Feeds

Micron's revenues circle drain for third straight quarter

Down, down, down for DRAM and flash maker

Internet Security Threat Report 2014

The numbers are straightforward. In its second financial 2012 quarter, ending 1 March, DRAM and NAND maker Micron sold $2.1bn of chips and SSDs and made a loss of $224m. This reflects the deepening of a trend that has been underway for seven quarters, with declining revenues and falling profits turning into losses.

If you have a look at the chart below, you'll see the glory revenue quarter is the final one of financial 2010 – at $2.5bn – and the best profit number is the $939m earned in the third financial 2010 quarter. It has been downhill all the way since then. Revenues have declined and profits have declined faster as over-supply has caused the average selling prices (ASPs) for Micron's products to go south.

Micron Results Q2 fy2012

Micron's recent quarterly results

DRAM and NAND production is hugely capital-intensive and the only way to turn a crust is through churning out and selling sufficient chips to lower the cost/unit enough to enable a supplier to have attractive prices with enough margin for a profit. Micron hasn't pulled this off.

It has reduced capital costs by partnering Intel in IMTF to make NAND chips but that hasn't worked in a "make profits" sense. It is moving up the NAND value chain by selling SSDs but SSD revenues are a drop in the ocean compared to chip revenues. Maybe Elpida's bankruptcy provides an opportunity to pick up DRAM fab capacity at a good price and so increase chip volume and lower per-unit costs.

Micron said that DRAM and NAND flash revenues "were slightly higher in the second quarter of fiscal 2012 compared to the first quarter of fiscal 2012, due primarily to approximate 20 per cent increases in sales volumes offset by decreases in average selling prices."

The DRAM ASP went down 16 per cent in the second quarter compared to the year-ago quarter, while NAND ASPs went down 23 per cent. Annoyingly bit growth was up – 21 per cent for DRAM and 36 per cent for NAND – excluding sales to Intel. Micron lowered its production costs, with cost/bit of DRAM declining 14 per cent and 18 per cent for NAND, but it was not enough to offset the ASP declines. You sell more bits but for a lot lower price and lose money – what a game to be in.

There's the problem right there. Overall revenues weren't higher in the second quarter compared to the first, because sales of other products, such as NOR flash, went down. The company said: "The company's consolidated gross margin declined to 13 per cent in the second quarter of fiscal 2012 compared to 15 per cent for the first quarter of fiscal 2012, due primarily to declines in gross margins for the company's NOR flash products in the wireless market. "

The firm is getting more fab volume by restructuring the IMTF partnership with Intel. Micron CEO Mark Durcan said in the earnings call that, together with a new fab in Singapore that is ramping up production, this "will lead to structural margin improvement going forward."

He wouldn't comment about Elpida, beyond saying that Micron evaluates market situations and aims to strengthen its competitive position. Whoever gets the Elpida fab capacity should be able to increase chip output volume and lower costs, in principle, and that underscores everything in this business. Production volume and lower unit costs are key. If Samsung gets it, then its lead over the other players will stretch out and they may never catch up, sparking off consolidation at the second-tier DRAM and NAND fab supplier level.

Micron should fare well if that happens and could hope to reverse its losses into profits a few quarters on. ®

Choosing a cloud hosting partner with confidence

More from The Register

next story
MI6 oversight report on Lee Rigby murder: US web giants offer 'safe haven for TERRORISM'
PM urged to 'prioritise issue' after Facebook hindsight find
I'll be back (and forward): Hollywood's time travel tribulations
Quick, call the Time Cops to sort out this paradox!
Assange™ slumps back on Ecuador's sofa after detention appeal binned
Swedish court rules there's 'great risk' WikiLeaker will dodge prosecution
NSA mass spying reform KILLED by US Senators
Democrats needed just TWO more votes to keep alive bill reining in some surveillance
prev story

Whitepapers

Driving business with continuous operational intelligence
Introducing an innovative approach offered by ExtraHop for producing continuous operational intelligence.
The total economic impact of Druva inSync
Examining the ROI enterprises may realize by implementing inSync, as they look to improve backup and recovery of endpoint data in a cost-effective manner.
Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Simplify SSL certificate management across the enterprise
Simple steps to take control of SSL across the enterprise, and recommendations for a management platform for full visibility and single-point of control for these Certificates.