The paragraph is a transcript from Micron Technology's Fiscal First Quarter 2025 Post Earnings Analyst Call. The host, Satya Kumar, introduces the call, mentioning key participants like Sumit Sadana, Manish Bhatia, and Mark Murphy. He notes that the discussion will include forward-looking statements about market demand, trends, and expected results, which are subject to risks and uncertainties. These statements are not guaranteed, and the company is not obligated to update them based on future events. The call proceeds to a Q&A session, with the first question from Harlan Sur of JPMorgan concerning a 100 basis point decline in gross margin in Q2, attributed mainly to issues with NAND related mixes, pricing, and lower shipments.

The paragraph discusses expectations and insights regarding DRAM pricing and financial performance, particularly for Micron. Sumit Sadana indicates that while they don't provide specific pricing guidance for competitive reasons, they are experiencing positive trends in product mix and growth in areas like high-bandwidth memory (HBM) and data centers. Despite some short-term challenges, such as seasonality and NAND issues, their data center and DRAM performance remain strong. This robustness is expected to maintain their margins in Q2. Additionally, Harlan Sur highlights Micron's significant growth in enterprise and data center SSD market share, particularly in PCIe and NVMe, which has risen from 3-5% in 2021 to 10-12% by the end of the previous year.

The paragraph discusses the significant progress made by a company in its data center SSD business over the years, highlighting investments and rejuvenation of its product portfolio. It mentions their current market position, citing new industry-leading products like 30 and 60 terabyte SSDs, and the PCIe Gen5 60 terabyte SSD. Despite some inherent volatility, the company expects growth in bit shipments for data center SSDs starting in fiscal Q3, driven by strong data center capital expenditures from customers and a robust product portfolio. Harlan Sur expresses appreciation for the information, and the conversation moves on to the next question.

In this paragraph, Mark Murphy addresses questions about the constraints on gross margin in the upcoming fiscal third quarter. He states that they are not providing specific guidance on third-quarter gross margins to ensure accuracy. There are some unfavorable conditions, like challenging NAND market dynamics and underload charges, expected to impact margins. However, these are estimated to have around a 100-basis-point impact. Despite these challenges, there are several positive factors, such as continued data center growth, benefits from high-margin products, and volume growth in data center SSDs. These favorable conditions are expected to support margin expansion beyond the third quarter.

The paragraph discusses Micron's inventory expectations and their strategic position in the data center memory market. Micron anticipates that DRAM inventories will improve and be below target levels by the end of the year, while NAND inventories will improve gradually from the second to fourth quarter. The conversation shifts to LPDDR5X memory, highlighting Micron's leadership as the pioneering memory supplier for data centers, specifically in the LPDDR5X category associated with NVIDIA's Blackwell product cycle. Micron has innovated to address data center RAS requirements in non-purpose-built memory, positioning itself as a key partner for customers and driving opportunities in the data center business.

The paragraph discusses the significant growth and revenue from the data center sector, highlighting the company's leading position in providing high-capacity DIMMs and other data center solutions like HBM and SSDs. It notes substantial sequential and year-over-year growth in this area. Chris Caso from Wolfe Research then asks about the increased caution in the company's outlook, and Sumit Sadana explains that a delay in the anticipated PC refresh cycle has contributed to this, though it is expected to occur in 2025.

The paragraph discusses the PC market's near-term outlook, highlighting that the current average age of PCs signals the need for upgrades, which could drive demand for higher memory content by 2025. However, the PC shipment forecast for 2024 is flat due to delayed upgrade cycles and inventory issues from previous quarters. While consumer-oriented segments face challenges, the data center market remains strong, with temporary moderation in demand for SSDs expected to rebound soon. Overall, inventory issues are anticipated to improve by spring.

The paragraph discusses shipment growth for DRAM and NAND, highlighting that current shipments to customers are lower than their consumption rates, leading to inventory issues. These issues are expected to improve by spring, with shipment growth resuming in the latter half of the fiscal year. DRAM supply is tight, particularly due to HBM impacting non-HBM availability, while actions are being taken to balance NAND supply with demand. Chris Caso inquires about DRAM versus NAND demand, with Mark Murphy clarifying that DRAM bits will decline in Q2 but not as significantly as NAND. The revenue decline for the second quarter is mainly attributed to NAND, with consumer-oriented segments affecting DRAM, though improvements are expected after the first calendar quarter.

The paragraph discusses future projections for DRAM and NAND volumes and the transition to High Bandwidth Memory (HBM) production. Manish Bhatia explains that as they mature their HBM yields, there will be a trade-off with conventional DRAM. For every one conventional DRAM wafer start, they will need three in HBM to achieve the same number of bits. This transition is expected to occur by calendar year 2025 as they aim to maintain their DRAM bit share. Vijay Rakesh also inquires about the capital expenditure (CapEx) split between HBM, conventional DRAM, and NAND, although the paragraph does not provide specific details on this.

In the paragraph, Manish Bhatia discusses the significant capital expenditure (CapEx) dedicated to High Bandwidth Memory (HBM) for the fiscal year, noting investments in front-end fabrication, assembly, testing, and clean room facilities. There is also ongoing investment in construction and facilities, including a project in India. Mark Murphy mentions they've reduced CapEx for NAND, with spending lower than its revenue percentage. The DRAM investment is primarily influenced by trade ratios and HBM needs. During the Q&A, Brian Chin inquires about NAND supply reductions, referencing past delays by larger suppliers in reducing wafer inputs. Sumit Sadana refrains from speculating on competitors' actions but emphasizes their own proactive market measures.

In the paragraph, the discussion revolves around Micron's shift in its DRAM production focus from DDR4 to newer technologies like DDR5 and HBM. Brian Chin notes that only about 10% of Micron's DRAM sales will come from DDR4 in the upcoming quarters, suggesting a significant shift toward more advanced DRAM products. Sumit Sadana confirms this shift, explaining that while they support long life cycle products for specific segments such as industrial and automotive, the overall focus is on leading-edge technologies. Micron is dedicating significant capacity to quickly ramp up production of HBM, aiming to reach its natural market share by the second half of 2025. This shift is evident in their product mix, with an emphasis on leadership in data centers and growth in both the DDR and LP DRAM markets.

In a Q&A session, Quinn Bolton from Needham & Company asked Mark Murphy about the anticipated decline in NAND revenue and its impact on overall sales, suggesting it might decrease by 30% or more. Mark confirmed that NAND would lead the sequential revenue decline from the second quarter. Quinn also inquired about high inventory levels, asking for quantification of any progress made in reducing them. Mark responded that while progress was achieved in the first quarter and Days Inventory Outstanding (DIO) dropped below 150 days, a volume-related increase in DIO and absolute inventory dollars is expected in the second quarter, indicating a rise rather than a reduction in inventories.

The paragraph is an excerpt from a discussion between analysts and a company executive, Mark Murphy, regarding inventory and demand forecasts for DRAM and NAND products. Due to ongoing strength in data centers and growth in consumer markets, the company expects its inventories for both NAND and DRAM to decrease over the year. Murphy notes that the company's DRAM inventory levels will be below target by the end of the fiscal period, reflecting an intention to align shipping with consumption by Q3. Quinn Bolton and Timothy Arcuri from UBS seek clarity on DRAM bit shipment expectations, with Arcuri questioning if shipments will align with a forecasted mid-teen growth for the industry in calendar 2025. Murphy confirms that industry bit demand for DRAM is anticipated to grow by mid-teens in that period.

The paragraph is a part of a discussion between Timothy Arcuri, Mark Murphy, and Sumit Sadana about the company's shipping expectations and market share for NAND and DRAM products. They expect stable bit share across 2024 and 2025 for both products. Their NAND shipments are anticipated to align closely with low double-digit demand growth. Murphy notes a difference between calendar and fiscal years, which affects shipping calculations, but confirms that for the calendar year, NAND and DRAM shipments will align with demand. The conversation then shifts to Hadi Orabi asking about the cancelability of HBM volume and pricing agreements, but the response isn't included in the paragraph.

The paragraph discusses agreements between the company and its customers regarding the purchase of HBM components, focusing on the quantities (8-high vs. 12-high) and associated pricing by quarter. Firm orders are placed due to lengthy lead times in the industry, but customers can cancel orders if it falls outside a certain timeframe. The company is experiencing high demand and is ramping up production as quickly as possible to meet targets. Hadi Orabi acknowledges the situation, and Toshiya Hari from Goldman Sachs asks about future revenue projections for HBM products. Despite not reporting specific HBM revenue, it is estimated to be around $800 to $900 million, and Hari suggests the growth rate may stabilize. He asks if constraints like space or TSP capacity are factors affecting this trajectory.

In the paragraph, Sumit Sadana discusses the company's strategy for increasing capacity and market share in HBM. They aim to reach a market share equivalent to their DRAM supply share, targeting the second half of the calendar year, with an expected $30 billion TAM for 2025. Although they don't report specific HBM numbers yet, they anticipate significant revenue growth from HBM. Manish Bhatia adds that their 8-high ramp exceeded expectations and they are set for a strong ramp moving forward, with confidence in transitioning to 12-high by 2025, highlighting the scalability of their process.

The paragraph discusses the gradual increase in production capacity for HBM3E technology, highlighting that the company started from a low point due to having no initial product in HBM3 and limited production in HBM2E. The company is steadily installing new equipment and qualifying it, leading to week-over-week growth in capacity. As they continue to ramp up production, particularly with the 12-high becoming a larger part of their product mix, they expect to see solid revenue growth throughout fiscal year '25 and into calendar year '25.

This summary was generated with AI and may contain some inaccuracies.