Memory and Storage

Micron Revenue Climbs in its Fiscal Fourth Thanks to DRAM—But Not So Much from NAND

20 November 2013

Micron Technology is enjoying continuing positive momentum for its dynamic random access memory (DRAM) line even as the company’s NAND flash portfolio slows down, based on final-quarter revenue results of the U.S. maker’s two major memory products, according to a new Flash Dynamics report from IHS.

Micron’s revenue for the fiscal fourth quarter, which ended in August, amounted to $2.84 billion, up a solid 23 percent from $2.32 billion in the third quarter. Within the company, the DRAM Solutions Group posted earnings of $1.24 billion, a 34 percent gain from $924 million. Meanwhile, the NAND Solutions Group had much slower growth of 7 percent, moving from $730 million to $781 million.

DRAM was the undisputed shining star in Micron’s fiscal fourth-quarter financial performance.

Part of DRAM’s prominence in the Micron ledger can be traced to events in the past that continue to have an effect on the present, such as production cuts undertaken by the industry to relieve the potential for oversupply, as well the industry consolidation that has occurred within the trade, effectively cutting the number of DRAM producers worldwide to just three in number.

Besides Micron, the only other major DRAM producers operating at present are Samsung and SK Hynix, both of South Korea. Last year, Micron gained the right to acquire Elpida Memory of Japan, which had been the fourth DRAM producer of note until it declared bankruptcy and was snapped up by Micron. The overall effect of the consolidation has been to streamline production in the entire DRAM space, contributing to stability and price increases for a previously volatile product.

DRAM is also performing well because of short-term causes. A recent fire at SK Hynix has served to grow revenue and broaden margins for PC DRAM because of new constrictions in supply caused by the disaster. Micron appears to have benefited from this development, just as the DRAM market has on the whole.

Mobile DRAM was a particularly strong contributor to Micron coffers during the period. Strong demand in the mobile segment drove gains in the DRAM Solutions Group as well as in one other sector, the Wireless Solutions Group.

In contrast, however, to the significant revenue growth for the quarter, Micron’s operating profit did not enjoy similar strength in expansion. For the DRAM Solutions Group, margins grew by just 2 percent despite a quarterly increase of 5 percent in DRAM average selling prices.

Even so, DRAM remains the most profitable product segment for the company given operating income of $183 million, representing earnings after depreciation and operating expenses like wages are taken out.

The most significant positive change for Micron’s bottom line came with the decrease in losses for the Wireless Solutions Group, where operating losses narrowed to -$50 million from -$62 million in the company’s fiscal third quarter. This was mainly due to the strength of DRAM pricing rather than on the flash memory side where the market has been experiencing soft demand.

While the NAND Solutions Group continued to report an increase in margins, the decline in NAND average selling prices has been more severe than expected. A decrease of 9 percent in prices basically negated gains from the company’s robust cost declines of 10 percent.

For NAND, the slide in pricing along with a weaker-than-anticipated bit growth is indicative that the erstwhile bull market for flash memory dating to the beginning of the year now appears to be running out of steam. NAND bit growth for Micron in the fiscal fourth rose 18 percent, compared to the much larger 44 percent bit growth in DRAM for the company.

Read more >> Micron's results show momentum continuing for DRAM, slowing for NAND

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