess two quarters ago, I think you guys reported some prepayments given given the agreements that you are establishing on <unk> I'm curious if is there any update to the prepayments I think it was $600 million previously these last two quarters.

Speaker Change: And then I guess as part of that how do I think about the capacity footprint of HCM. How that's evolved over the course of this last quarter is there any flexibility too.

Moved at higher or are you are you just pretty much completely set for fiscal 'twenty five at this point.

Speaker Change: Yes, I'll take the prepayment question and then I'll turn it over to <unk> to talk about the HBM manufacturing footprint.

Speaker Change: In terms of prepayments we have had.

Speaker Change: Like you said.

Speaker Change: Some level of prepayments.

Speaker Change: And we continue to have these discussions with customers about their goals and desires to.

Enter into these.

Speaker Change: Agreements with us.

Speaker Change: And.

Speaker Change: Use prepayments as appropriate.

Speaker Change: Part of the discussion in <unk>.

Speaker Change: Value from both sides in terms of the puts and takes on the various terms in the agreement.

Speaker Change: So we'll continue to evaluate these sort of opportunities of course as you know in 2023.

Speaker Change: We have had.

Speaker Change: A tough downturn in the industry. So as we were coming out of it we were definitely open to some of these discussions we remain open to some of these discussions however.

Speaker Change:

Speaker Change: As Mark and Sanjay have provided to you in the earlier call and in the prepared remarks, our expectation is that we will fund a lot of the capital investments for next year and the growth in those capital investments for next year through our operating cash flow and still have.

Speaker Change: Robust growth in our free cash flow for next year or so.

Speaker Change: We are going to continue to rely on that but there can be opportunities to.

termination: <unk> entered into certain unique types of arrangements with customers and we continue to evaluate those on a case by case basis and I'll turn it over termination to talk about the footprint.

termination: Sure.

termination: No.

Speaker Change: No that we're coming from a very low base installed capacity for HBM.

termination: Given our decision to skip HBM, three and really focus on our <unk>, where we felt we would have product differentiation capability, which we which our technology and product team have really delivered and our customers are really appreciating, but so our goal and our two we set the target debt to intercept are normal DRAM market share with our HBM.

termination: There to match our.

termination: Overall DRAM market share in calendar year, 'twenty, five and that's what we're marching towards and so our.

termination: <unk> and the unique HBM equipment, our investments in clean room space are all marching towards that and we are on that.

termination: <unk> trajectory and confident in achieving that.

termination: Just keep in mind, a couple of things the clean.

termination: Clean room space to where enabling for this HBM ramp is more complex than standard assembly clean room space. So.

termination: That's one element of what we're working towards to be able to reach that.

termination: To reach that goal, but the ramp is.

termination: Significant given where we're starting from but.

termination: We're confident we're going to be able to to.

termination: That goal.

termination: Okay.

termination: And do so with.

termination: No.

termination: Our world class quality World class yield.

termination: Excellent cost structure.

Thank you and Mark just a quick follow up how do you think about operating expenses as the fundamentals improve from here I know you gave this quarter's guidance, but just curious of how you would think about the glide path beyond this quarter.

Yes.

termination: We did well in the quarter on Opex shares demonstrating control again, we're at the lower end of the guide on our Opex. It's up in fourth quarter is as we said thats driven really by.

termination: Primarily R&D program expenses, but we also had in the third quarter, which was built into our guidance.

termination: Our land sale that was about a third.

Speaker Change: Yes, it would be responsible for about a third of the increase from from third to fourth quarter.

Speaker Change: And November quarter.

Speaker Change: Do you see opex.

Speaker Change: Ticking up again.

Again, driven principally by R&D program expenses.

Speaker Change: Great work on the NAND front also number of DRAM related activity, including.

<unk> development.

Speaker Change: So we would expect.

Speaker Change: Yes.

Speaker Change: Opex to be up mid single digits.

Speaker Change: <unk> Q over over $1 1 billion and then some.

Speaker Change: Yes, some modest increase sequentially.

Speaker Change: Sequentially through the year.

Speaker Change: And 25.

Mark Murphy: Thank you Mark.

Speaker Change: Thank you and our next question comes from the line of Sunni pleasure from Raymond James Your question. Please.

Mark Murphy: Yes.

Speaker Change: Yes, Thank you guys.

Speaker Change: Question is on inventories at your customers maybe.

Speaker Change: Just looking at your PC and smartphone customers.

Speaker Change: Some talk about some of the customers pre build some inventory ahead of the price increases if you can talk about what you your view based on your visibility as to how much inventory, they're holding and then on the data center. It looks like the inventory correction is mostly done.

And the.

Speaker Change: I'm just curious you talked about.

Some optimism about even.

Speaker Change: <unk> server demand picking up a bit. So I was wondering if you can comment on that as well.

Yes, I mean I'll comment on the data Center first and then when you go to Pcs and smartphones on the data center side.

Speaker Change: We had been saying for some time that we expect the data center demand to start returning in the first half of calendar 'twenty four and that has been pretty much on target and as the.

Speaker Change: Second calendar quarter, our third fiscal quarter.

Speaker Change: Continued.

Speaker Change: We saw a strengthening of that demand in the data center.

Speaker Change: And that strong trend has continued.

Speaker Change: Really driven by AI. It started with a lot of the demand coming from AI and then we're starting to see and we had mentioned this earlier we had thought we had started to see some early signs of improvement in demand in traditional servers and that kind of.

Speaker Change: Demand improvement is continuing so thats a positive sign overall in the data center beyond just the AI servers as well.

Speaker Change: And.

Speaker Change: The inventory is pretty normalized in the data center and a lot of the demand comes with a level of urgency and we have been trying to chase that supply because.

Speaker Change: The leading edge nodes are tight.

Now we.

Speaker Change: We had mentioned in terms of the shape of the recovery of the industry for certain end markets that coming out of the 2023 downturn that Pcs and smartphones would pick up in terms of volume before data center and that has been.

Speaker Change: Exactly how it transpired.

Speaker Change: We started seeing strength in those segments.

Speaker Change: Late in calendar 'twenty, four and then that strength continued into calendar Q1 et cetera, and so yes those customers have.

Speaker Change: Chest and build some inventory because of three.

Speaker Change: Three important factors one relates to obviously the price strength.

Speaker Change: That.

Speaker Change: Was being discussed with customers in terms of the trajectory of pricing. We have also articulated that we expect pricing to continue to increase throughout calendar 2024, and so that has.

Been an incentive for some customers too.

Such as some of the volume ahead.

Speaker Change: Factor relates to customers on expectations of dimmed.

Speaker Change: Demand growth in their business as they launch AIP season add smartphones on these obviously come with higher average capacities, we have spoken about that quite a bit in our prepared remarks and.

Speaker Change: If you look at the.

Speaker Change: Expectations of.

Replacement cycle, driven unit volume increases.

Speaker Change: We have fairly modest assumptions in terms of unit volume growth. This year only low single digit percentage in PC mid single digit percentage in smartphones.

And even next year that expectations are fairly modest, but there could be upsides saw some of our customers are expecting higher levels of unit volume growth next year than what we are modeling and so there could be upsides.

Speaker Change: And that could be driven by.

Speaker Change: Stronger replacement cycle, driven by these AI capabilities in smartphones and Pcs, So that brings us to the tug portion of their drive to build some buffer which is that.

Speaker Change: Some of these customers are getting concerned about their ability to get their hands on supply next year and this is part of what is driving some of these earlier than usual discussions on LTA is these long term agreements for 2025 calendar year supply because the growth in the data center continues at a pretty.

Speaker Change: Robust pace the HBM growth as we have said earlier with that three to one trade ratio displaces a lot of wafers.

And between HBM high Camden's et cetera on the DRAM side AI server growth return of traditional server growth and if you get any of this.

Speaker Change: Both in the PC and smartphone space pretty soon you get to a very very quickly a scenario where the.

Speaker Change: The supply growth in the industry is unable to keep up with the demand growth.

That is causing customers to pull in some of these discussions about supply and.

Speaker Change: And they are carrying some extra inventory to guard against that so that's sort of the.

Speaker Change: A high level perspective on that.

Speaker Change: Great.

Speaker Change: Maybe one quick follow up on that you mentioned the hiking have bins.

Speaker Change:

Strong areas in the quarter, just curious I mean.

Speaker Change: How does the hard cap them I guess.

Speaker Change: <unk> works as HBM in terms of for.

Speaker Change: Proprietary nature of the product and the complexity and also given the higher margins seems like then and DDR is it as good a margin HBM and also do you think that sustains and also if you could put that into some context to how big the <unk>.

Speaker Change: Sam is towards the applications are for this particular product. Thank you.

Speaker Change: Yes, I think first I'll just mention that and this is an important clarification that we.

Speaker Change: Define high captains anything that is.

Speaker Change: More than 64 gigabyte of DRAM capacity, So 96, gigabytes 128, gigabytes and higher rates. So anything that is 96 gigabytes or higher we classify that as <unk> now when it comes to <unk>. We were one of the first wants to introduce 96 gigabyte.

Speaker Change: <unk> in the industry and when you look at 128 Gigabyte Dems Micron was the first company to introduce <unk>.

Speaker Change: Monolithic 32 gigabit die based 128 gigabyte dim so unless it's a mouthful, but essentially it's it's.

Speaker Change: I've been behaved without use of DSV right. So it is extraordinarily cost efficient.

Speaker Change: Product and we were able to demonstrate that this product actually has lower latency than DSV base sedan and higher performance.

Speaker Change: And.

Speaker Change: And so it's a.

Speaker Change: Very very good world class product and Micron is.

Speaker Change: Really one of the first ones in the market with this and.

Speaker Change: And we have a very compelling cost structure on this now these products going to AI servers, I've mentioned before they ISO where growth has been very robust and the demand has been strong.

Speaker Change: For these high Cat <unk>, and we have definitely very accretive margins on these products compared to the company margins.

Speaker Change: <unk>.

Speaker Change: Both HP.

Speaker Change: <unk> and <unk> have some of the stronger stronger margin profiles and the DRAM portfolio.

Very accretive to the overall company level, but I'll also mention that obviously the rest of the company product pricing is increasing quarter on quarter and that the rest of the company portfolio pricing keeps.

Speaker Change: Improving the margins of the rest of the company portfolio. So thats a positive too but that these two.

Products are.

Very very robust margins.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Thank you and our next question.

Speaker Change: Comes from the line of Brian.

Brian Chin: Brian Chin.

Brian Chin: Yes.

Stifel: From Stifel. Your question please.

Stifel: Yes, it's Brian Chin here, thanks for taking a few questions.

Speaker Change: Maybe just.

Speaker Change: One kind of nearer term first the.

Speaker Change: I know it.

Speaker Change: Give sort of detailed P&L between DRAM and NAND, but maybe just kind of in terms of a crossover but was your NAND business profitable and Cisco <unk> or if not do you expect it to be in fiscal <unk> and does that low single digit shipment growth.

Speaker Change: Guidance.

And then reflecting more of the pull forward of smartphone demand or.

Speaker Change: Is that somewhat reflective of your increasing bitumen constraint as utilization rates, they're fully recover.

Speaker Change: Yes, Brian what we disclose youll see the Q tomorrow I can I can say that.

Speaker Change: In the NAND business overall gross margins improved.

Speaker Change: In the third quarter.

Speaker Change: And then at the segment level, probably the best proxy for that business as the storage business unit.

Speaker Change: And that business did deliver operating profit in the quarter, which is substantially improved substantially improved from the prior quarter.

Speaker Change: Got it.

Speaker Change: And then just that part about the.

Speaker Change: The floor guidance for bits shipment growth low single digits and then.

Speaker Change: Yes, I think in terms of the growth in NAND.

On a quarter to quarter basis look, they're always all kinds of ebbs and flows.

Speaker Change: Between quarters.

Speaker Change: And the important thing that we're trying to do is to shift our mix towards the data center.

Speaker Change: And.

Speaker Change: That is obviously.

Speaker Change: Lot of demand that we are chasing and.

Very good prices and margins compared to the rest of the portfolio. So thats, what we are doing and.

Speaker Change: All of the changes that we reported in terms of our revenue like for example, our mobile business you referred to the smartphone volumes, our mobile business was down 1% in Q3 that was all.

Speaker Change: Planned.

Speaker Change: Changes in volume and mix changes happening in our business. The overall trends for 2024 calendar year for the mobile business.

Have been fairly stable and consistent with what we have been mentioning for several quarters now that our expectation has been and that sell through of mobile phones to be in that mid single digit percentage unit volume growth for calendar 'twenty four if anything calendar 'twenty 'twenty four Q1 numbers.

Our reported out of the industry in terms of sell through or better than.

Speaker Change: What the overall full year expectations would suggest but we are not changing our outlook at this time.

Speaker Change: Okay, Great and maybe just.

Speaker Change: Follow up and I think other folks are maybe trying to get at this somewhat as well but.

Speaker Change: At the expected level of Capex you are currently communicating now for fiscal 'twenty five.

Speaker Change: Standing that more than half of that.

Speaker Change: Greece's for construction Capex.

Is it reasonable to expect micron will be able to increase bit supply in that mid teens for DRAM, maybe high teens for NAND next year or would more investment would be needed to grow in line with the market.

Speaker Change: The bit demand is at that level or even stronger next year.

Speaker Change: So Brian.

Speaker Change: Just trying to parse.

Speaker Change: Part of your question a couple of a couple of just clarifications, we said that more than half or more of the increase in capex between expected increase in capex between fiscal 'twenty, four and 'twenty five we'll be for the U S. Construction Capex right.

Speaker Change: And so we do have some other ongoing facilities and.

Speaker Change: <unk>.

Speaker Change: Work around the around the rest of our footprint in Asia as I mentioned on the call earlier to be able to enable our.

Speaker Change: Our technology transitions and that's really the answer is that our technology transitions for DRAM in Japan, and Taiwan again, one data continuing to ramp.

Speaker Change: And then one gamma being introduced in calendar year 'twenty five those are going to be sufficient even with a growing.

Speaker Change: The penetration.

Penetration of HBM for us to be able to maintain our market share in that mid teens range and we believe we can achieve the long term CAGR with that as technology transitions become less efficient as demand continues to grow and HBM penetration grows we do as we've said for many years expect greenfield wafer capacity growth.

Speaker Change: To be needed and Thats timed with these U S projects, which would be towards the latter half of the decade.

Speaker Change: And just to just to build on that.

<unk> <unk>.

Speaker Change: 2025.

Speaker Change: Calendar year and fiscal year for us we expect to have.

Speaker Change: We expect to maintain our bit share across both DRAM and NAND and part of that part of those shipments will come from inventory. So you have heard Mark mentioned to you that our inventory will normalize.

Speaker Change: By the end of 2025, and and part of that inventory is going to be.

Speaker Change: Helping us ensure that we can maintain flat <unk> sure.

Speaker Change: Next year.

Speaker Change: Okay. Thanks very helpful.

Speaker Change: Yes.

Speaker Change: Thank you and.

Speaker Change: Our next question comes from the line of harsh Kumar from Piper Sandler Your question. Please.

Harsh Kumar: Hey, guys I kind of look at your.

Harsh Kumar: Long term model and I look back a little bit I saw that your peak margins are somewhere in the 61 and half percent range now you've got contracted pricing for HBM sounds like for 2020 five but it's hard for me to think that your pricing would call for HBM gross margin to be in that range in that 60% range because that's what.

Speaker Change: Logic commands could you I was wondering if you could give us an idea of what's your aspirational gross margin is and if you can for HCM and if you can give us a number maybe help us think about a framework. So that we can try and get an idea of where you might be what you might be planning for margins for HBM.

The ecosystem.

Speaker Change: And then just a quick follow up you've talked about pricing locked in through 'twenty five Transco could you talk about your design visibility. How many years is that also 2025 as an indication of design visibility, but large GPU.

Speaker Change: Yes, I mean, we're obviously.

Speaker Change: Anders or is your design visibility longer than that.

Speaker Change: Not disclosing our HBM margins.

Speaker Change: Yes, I mean, we have.

But you can you can.

Speaker Change: Customers that we have logged volumes with them.

Speaker Change: Imagine that we see.

Speaker Change: <unk>.

Speaker Change: Certainly have this view that the industry is in a tight place today.

Speaker Change: And they are some of those customers are starting.

Speaker Change: It uses for their platforms in 2025.

Speaker Change: We expect to have continued price increases and 24 calendar year.

Speaker Change: And those platforms are going to continue into 2026 and beyond.

Speaker Change: And going into fiscal and calendar 'twenty five we obviously continue to see tight and tightening industry conditions due to the growth of HBM datacenter growth all of the other segments going into AI driven growth mode and so.

Speaker Change: So.

Speaker Change: The discussion we had earlier with you about launching with Nvidia for 2024, and then multiple customers in 2025, those multiple customers, who we work with to launch the products in 2025 are actually going to continue.

Speaker Change: Obviously, when we think about fixing pricing.

Speaker Change: Into 2026 and beyond now keep in mind. This all relates to the HBM three E product the <unk> product launches with it.

Speaker Change: For all of calendar 2025 for HBM, we're going to do the pricing with that backdrop in mind that we want to fixed pricing.

Speaker Change: And then through the course of calendar 2025, we'll transition the mix over to 12 high and then HBM four comes in in 2026 and.

Level that we don't regret later.

Speaker Change: And of course, the industry is going to continue to strengthen in terms of financial performance and margins.

Speaker Change: We expect that from micron for sure.

Speaker Change: Then you have.

Speaker Change: B M for going on and then following that.

Speaker Change: But we are comfortable with our HBM margin profile.

Speaker Change: Later, you will get <unk>.

Speaker Change: Because of which we have been able to.

Speaker Change: And.

Speaker Change: So <unk> will happen will ship through the end of the decade.

Speaker Change: These prices ahead of time.

Speaker Change: And.

Speaker Change: This is a super complex product and the margin profile justifies.

Speaker Change: Late in the decade and through the end of the decade.

Speaker Change: And so we are already in very deep engagements with customers on designing HBM for NH beam for E. And so these are long partnerships with customers. They required long cycle time planning for IP and as we get to HBM.

Speaker Change: That level of value that it is creating for the ecosystem.

Speaker Change: And then just a quick follow up you've talked about pricing locked into 'twenty five Transco could you talk about your design visibility.

Speaker Change: Many years is that also 2025 as an indication of design visibility with large GPU vendors or is your design visibility longer than that.

Speaker Change: <unk> E that is going to be a very strong possibility of integration of customer IP into the base die.

Speaker Change: Yes, I mean, we have.

Speaker Change: And that would make H beam <unk> more of customized products won't be the same product going to all customers.

Speaker Change: Customers that we have logged volumes with them.

Speaker Change: <unk>.

Speaker Change: And they are some of those customers are starting.

Speaker Change: For customized HBM products and because of that it necessitates long term planning and.

Speaker Change: As far as their platforms in 2025.

Speaker Change: And those platforms are going to continue.

Speaker Change: Very deep.

Speaker Change: RMB engagement with customers and because of our leadership in HBM <unk> there.

Speaker Change: Into 2026 and beyond.

Speaker Change: So.

Speaker Change: As we have mentioned before 30% lower power consumption leadership specs on performance.

Speaker Change: We have really great relationships with multiple.

Speaker Change: HBM customers.

Speaker Change: And we are firmly engaged in the long term designs.

Speaker Change: Into 2026 and beyond now keep in mind. These all relates to the HBM three E product the <unk> product launches with a pipe.

Speaker Change: Congratulations guys and Super helpful. Thank you.

Okay.

Speaker Change: Thank you.

Speaker Change: Our next question.

And then through the course of calendar 2025, we'll transition the mix over to 12 high and then HBM four comes in 2026.

Speaker Change: Comes from the line of Quinn Bolton from Needham and company. Your question. Please.

Speaker Change: Thanks for taking my question I, just wanted to go back to the.

Speaker Change: <unk> ability to maintain market share with the transition to HBM memory with the high cap.

Speaker Change: And.

And then you have <unk>.

Speaker Change: <unk> going on and then following that.

Speaker Change: <unk> modules in the node transitions I mean I guess.

Speaker Change: Later, you will get <unk> and.

Speaker Change: Historically no transitions.

Speaker Change: Typically it's the same equipment set C. Net wafer starts typically decline and so it feels like you've got a lot of factors that would sort of argue for a net reduction continued net reduction in wafer starts and.

Speaker Change: And so <unk> will happen will ship through the end of the decade.

Late in the decade and through the end of the decade.

Speaker Change: And so we are already in very deep engagements with customers on designing HBM for NH beam E and so these are long partnerships with customers. They required long cycle time planning for IP and as we get to HBM.

Speaker Change: And so just wondering if you could you could address over the next couple of years.

Speaker Change: Trends should we be thinking about in terms of your DRAM kind of wafer starts.

Speaker Change: Over that period.

Speaker Change: Brooklyn So.

Speaker Change: <unk> E that is going to be a very strong possibility of integration of customer IP into the base die and that will make H beam for a more customized.

Speaker Change: <unk>.

Speaker Change: Kind of given some color on where we think it's an industry wide phenomenon out of the downturn in fiscal and calendar 'twenty three and into calendar 'twenty, four now where we as well as.

Speaker Change: It won't be the same product going to all customers.

Speaker Change: Others in the industry, we believe all others in the industry did take advantage of this.

Speaker Change: Multiple customized HBM products and because of that it necessitates long term planning and.

Speaker Change: Phenomenon that you mentioned, where as we transition to newer technologies, we reduced wafer start capability structurally.

Speaker Change: Very deep.

Speaker Change: <unk> engagement with customers and because of our leadership in HBM <unk> Baird.

Speaker Change: So that did happen and.

Speaker Change: As we have mentioned before 30% lower power consumption leadership specs and performance.

For us and for others.

Speaker Change: Having said that that's not something that.

Speaker Change: We have.

Speaker Change: Is always going to be the case.

Speaker Change: Really great relationships with multiple <unk>.

Speaker Change: <unk>.

Speaker Change: We as well as rest of the industry did it to be able to reduce capex in the face of very very weak demand.

Speaker Change: <unk> customers.

Speaker Change: And we are firmly engaged in the long term designs.

Speaker Change: And still get the benefits in terms of performance and cost reduction from the technology transitions.

Speaker Change: Congratulations guys on Super helpful. Thank you.

Speaker Change: So moving forward, obviously, you can imagine if every every year you just keep structurally reducing thats not thats going to have impacts on both your bit supply and your costs. So.

Speaker Change: Thank you and our next question.

Speaker Change: It comes from the line of Quinn Bolton from Needham <unk> Company. Your question. Please.

Speaker Change: Thanks for taking my question I, just wanted to go back to the.

Speaker Change: I would I would not be thinking as we head into this upturn.

Speaker Change: <unk> ability to maintain market share with the transition to HBM memory with the high cap.

Speaker Change: The industry will continue with that structural reduction year on year, you'll see investments more in line with a typical pre downturn, where we would maintain our wafer capacity.

Speaker Change: The modules and the node transitions I mean I guess.

Speaker Change: Historically no transitions.

Speaker Change: While we make these transition investments.

Speaker Change: Typically it's the same equipment sets the net wafer starts typically decline and so it feels like you've got a lot of factors that would sort of argue for a net reduction continued net reduction in wafer starts.

Speaker Change: Over the.

Speaker Change: As we go through towards the second half of the decade and beyond as technology transitions become more challenging the bit growth capability from the newer technologies is not as great as maybe previous generations, that's where we see the need for.

And so just wondering if you could you could address over the next couple of years.

What trends should we be thinking about in terms of your DRAM kind of wafer starts.

Speaker Change: I think we've commented before the need for Greenfield wafer capacity growth for the entire DRAM industry.

Speaker Change: For that period.

Speaker Change: And HBM and this trade ratio that we're talking about.

Speaker Change: Brooklyn, So we talked.

Speaker Change: And then kind of given some some color on what we think is an industry wide phenomenon out of the downturn in fiscal and calendar 'twenty three and into calendar 'twenty, four now where we as well as.

Speaker Change: Just one aspect of that that phenomenon that maybe.

Speaker Change: It makes that more and more that need for new wafer capacity as we go towards the second half of the decade more important.

Speaker Change: Okay.

Speaker Change: Your question, we feel good about.

Speaker Change: Others in the industry, we believe all of us and the industry did take advantage of this.

Speaker Change: As we discussed being able to maintain our DRAM market share even as we grow our our HBM.

Phenomenon that you mentioned, where as we transitioned to newer technologies, we reduced wafer start capability structurally.

Speaker Change: Share to be in line with our overall DRAM sure.

Speaker Change: So it sounds like you've got facility space in Japan, and Taiwan to kind of increased wafer starts to allow you to maintain share.

Speaker Change: That did happen and.

Speaker Change: No.

For us and for others.

Speaker Change: Having said that that's not something that.

Basically to be able to make technology transitions, while broadly maintaining our wafer starts.

There's always going to be the case.

Speaker Change: Because we as well as the rest of the industry did it to be able to reduce capex in the face of very very weak demand.

Speaker Change: Got it okay. Thanks, and then just a follow up on the <unk>. Obviously, a lot of this is being driven today by by the AI accelerators, but just wondering do you see that proliferating Cpus like great CPU, obviously in.

Speaker Change: And still get the benefits in terms of performance and cost reduction from the technology transitions.

Speaker Change: The black coal generation has some pretty significant HBM content with it.

Speaker Change: So moving forward obviously, you can imagine if every every year you just keep structurally reducing that's not that's going to have impacts on both your bit supply and your costs. So.

Speaker Change: FPGA or network switches anything becoming more meaningful or do you think this is largely AI accelerator kind of <unk>.

Speaker Change: I would I would not be thinking as we head into this upturn that the industry will continue with that structural reduction year on year, you'll see investments more in line with a typical pre downturn, where we would maintain our wafer capacity.

Speaker Change: <unk> accelerator.

Driven in terms of the atrium.

Demand drivers.

Speaker Change: Yes, I mean this is heavily based on the requirements of the system level performance and the type of applications that require that high level of performance if that performance level really dictates.

Speaker Change: While we make these transmission investments.

Speaker Change: Now over the.

Speaker Change: 11 of processor memory bandwidth that cannot be met easily with.

Speaker Change: Traditional approaches.

Then of course.

Speaker Change: HBM has to be considered thus far.

Speaker Change: I think we've commented before the need for Greenfield wafer capacity growth for the entire DRAM industry.

Speaker Change: Is AI servers, but there are other product categories and applications, which are starting to investigate HBM of course not with these many placements.

Speaker Change: And HBM and this trade ratio that we're talking about.

Speaker Change: Just one aspect of that that phenomenon that maybe.

Speaker Change: As you see around the GPU, because the GPU placements fixed placements eight placements.

Speaker Change: It makes that more and more that need for new wafer capacity as we go towards the second half of the decade more important.

Speaker Change: <unk> hundred 12 high etcetera, just a lot of memory and other applications, which may contemplate using HBM may not need that many placements. It is being contemplated in other places, but obviously the bar is high because HBM is very expensive implement.

Speaker Change: Okay.

Speaker Change: A quick question, we feel good about.

Speaker Change: As we discussed being able to maintain our DRAM market share even as we grow our our HBM.

Share to be in line with our overall DRAM sure.

Speaker Change: So it sounds like you've got facility space in Japan, and Taiwan to kind of increased wafer starts to allow you to maintain share.

Speaker Change: Basically to be able to make technology transitions, while broadly maintaining our wafer starts.

Speaker Change: The black oil generation has some pretty significant HBM content with it.

Speaker Change: FPGA or network switches anything becoming more meaningful do you think this is largely AI accelerator.

Speaker Change: <unk> accelerator.

Speaker Change: Driven in terms of the HBM.

Speaker Change: Demand drivers.

11 of processor memory bandwidth that cannot be met easily with.

Speaker Change: Traditional approaches.

Speaker Change: Then of course.

Speaker Change: HBM has to be considered thus far.

Speaker Change: Is AI servers, but there are other product categories and applications, which are starting to investigate HBM of course not with these many placements.

Speaker Change: As you see around the GPU, because the GPU placements fixed placements eight placements.

Speaker Change: <unk> hundred 12 high et cetera, just a lot of memory and other applications, which may contemplate using HBM may not need that many placements. It is being contemplated in other places, but obviously the bar is high because HBM is very expensive implementation of memory.

But it is also one that is very power efficient compared to doing it in other ways.

Speaker Change: Another way that companies are trying to figure out how this architecture evolves over time is to assess the mix of HBM versus DDR five versus LP five so LP low power memory is starting to make its way into the data center.

Speaker Change: And then used to be the way obviously.

Speaker Change: The vast capabilities of LP, which is reliability availability and serviceability is not the same as DDR five and consequently requires a lot of new architectural approaches, but do you have seen.

Speaker Change: Leaders like Nvidia showed the way in terms of using LTE DRAM in there.

Speaker Change:

Speaker Change: Servers so.

Speaker Change: That trend is also starting.

Speaker Change: As another approach, but overall HBM usage will increase over time, but.

Speaker Change: The volumes will be dominated by.

Speaker Change: Accelerators.

Speaker Change: Keith.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: And our final question for today.

Speaker Change: Comes from the line of Vivek Arya.

Speaker Change: From Bank of America Securities. Your question. Please.

Speaker Change: Thanks for the follow ups, just a few clarifications on the Capex side. So the mid Thirty's capex intensity is that gross or net of any tips funding and are you assuming any depreciation benefits in gross margin benefits like Intel.

Speaker Change: Been doing.

Speaker Change: That said, that's a net number and.

Speaker Change: So we will be providing you net numbers based on our.

Speaker Change: Latest assessment on wind grants come in.

Speaker Change: And also when.

Speaker Change: C.

Speaker Change: Is received we will get the depreciation benefits when it's put in service, but the cash.

Speaker Change: Reimbursement in the case of ITC there may be at.

Speaker Change: There will be a timing difference on that compared to grants.

Speaker Change: Got it so the mid 30% is a net number and growth capex to be higher.

Speaker Change: And that.

Speaker Change: That's correct.

Speaker Change: Got it and then on WMC can.

Speaker Change #100: Can you give us a sense, Michael what sort of the mix in capex in fiscal <unk> or what is the mix in fiscal <unk>.

Speaker Change #100: At 24, and how should be conceptually think about that mix.

Speaker Change #100: In fiscal 'twenty.

Yes.

Speaker Change #100: We did say that <unk> was down mid fiscal 'twenty for like it had been in fiscal <unk> was down in fiscal 'twenty three that down again in fiscal 'twenty. Four we have said it'll be up in fiscal 'twenty five.

Speaker Change #100: However, we did say that Greenfield construction is a material part of the spend in fiscal 'twenty five.

Speaker Change #100: And that.

Speaker Change #100: We've not given specific WMC.

Speaker Change #101: I would say one other thing to keep in mind is that we do.

Speaker Change #101: <unk> tried to provide more color on this.

Speaker Change #101: <unk> ramped us.

Speaker Change #101: The equipment for the HBM reps.

Speaker Change #101: Equipment there.

Speaker Change #101: Does start to make up a bigger portion as we are embarking on this ramp to be able to go from very little share.

Speaker Change #101: Two towards our natural market share next year, so that as a as a percentage wise.

Speaker Change #101: In terms of equipment categories HBM unique.

Speaker Change #101: Unique equipment is obviously going to be a very high or the highest growth area.

Speaker Change #101: And then anything incremental for EV sorry. Please go ahead.

Vivek: No go ahead vivek.

Vivek: I mean, we are going to be.

We've talked about we've already.

Speaker Change #103: <unk> made some UV investments and we've got a.

Pretty efficient UV.

Speaker Change #103: Implementation plan for one gamma we are going to be implementing UV in Japan, though that is one thing that we've guided so of UV is in the mix of the of our.

Speaker Change #103: <unk> plans for for ramping one gamma and beyond.

Speaker Change #104: Okay, Okay I'll get back in the queue. Thank you.

Speaker Change #104: Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Mark Murphy for any further remarks.

Mark Murphy: I just wanted to provide a bit of housekeeping for your models.

Speaker Change #105: The third quarter.

We just reported DRAM debt cost or flattish.

Speaker Change #105: NAND was down several percent sequentially.

Speaker Change #106: For FY 'twenty five.

Graham: Graham I'll end cost mid to high single digits.

Down.

Graham: Long term.

Graham: But HBM mix and.

Graham: 25, well impact cost downs and.

Graham: Cost Downs and 25 for DRAM will be down only modestly.

Graham: Yeah.

Speaker Change #108: Thank you all for joining today's call.

Speaker Change #109: Thank you and thank you ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

Your session to ask a question. During this session you will need to press star one on your telephone. If your question has been answered and you'd like to remove yourself from the queue simply press Star One again as a reminder, today's program is being recorded and now I'd like to hand, the program over to Cynthia Kilmer Investor Relations.

Speaker Change: Thank you and welcome to Micron technologies fiscal third quarter of 2024 post earnings analyst call on the call with me today are Sumit Sedona, Micron's, Chief business Officer, Manish Bhatia EVP of global operations and Mark Murphy our CFO.

Speaker Change: As a reminder, the matters. We're discussing today include forward looking statements regarding market demand and supply market trends and drivers and 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.

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

Speaker Change: Although we believe that the expectations reflected in the forward looking statements are reasonable we cannot guarantee future results levels of activity performance and achievements, we're under no duty to update any of the forward looking statements to conform the statements to actual results.

Speaker Change: Can now open the call up for Q&A.

Speaker Change: Certainly one moment for our first question.

Speaker Change: And our first question comes from the line of C. J Muse from Cantor Fitzgerald. Your question. Please.

Speaker Change: Yes. Good afternoon, thanks for taking the question.

Your first question, then Youre ramping capex significantly here in fiscal 'twenty five, but it certainly sounds like Greenfield is only coming fiscal 2017 at the earliest so I guess, how do we think about.

Speaker Change: You're getting to your DRAM market share for HBM and <unk> 25 was that all.

Speaker Change: Just conversions from DDR, five and then I guess with DDR five supply it would appear that that would be significantly under supplied by you guys or if that's kind of.

Speaker Change: The plan into 'twenty five for you guys.

Speaker Change: C. J S finish I'll take I'll take that and then.

Speaker Change: And Mark can add some comments, but yes the.

Speaker Change: The new U S.

<unk> both will.

Speaker Change: Provide DRAM bit growth only towards the latter half of the decade, we said Idaho.

Speaker Change: Starting in meaningful supply in 'twenty seven.

Speaker Change: And.

Speaker Change: And New York 28 or later.

Speaker Change: So our bit growth in the near term and DRAM is going to come from the technology transitions that we have in both Taiwan and Japan.

Speaker Change: Still ramping our one beta which is the industry's best node right now and we expect to begin production ramp of our one gamma.

Speaker Change: And actually implement that both in Taiwan, and then eventually in Japan as well, we announced last year that we're gonna be enabling U V. In Japan. So that we can ramp the one gamma node there as well so our big growth.

Speaker Change: Sort of intervening period before we get to the new.

Speaker Change: <unk>.

Speaker Change: U S manufacturing sites will be driven by technology transitions in our existing footprint and we have space and everything.

Speaker Change: Lined up to be able to do that and.

Speaker Change: T J I would only add that.

Speaker Change: Yes, we did say that yes through 'twenty five and we would expect that to continue to 'twenty into 'twenty six that we would we would be at.

Speaker Change: While approaching our target levels of inventory by end of 'twenty five we'll be laying on inventories as we see it in 2006.

Speaker Change: We're already sort of prioritizing bets to higher value markets now, which.

Speaker Change: It's driving.

Speaker Change: Yeah interesting customers for.

Speaker Change: Longer term agreement discussions are earlier than they typically would and behavior like that.

And I.

Speaker Change: And I think it would go to a favorable you'll actually I mean, our goal is to maintain or our market share to grow our HBM share sometime in calendar year 'twenty five we'll get our fair to match, our our DRAM overall good share in that maintain R. R.

Speaker Change: Market share.

Speaker Change: From there on.

Very helpful and just a quick follow up on <unk>, obviously, not mature products from a yield perspective.

Speaker Change: When you are setting your pricing early.

Speaker Change: In a yield ramp how does that work do you set higher pricing knowing that you're going to have words yields as that improves your share that benefit with your customers or is that something that you hold yourselves, how should we think about that.

Speaker Change: Yes.

Simon: This is Simon here.

Speaker Change: We have these.

Speaker Change: Pricing agreements done for 2024.

Speaker Change: As well as.

Speaker Change: Most of the funding 25 pricing has also done were sold off or quantify from a volume perspective pricing.

Speaker Change: Almost done for all of 2025 as well and the pricing is set at a level, where we expect the overall gross margin to be at.

Speaker Change: Robust levels consistent with the value of this product provides to our customers.

Speaker Change: DM customers and it is obviously the most complex product that the industry has ever done so.

Speaker Change: Pricing also contemplates that.

Speaker Change: And of course the.

Speaker Change: Fighting us.

Speaker Change: It's done in a fairly.

Speaker Change: Consistent way across time, and obviously as the product ramps the costs come down to use improve.

Speaker Change: And then the gross margin improves over time, that's typically how it works for pretty much all of the product.

Speaker Change: And.

Speaker Change: The early level of gross margin is lower than what the mature U.

Speaker Change: Margin ends up being.

Despite that and you know us being very early in the ramp of HBM.

Speaker Change: We have said that our first full quarter of production with over $100 million of revenue already achieved.

Speaker Change: <unk> margins that was accretive to the company margins as well as to the company's DRAM margin.

Speaker Change: Thank you very much.

Thank you and our next question.

Erin: Comes from the line of Erin.

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

Speaker Change: Yes, thanks for doing the after call and let me ask a question so.

On the HBM discussion a little bit further.

Speaker Change: I guess two.

Speaker Change: Two quarters ago, I think you guys reported some prepayments given given the.

Speaker Change: Agreements that you are establishing an HBM I'm curious if is there any update to the prepayments I think it was $600 million previously these last two quarters and then I guess.

Speaker Change: As part of that how do I think about the capacity footprint of HCM, how that's evolved over the course of this last quarter is there any flexibility too.

Speaker Change: <unk> moved at higher or are you are you just pretty much completely set for fiscal 'twenty five at this point.

<unk>: Yeah, I'll take the prepayment question and then ill turn it over to <unk> to talk about the HBM manufacturing footprint.

Speaker Change: In terms of prepayments we have had.

Speaker Change: Like you said.

Speaker Change: Some level of prepayments.

Speaker Change: And we continue to have these discussions with customers about their goals and desires to.

Speaker Change: Enter into these.

Speaker Change: Agreements with us.

Speaker Change: And.

Speaker Change: Use prepayments as appropriate.

Speaker Change: Part of the <unk>.

Speaker Change: Discussion then.

Speaker Change: <unk> from both sides in terms of the.

Speaker Change: The puts and takes on the various terms in the agreement.

Speaker Change: And so we will continue to evaluate these sort of opportunities.

Speaker Change: Of course.

Speaker Change: As you know in 2023.

Speaker Change: We have had.

Speaker Change: A tough downturn in the industry. So as we were coming out of it we were definitely open to some of these discussions we remain open to some of these discussions however.

Speaker Change: Robust growth in our free cash flow for next year or so.

Speaker Change: We are going to continue to rely on that but there can be opportunities.

termination: To enter into certain unique types of arrangements with customers and we continue to evaluate those on a case by case basis and I'll turn it over termination to talk about the footprint.

Speaker Change: Sure.

Speaker Change: No.

Speaker Change: Know that we're coming from a very low base installed capacity for HCM.

Given our decision to skip HBM, three and really focus on our <unk>, where we felt we would have product differentiation capability, which we which our technology and product team.

Speaker Change: Really delivered and our customers are really appreciating, but so our goal and our two we set the target that intercept are normal DRAM market share with our HBM share to match our.

Speaker Change: Overall DRAM market share in calendar year, 'twenty, five and that's what we're marching towards and so our investments in the unique HBM equipment, our investments in clean room space are all marching towards that and we're on that.

Speaker Change: Ramp trajectory and confidence in achieving that.

Speaker Change: Just keep in mind, a couple of things the clean.

Speaker Change: Clean room space to where enabling for this HBM ramp is more complex than standard assembly clean room space. So.

Speaker Change: That's one element of what we're working towards to be able to reach that.

Reached that goal, but the ramp is.

Speaker Change: Significant given where we're starting from but.

Speaker Change: We're confident we're going to be able to to Oh.

Speaker Change: That goal.

Speaker Change: Yes.

Speaker Change: And do so with.

Speaker Change: No.

Our world class quality World class yield and.

Speaker Change: Excellent cost structure.

Speaker Change: Thank you and Mark just a quick follow up how do you think about operating expenses as the fundamentals improve from here I know you gave this quarter's guidance, but just curious of how you would think about the glide path beyond this quarter.

Speaker Change: Yes.

Mark Murphy: We did well in the quarter on Opex is demonstrating control again, we're at the lower end of the guide on our Opex. It's up in fourth quarter is as we said thats driven really by.

Mark Murphy: Primarily <unk>.

Mark Murphy: R&D program expenses, but we also had in the third quarter, which was built into our guidance.

Speaker Change: Land sale that was about a third of.

Speaker Change: Yes, it would be responsible for about a third of the increase from from third to fourth quarter.

Speaker Change: And November quarter.

Speaker Change: Do you see opex.

Speaker Change: Picking up again.

Speaker Change: Again, driven principally by R&D program expenses.

Speaker Change: Great work on the NAND front also number of.

Speaker Change: DRAM related activity, including <unk>.

Speaker Change: <unk> development.

Speaker Change: So we would expect.

Speaker Change: Yes.

Speaker Change: Opex to be up mid single digits.

Speaker Change: For Q2, <unk> Q over over $1 1 billion and then some.

Speaker Change: Yes, some modest increase sequentially.

Speaker Change: Sequentially through the year.

Speaker Change: And 25.

Mark Murphy: Thank you Mark.

Speaker Change: Thank you and our next question comes from the line of Sunni pressure from Raymond James Your question. Please.

Speaker Change: Yes, Thank you guys.

Speaker Change: My question is on inventories at your customers maybe.

Speaker Change: Just looking at your PC and smartphone customer of theirs.

Speaker Change: Some talk that some of the customers pre build some inventory ahead of the price increases if you can talk about what you your view based on your visibility as to how much inventory they're holding.

And then on the data center it looks like the inventory correction is mostly done.

Speaker Change: And the.

Speaker Change: I'm just curious you talked about.

Speaker Change: Some optimism about even standard server demand picking up a bit so wondering if you can.

Speaker Change: No comment on that as well.

Speaker Change: Yeah, I mean I'll comment on the data Center first and then we can go to Pcs and smartphones on the datacenter side.

Speaker Change: We had been saying for some time that we expect the data center demand to start returning in the first half of calendar 'twenty or and that has been pretty much on target and as the.

Speaker Change: Second calendar quarter, our third fiscal quarter.

Speaker Change: Continued.

Speaker Change: We saw a strengthening of that demand in the data center.

Speaker Change: And that strong trend has continued.

Speaker Change: Demand improvement is continuing so thats a positive sign overall in the data center beyond just the AI servers as well and.

Speaker Change: Inventory is pretty normalized in the data center and a lot of the demand.

Speaker Change: With the level of urgency and we have been trying to chase that supply because.

Speaker Change: The leading edge nodes are tight.

Speaker Change: Now.

Speaker Change: We had mentioned in terms of the shape of the recovery of the industry for certain end markets.

Speaker Change: That coming out of the 2023 downturn that Pcs and smartphones would pick up in terms of volume before data center and that has.

Speaker Change: And exactly how it transpired b.

Speaker Change: We started seeing strength in those segments.

Late in calendar 'twenty, four and then that strength continued into calendar Q1 et cetera, and so yes those customers have.

Speaker Change: Chest and build some inventory because of three.

Speaker Change: Three important factors one relates to obviously the price plan.

Speaker Change: That.

Speaker Change: Was being discussed with customers in terms of the trajectory of pricing we have.

Speaker Change: Also articulated that we expect pricing to continue to increase throughout calendar 2024, and so that has.

Speaker Change: Then an incentive for some customers to buy.

Speaker Change: Such as some of the volume ahead, the second factor relates to our customers on expectations of demur.

Speaker Change: If you look at the.

Speaker Change: Expectations of.

Speaker Change: A replacement cycle driven unit volume increases.

Speaker Change: We have fairly modest assumptions in terms of unit volume growth. This year only low single digit percentage in BC mid single digit percentage in smartphones.

Speaker Change: And even next year that expectations are fairly modest, but there could be upsides.

Speaker Change: Customers are expecting higher levels of unit volume growth next year than what we are modeling and so there could be upsides.

Speaker Change: And that could be driven by.

Speaker Change: Stronger replacement cycle, driven by these AI capabilities in smartphones and Pcs, So that brings us to the tug portion of their drive to build some buffer which is that.

Speaker Change: Some of these customers are getting concerned about their ability to get their hands on supply next year and this is part of what is driving some of these earlier than usual discussions on LTA with long term agreements for 2025 calendar year supply because the growth in the data Center continues.

Speaker Change: Pretty robust pace the HBM growth as we have said earlier that three to one trade ratio displaces a lot of wafers and between HBM high cat bonds et cetera on the DRAM side AI server.

Speaker Change: Our growth return of traditional load growth and even if you get any of this.

Speaker Change: The growth in the PC and smartphone space pretty soon you get to a very very quickly a scenario there.

Speaker Change: The supply growth in the industry is unable to keep up with the demand growth.

That is causing customers to pull in some of these discussions about supply and.

Speaker Change: And they are carrying some extra inventory to guard against that so that's sort of the.

Speaker Change: High level perspective on that.

Speaker Change: Great.

One quick follow up on that you mentioned the high cap bins.

Speaker Change: One of the.

Speaker Change: Strong areas in the quarter, just curious I mean, how.

Speaker Change: It is hard to have been I guess compare versus HBM in terms of the.

Speaker Change: The nature of the product and the complexity and also given the higher margins seems like then and DDR is it as good a margin of HBM and also do you think that sustains and also if you could put that into some context to how big the.

Sam is would be applications off a bit or particular product. Thank you.

Speaker Change: Yes, I think first I'll just mention that.

Speaker Change: And this is an important clarification that we.

Define high captains as anything that is.

Speaker Change: More than 64 gigabyte of them capacity, So 96, gigabytes 128, gigabytes and higher right. So anything that is 96 gigabytes or higher we classify that as <unk> now when it comes to <unk>.

Speaker Change: One of the first wants to introduce 96 gigabyte.

Speaker Change: <unk> in the industry and when you look at 128 gigabyte in Micron was the first company to introduce a monolithic 32 gigabit die based 128 gigabyte dim.

Speaker Change: So I know thats, a mouthful, but essentially it's it's.

Speaker Change: Been behaved without use of DSV right. So it is extraordinarily cost efficient.

Speaker Change: Our product.

Speaker Change: And we were able to demonstrate that this product actually has lower latency than DSV base them and higher performance.

Speaker Change: And so it's a.

Speaker Change: Very very good world class product and Micron is.

Speaker Change: Really one of the first ones in the market with this and.

Speaker Change: And we have a very compelling cost structure on this now these products going to AI servers, I've mentioned before they add to our growth has been very robust and the demand has been strong.

For these high <unk> and we have definitely very accretive margins on these products compared to the company margins.

Speaker Change: And.

Speaker Change: Both.

Speaker Change: HBM and high kept them have some of the stronger stronger margin profiles and the DRAM portfolio.

Speaker Change: Very accretive to the overall company level, but I'll also mention that obviously the rest of the company product pricing is increasing quarter on quarter and that that's what the company portfolio pricing keeps.

Speaker Change: Improving the margins of the rest of the company portfolio, So thats a positive too but that these.

Speaker Change: Products are.

Speaker Change: Very very robust margin.

Okay.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Thank you and our next question.

It comes from the line of Brian Chin.

Stifel: From Stifel. Your question please.

Stifel: Yes, it's Brian Chin here, thanks for taking a few questions.

Stifel: Maybe just.

Stifel: One kind of nearer term first the.

I know you.

Brian Edward Chin: Give sort of detailed P&L between DRAM and NAND, but maybe just kind of in terms of a crossover what was your NAND business profitable in fiscal <unk> or if not do you expect it to be in fiscal <unk> and is that low single digit shipment growth.

Brian Chin: Guidance.

Brian Chin: And then reflecting more of the pull forward of smartphone demand or.

Brian Chin: Is that somewhat reflective of your increasing bitumen constraint as utilization rates, they're fully recover.

Speaker Change: Yes, Brian what we disclose youll see the Q tomorrow I can I can say that.

Speaker Change: The NAND business overall gross margins improved.

Speaker Change: In the third quarter.

Speaker Change: And then at the segment level, probably the best proxy for that business as the storage business unit.

Speaker Change: And that business did deliver operating profit in the quarter, which is substantially improve substantially improved from the prior quarter.

Speaker Change: Got it.

Speaker Change: And then just that part about the.

Speaker Change: <unk> guidance for bit shipment growth low single digits.

Speaker Change: Dan.

Yes, I think in terms of the growth and then.

Speaker Change: On a quarter to quarter basis look there are always.

Speaker Change: All kinds of ebbs and flows.

Speaker Change: Between quarters.

Speaker Change: And the important thing that we're trying to do is to shift our mix towards the data center.

Speaker Change: And.

Speaker Change: That is obviously a lot of demand that we are chasing at.

Very good prices and margins compared to the rest of the portfolio. So thats, what we are doing and.

Speaker Change: All of the changes that we reported in terms of our revenue like for example, our mobile business you'd effort through the smartphone volumes our module business was down 1% in Q3 that was all.

Speaker Change: Planned.

Speaker Change: Changes in volume and mix changes happening in our business. The overall trends for 2020 for calendar year for the mobile business.

Have been fairly stable and consistent with what we have been mentioning for several quarters now that our expectation has been and that sell through mobile phones to be in that mid single digit percentage of unit volume growth for calendar 'twenty four if anything calendar 'twenty 'twenty four Q1 numbers that.

Speaker Change: Our reported out of the industry in terms of sell through or better than.

Speaker Change: What the overall full year expectations would suggest but we are not changing our outlook at this time.

Speaker Change: Okay, Great and then maybe just on <unk>.

Speaker Change: However, I think other folks are maybe trying to get at this somewhat as well but.

Speaker Change: At the expected level of Capex you are currently communicating now for fiscal 'twenty, five and understanding that more than half of that increases for construction capex.

Speaker Change: Is it reasonable to expect micron will be able to increase bit supply in that mid teens for DRAM, maybe high teens for NAND next year or would more investment would be needed to grow in line with the market.

Speaker Change: The bit demand is at that level or even stronger next year.

Brian Edward Chin: So Brian.

Speaker Change: Just trying to.

Parts of your question a couple of a couple of just clarifications, we said that more than half or more of the increase in capex between expected increase in capex between fiscal 'twenty, four and 'twenty five will be for the U S. Construction Capex right.

Speaker Change: And so we do have some other.

Ongoing facilities and.

Speaker Change: Work around the around the rest of our footprint in Asia as I mentioned on the call earlier to be able to enable R.

Speaker Change: Our technology transitions and that's really the answer is that our technology transitions for DRAM in Japan, and Taiwan again, one data continuing to ramp and then one gamma being introduced in calendar year 'twenty five those are going to be sufficient even with a growing.

Speaker Change: Uh huh.

Speaker Change: <unk> of H B M for us to be able to maintain our market share in that mid teens range and we believe we can achieve the long term CAGR with that as technology transitions become less efficient as demand continues to grow and atrium penetration grows we do as we've said for many years expect greenfield wafer capacity growth to be.

Speaker Change: Needed and Thats timed with these U S projects, which would be towards the latter half of the decade.

Speaker Change: And just to just to build on that.

Speaker Change: 2025.

Speaker Change: Calendar year and fiscal year for us we expect to have.

Speaker Change: We expect to maintain our bit share across both DRAM and NAND and part of that part of those shipments will come from inventories. So you have heard Mark mentioned to you that our inventory will normalize.

Speaker Change: By the end of 2025, and and part of that inventory is going to be.

Helping us ensure that we can maintain flat but sure.

Speaker Change: Next year.

Speaker Change: Okay. Thanks very helpful.

Thank you and.

Speaker Change: Our next question comes from the line of harsh Kumar from Piper Sandler Your question. Please.

Harsh Kumar: Hey, guys when I kind of look at your <unk>.

Harsh Kumar: Long term model and I look back a little bit I saw that your peak margins are somewhere in the 61, 5% range now you've got contracted pricing for HBM sounds like for 2020 five, but it's hard for me to think.

Harsh Kumar: That your pricing would call for HBM gross margin to be in that range in that 60% range, because that's what logic commands.

Speaker Change: I was wondering if you could give us an idea of what's your aspirational gross margin is and if you can for HCM and if you can give us a number maybe help us think about a framework. So that we can try and get an idea of where you might be what you might be planning for margins for H b.

Speaker Change: Yes, I mean, we're all.

Speaker Change: Obviously.

Speaker Change: Not disclosing our HBM margins.

Speaker Change: But you can you.

You can imagine that we.

Speaker Change: Certainly have this view that the industry is in a tight place today.

Speaker Change: We expect to have continued price increases and 24 calendar year.

Speaker Change: And going into fiscal and calendar 'twenty five.

Speaker Change: Obviously continue to see tight and tightening industry conditions due to the growth of HBM datacenter growth all of the other segments going into AI driven growth mode.

So.

Speaker Change: Obviously, when we think about fixing pricing.

Speaker Change: For all of calendar 2025 for HBM, we are willing to do the pricing with that backdrop in mind that we want to fixed pricing.

Speaker Change: The level that we don't regret later.

Speaker Change: And of course, the industry is going to continue to strengthen in terms of financial performance and margins.

Speaker Change: We expect that from micron for sure.

But we are comfortable with our HBM margin profile because.

Speaker Change: Of which we have been able to.

Speaker Change: These prices ahead of time.

Speaker Change: And.

Speaker Change: This is a super complex product and the margin profile justifies.

Speaker Change: That level of value that it is creating for the ecosystem.

Speaker Change: Understood and then just a quick follow up you've talked about pricing locked into 'twenty five Transco could you talk about your design visibility. How many years is that also 2025 as an indication of design visibility with large GPU vendors are as they're designed to avoid any longer than that.

Speaker Change: Yes, I mean, we have.

Speaker Change: Customers that we have logged volumes with us.

Speaker Change: And.

Speaker Change: And they are some of those customers are starting purchases for their platforms in 2025 and those platforms are going to continue.

Speaker Change: Into 2026 and beyond.

Speaker Change: So.

Speaker Change: The discussion we had earlier with you about launching with Nvidia for 'twenty 'twenty four and then multiple customers in 2025, those multiple customers, who we work with to launch the product in 2025 are actually going to continue.

Speaker Change: Into 2026 and beyond now keep in mind. These all relates to the HBM through E product the <unk> product launches with a pipe.

Speaker Change: And then through the course of calendar 2025, we'll transition the mix over to 12 high.

Speaker Change: And then HBM four comes in in 2026.

Speaker Change: And.

Speaker Change: Then you have <unk>.

Speaker Change: <unk> four going on and then following that.

Speaker Change: Widened later, you'll get HBM for E S.

Speaker Change: And.

Speaker Change: And so <unk> will happen will ship through the end of the decade.

Speaker Change: Late in the decade and through the end of the decade.

Speaker Change: And so we are already in very deep engagements with customers on designing HBM for NH beam E and so these are long partnerships with customers. They are acquired long cycle time planning for IP and as we get to HBM.

Speaker Change: <unk> E that is going to be a very strong possibility of integration of customer IP into the base die.

Speaker Change: That will make <unk> more customized.

Speaker Change: <unk> won't be the same product going to all customers.

Speaker Change: Of a customized HBM products and because of that it necessitates long term planning and.

Speaker Change: Very deep.

Speaker Change: R&D engagement with customers and because of our leadership in <unk> Behr.

Speaker Change: As we have mentioned.

Speaker Change: 30% lower power consumption.

Speaker Change: You should expect some performance.

Speaker Change: We have.

Speaker Change: Really great relationships with multiple.

Speaker Change: HBM customers.

Speaker Change: And we are firmly engaged in the long term designs.

Speaker Change: Congratulations guys and Super helpful. Thank you.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change #100: And our next question.

Speaker Change #101: It comes from the line of Quinn Bolton from Needham and company. Your question. Please.

Speaker Change #102: Thanks for taking a question I just wanted to go back to the to the.

Speaker Change #102: Ability to gain market share with the transition to HBM memory with the high cap.

Speaker Change #103: The modules and the node transitions I mean I guess.

Historically no transitions.

Speaker Change #104: You typically with the same equipment set C. Net wafer starts typically decline and so it feels like you've got a lot of factors that would sort of argue for a net reduction continued net reduction in wafer starts.

Speaker Change #104: And so I just wonder if you could you could address over the next couple of years.

Speaker Change #105: What trends should we be thinking about in terms of your DRAM kind of wafer starts.

Speaker Change #105: Over that period.

Speaker Change #106: Brooklyn, So we talked.

Speaker Change #106:

Speaker Change #106: Kind of given some color on what we think is an industry wide phenomenon out of the downturn in fiscal and calendar 'twenty three and into calendar 'twenty, four now where we as well as.

Speaker Change #106: Others in the industry, we believe all of this and the industry did take advantage of this.

Speaker Change #107: Phenomenon that you mentioned, where as we transitioned to newer technologies, we reduced wafer start capability structurally.

Speaker Change #107: That did happen and.

Speaker Change #107: No.

Speaker Change #107: For us and for others.

Having said that that's not something that.

Speaker Change #107: Is always going to be the case.

Speaker Change #107: Because we as well as rest of the industry did it to be able to reduce capex in the face of very very weak demand.

Speaker Change #107: And still get the benefits in terms of performance and cost reduction from the technology transitions.

Speaker Change #107: So moving forward obviously, you can imagine if every every year you just keep structurally reducing that's not that's going to have impact on both your bit supply and your costs. So.

Speaker Change #107: I would I would not be thinking as we head into this upturn that the industry will continue with that structural reduction year on year, you'll see investments more in line with a typical pre downturn, where we would.

Speaker Change #107: Maintain our wafer capacity.

Speaker Change #107: While we make these transition investments now.

Speaker Change #107: Now over the.

Speaker Change #107: You know as we go through towards the second half of the decade and beyond as technology transitions become more challenging.

The bit growth capability from the newer technologies is not as great as maybe previous generations, that's where we see the need for.

Speaker Change #107: I think we've commented before the need for Greenfield wafer capacity growth for the entire DRAM industry.

Speaker Change #107: And HBM and this trade ratio that we're talking about.

Is just one aspect of that that phenomenon that maybe.

Speaker Change #107: It makes that more and more that need for new wafer capacity as we go towards the second half of the decade more important.

Speaker Change #107: Alright Thats helpful.

Speaker Change #108: A quick question, we feel good about.

Speaker Change #108: As we discussed being able to maintain our DRAM market share even as we grow our R. H P M.

Speaker Change #108: Share to be in line with our overall DRAM sure.

Speaker Change #109: Okay. So it sounds like you've got.

Speaker Change #110: Facility space in Japan, and Taiwan that kind of increased wafer starts to allow you to maintain share.

Speaker Change #111: Basically to be able to make technology transitions, while broadly maintaining our wafer starts.

Speaker Change #112: Got it okay. Thanks, and then just a follow up on the <unk>. Obviously, a lot of this is being driven today by by the AI accelerators, but just wondering do you see that proliferate into Gpus like the great CPU, obviously in the black oil generation has some pretty significant HBM content with it DC FPGA or <unk>.

Speaker Change #112: Network switches anything becoming more meaningful do you think this is largely AI accelerator kind, a GPU accelerator driven.

Speaker Change #112: Driven in terms of the HBM.

Speaker Change #112: Demand drivers.

Speaker Change #112: Yes, I mean this is heavily based on the requirements of the system level performance and the type of applications that require that high level of performance if that performance level.

Speaker Change #112: Really dictates.

Speaker Change #112: 11 of processor memory bandwidth that cannot be met easily with.

Speaker Change #112: Traditional approaches.

Speaker Change #112: Then of course.

Speaker Change #113: <unk> has to be considered thus far it is AI servers, but there are other product categories and applications, which are starting to investigate HBM of course not with these many placements.

Speaker Change #113: As you see around the GPU, because the GPU placements fixed placements eight placements.

Speaker Change #113: 12 high et cetera, it's just a lot of memory and other applications, which may contemplate using HBM may not need that many placements.

Speaker Change #113: Is being contemplated in other places, but obviously the bar is high because HBM is very expensive implementation of memory.

Speaker Change #113: But it is also one that is very power efficient.

Speaker Change #113: <unk> to doing it in other ways.

Speaker Change #113: Another way that companies are trying to figure out how this architecture evolves over time is to assess the mix of HBM versus DDR five versus LP five so LP low power memory, it's starting to make its way into the data center.

Speaker Change #113: Then used to be the way obviously.

Speaker Change #113: <unk> capabilities of LP, which is reliability availability and serviceability is not the same as DDR five and consequently requires a lot of new architectural approaches, but you have seen.

Speaker Change #113: Leaders like Nvidia showed the way in terms of using LTE DRAM in there.

Speaker Change #114: Servers so.

Speaker Change #114: That trend is also starting.

Speaker Change #114: As another approach, but overall HBM usage will increase over time, but.

Speaker Change #114: The volumes will be dominated by.

Speaker Change #114: Accelerators.

Speaker Change #114: Thank you.

Speaker Change #114: Yes.

Speaker Change #114: Thank you.

Speaker Change #114: Okay.

Speaker Change #114: And our final question for today.

Speaker Change #114: Comes from the line of Vivek Arya.

Speaker Change #115: From Bank of America Securities. Your question. Please.

Vivek Arya: Thanks for the follow up just a few clarifications on the Capex side. So the mid Thirty's capex intensity is that gross or net.

Vivek Arya: Any tips funding and are you assuming any depreciation benefits in gross margin benefits like Intel.

Speaker Change #117: It has been doing.

Speaker Change #117: That's a that's a net number.

Speaker Change #117: <unk>.

Speaker Change #118: So we will be providing you that numbers based on our.

Speaker Change #118: <unk> assessment on when grants come in.

Speaker Change #118: And also when ITC.

Speaker Change #118: Is received we will get the depreciation benefits when it's put in service, but the cash.

Reimbursement in the case of ITC there may be at.

Speaker Change #118: Timing difference there will be a timing difference on that compared to grants.

Speaker Change #119: Got it to the mid 30% is a net number and growth capex to be higher.

Speaker Change #119: <unk> done that.

Speaker Change #119: That's correct.

Speaker Change #120: Got it and then on WMC can.

Speaker Change #120: Can you give us a sense, Michael what sort of the mix in capex in fiscal <unk> or what is the mix in fiscal <unk>.

Speaker Change #120: 24, and how should be conceptually think about that mix in fiscal 'twenty.

Speaker Change #120: Yes.

Speaker Change #120: We did say that <unk> was down.

Speaker Change #121: In fiscal 'twenty for like it had been in fiscal <unk>. It was down in fiscal 'twenty, three and then down again in fiscal 'twenty. Four we have said it'll be up in fiscal 'twenty five.

Speaker Change #121: However, we did say that Greenfield construction is a material part of the spend in fiscal 'twenty five.

Speaker Change #121: And that.

We've not given specific Wi Fi.

Speaker Change #122: I'd say one other thing to keep in mind is that we.

Speaker Change #122: <unk> tried to provide more color.

Speaker Change #122: <unk> ramped us concern.

Speaker Change #122: The equipment for the HBM ramp.

Speaker Change #122: Equipment there.

Speaker Change #122: Does start to make up a bigger portion as we are embarking on this ramp to be able to go from very little share.

Speaker Change #122: Two towards our natural market share next year, so that is a.

As a percentage wise.

Speaker Change #122: In terms of equipment categories HBM unique.

Speaker Change #122: Unique equipment is obviously going to be a very high or the highest growth area.

And then anything incremental for EV sorry.

Speaker Change #122: Sorry. Please go ahead.

Vivek Arya: No go ahead vivek.

Speaker Change #123: I mean, we are going to be.

Speaker Change #123: We've talked about we've already.

Speaker Change #124: <unk> made some UV investments and we've got a pretty efficient UV.

Speaker Change #124: Implementation plan for one gamma we are going to be implementing UV in Japan that is one thing that we've got it so.

Speaker Change #125: He is in the mix of the.

Speaker Change #125: <unk> plans for for ramping one gamma and beyond.

Speaker Change #126: Okay I'll get back in the queue. Thank you.

Speaker Change #126: Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Mark Murphy for any further remarks.

Mark Murphy: I just wanted to provide a bit of housekeeping for your models.

Speaker Change #127: The third quarter.

Speaker Change #128: That we just reported DRAM debt costs are flattish.

Speaker Change #129: <unk> was down several percent sequentially.

Speaker Change #129: For FY 'twenty five.

Speaker Change #129: Gram all in cost mid to high single digits.

Speaker Change #129: Down.

Speaker Change #129: Long term.

Speaker Change #129: But HBM mix and.

Speaker Change #129: 25, well impact cost downs and.

Speaker Change #129: Cost Downs and 25 for DRAM will be down only modestly.

Speaker Change #129: Thank you all for joining today's call.

Speaker Change #130: Thank you and thank you ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

Micron Technology Inc Post Earnings Analyst Call

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