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Micron Technology Inc. (MU)

UBS Global Technology Conference Call

November 12, 2018, 11:45 AM ET

Executives

Sumit Sadana - EVP and Chief Business Officer

Analysts

Tim Arcuri - UBS

Presentation

Tim Arcuri

Good morning. Thank you. We're going to get started. I'm Tim Arcuri, I'm the Semiconductor Analyst here at UBS. And we're very pleased to have Micron Technology with us, we have Sumit Sadana, who is the EVP and the Chief Business Officer at Micron. So thank you, Sumit.

Sumit Sadana

Thank you.

Tim Arcuri

So, I think, that -- I think, you wanted to say something, maybe a Safe Harbor initially.

Sumit Sadana

Yes, definitely. So you have -- I'll be making some statements that could be forward looking in nature. So please consult our SEC filings for our risk disclosures. With that we can proceed.

Question-and-Answer Session

Q - Tim Arcuri

Great, thank you. So why don't we start by just giving sort of an overview. You're in a very unique seat, because you're sort of at the center of the business strategy for the company and you talk to other customers all the time. Can you sort of give us an overview of sort of where the company is today?

You came over, there was a bunch of folks came over to Micron, of course, Sanjay. So, can you sort of give your perspective having been at SanDisk and sort of what you've learned and what the team has done since being at Micron. Thank you.

Tim Arcuri

Definitely. So, yes, I mean, I have been with Micron since June of last year. Sanjay, was announced as the CEO in May have 2017. And we have had good influx of talent into Micron from many different companies, and we are very proud of the leadership team and the talent in the company in the engineering ranks, and other functions is just outstanding. So we're continuing to build on that.

I think our priorities that we have made clear relate to sort of this next chapter that we believe we are able to drive in a very significant way, which is the new Micron story that we talk about. Micron is exceptionally well positioned, we’re at the nexus of multiple secular demand drivers that are long-term in nature. The DRAM industry is pretty well consolidated. We have 70% of our revenue and much more than that of our gross profit percentage coming from DRAM. And besides the growth drivers and the consolidated position in DRAM, we have some phenomenally exciting technologies in the hopper, like 3D cross point, as an example.

We have also been making tremendous progress on the profitability improvement initiatives that include getting our costs to become extremely competitive. And we have outlined our significant progress on that front. We've spoken about $9 billion profitability improvement measure at our Investor Day in May and we are -- we’ve made dramatic progress towards that goal over two-thirds of the way there already.

So our core profitability as a company at any part in any market condition is dramatically higher today than it has been at any time in the past. And then we have other initiatives, like improving the mix of our high value solutions. We have been working hard at that and that is certainly a journey, but we have been making really good progress on that front. The -- for example, the percent of our total NAND output that we sell as solutions versus selling them as components has been steadily rising through the last several quarters and we expect to continue to make progress on that effort as well over the next couple of years as new products come out.

So very excited about the -- both the market opportunity, the way we work with our customers, and how we are changing that relationship to be lot more strategic in nature. Dramatic improvements in our core profitability and underlying financial performance and couldn’t be more excited about the future.

Tim Arcuri

Great, thank you for that. Can we talk a little bit about China and maybe some of the recent U.S. government actions against China that relate to DRAM. There have been recent restrictions on Gin Wa [ph] which is a company that you've been in dispute with around IP. There's a lot there to potentially unpack. I know you can't say too much, but I thought it was interesting that that DOJ has clearly been involved in this case, but the action came from the U.S. Department of Commerce much like ZTE.

And I also thought it was interesting that the Chinese Government Official release was a bit measured, it didn't carry the normal retaliatory language in it and it was more about promoting normal business. So China is a big end market for you. So what can you say about this, and sort of where does this leave Micron in the industry?

Sumit Sadana

Yes. Sure, happy to discuss that. So, China is certainly an important market for us. If you see our SEC filings, we have said more than 50% of our revenue comes from China. But I think the important thing is that revenue includes a lot of revenue from customers around the world who have their supply chains in China. So our revenue that comes from companies that are headquartered in China is substantially lower.

But nevertheless, we have a very important supplier to the China ecosystem. We have strong customer relationships there. We have good business there. And we also have R&D facilities, manufacturing facilities there, and we employ thousands of people in China. So we are pretty well embedded in the ecosystem in China and it's a great market for us.

Read the rest of this transcript on seekingalpha.com