Chip maker Micron Technology (MU, Financial) is not going to run out of steam any time soon as it is capable of delivering more upside in the future and continuing its outstanding run. Let's take a look at a few reasons why Micron's performance can improve further.
End-market prospects are bright
Looking ahead, the good thing is that Micron should be able to sustain its outstanding run as the company is seeing favorable conditions in its end markets, specifically the NAND and DRAM markets. Supply in both these markets is expected to remain tight while demand should expand on the back of growth in mobile devices, servers and personal computing devices. As such, investors can expect Micron to continue delivering strong growth. Moreover, the company's focus on developing new technology is another reason why it looks well-positioned for the long run.
As supply growth slows down, the pricing of DRAM and NAND chips should turn favorable. In fact, Micron is already seeing strong pricing in DRAM, driven by demand and supply dynamics in server networking, enterprise market segments, and computing. In addition, the company is seeing rising demand from PC customers as well. As customers continue adding more memory to their systems, Micron will witness solid server DRAM growth.
On the other hand, Micron's graphic business is also getting better on the back of improving gaming console demand. To sustain this momentum, Micron is focused on deploying new technology. As such, the company has initiated DDR4 shipments, with Intel (INTC, Financial) officially releasing its DDR4-enabled platforms for which Micron is a verified partner. Micron is doing the right thing by focusing on the DDR4 segment, as this platform is expected to gain solid traction.
Innovation is the key to growth
The company is focusing on three key operational areas. First, it is deploying new technology that includes the ongoing 20-nanometer DRAM expansion and the 25-nanometer DRAM conversion. Micron is also working on the completion of the 16-nanometer planar NAND conversion and the launch of 3D NAND, along with the launch of TLC NAND for cost concerning applications. Apart from these, the company is developing its capabilities to offer superior controllers and packaging solutions.
In my opinion, Micron is doing the right thing by focusing on product development. Since it is working on the development of smaller-sized platforms for making chips, it should be able to provide its customers with more efficient products. Smaller SoCs (system-on-a-chip) mean that the chip will consume less power and less space but deliver an equally good performance as a bigger die size.
Moreover, Micron is focused on improving its manufacturing capacity. It is enhancing its manufacturing efficiency by engaging in moves such as line balancing, yield, cycle time and metrology. In addition, it is developing its product mix for delivering superior business returns and higher long-term margins.
Micron is also working on expanding its subsystem and memory system solutions. These include increasing the market penetration, forming extra storage solutions like enterprise SSDs and designing innovative mobile memory system solutions. As such, it is clear that Micron is focusing on product development, apart from increasing its manufacturing capacity to address the expected increase in demand from its end markets.
Micron has also entered the non-volatile DIMM category, offering DRAM content back-up with considerably improved dependability. It has received fresh orders from Tier 1 customers for its DDR3 based NVDIMM product. Micron has also signed a key OEM customer for releasing its DDR4-based NVDIMM, and is expected to initiate shipments going forward.
Also, Micron's hybrid memory cube technology is gaining improved traction at network and server customers. Further, the Knights Landing platform of Intel is expected to leverage similar Micron technology to enable superior performance computing.
On the other hand, Micron is continuously investing in process innovation and has completed the quickest ramp in the company’s history for its 256 gigabit, 16-nanometer planar product. Moreover, beyond just technological innovation, it is constantly adding controller and firmware resources to enable product development, increase the quality of its SATA-based SSD products and PCIe SaaS, followed by the release of its M500 DC enterprise product that targets data center applications.
Conclusion
Hence, Micron's focus on innovation should help the company continue getting better and benefit from improving demand in its end-markets.
