The Six Five team discusses the Micron Q1 Earnings results.
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Transcript:
Patrick Moorhead: Micron Q1 earnings. Pretty much straightforward, I got on Yahoo Finance and pontificated for a while, and I think you did some media as well. So here’s the state of the entire memory market, which is a really painful two years where there was oversupply. And then what happened is device makers, PCs and smartphones declined. And then you even had some declines in non-AI data center memory and storage. So that’s why you see these companies, and whether it’s Micron or Hynix or Samsung with negative gross margins. It’s really tough and some people automatically move to, “Hey, it’s a poorly run company.” No, folks, this has been the cycle of pain for this market for 30 years. And here’s the good news is pricing is stabilizing across every company including Micron, and they showed that with their margins and also their profitability.
And I think the difference is in how you show up for earnings has to do with cost control and investment control. And that’s exactly what Micron showed when you look at the bottom line, albeit it’s still a loss, it’s a lot less of a loss. So they’re starting to get pricing power back, their operational, I guess I would call it operational excellence is key in here. And we all have to look at the future where I would say six or seven years ago, Micron was not a leader really in any technology that was out there, and I’m sure that’s debatable. But then with new senior leadership, they really turned the corner and started putting the best of technologies out there to give folks like Samsung and SK hynix a run for the money. And as I look at the… I think there’s going to be a second half supercycle for AI PCs and AI smartphones. I think it’ll give them a lift and it will all come together. That’s my thought.
Daniel Newman: Wow. Well, I think what you said that’s probably most prescient is that this is a boom or bust industry, substantial boom or bust industry. And the bottom line is that these companies need to rake profits in during the booms. And they need to be very cautious during the gullies, and the gullies are substantial and they can be long-lasting. Now, one thing that’s happened as technologies proliferate is the cycles have become more volatile and more contracted. Meaning that the period of time of which these booms and busts happen seems to move quicker because innovation cycles move quicker. So for instance, the innovation cycle that we’re moving towards with AI and AI PCs is going to fuel demand for memory. And that we know that in 2024, second half, the AI PC is going to become substantially available in the market. That’s going to create a supercycle of buying for PCs both commercially and consumer.
We also know that Apple has every so many generations of iPhone is a real supercycle. They’re iterative, iterative and iterative, but then they’re going to… Or even you look at the Vision Pro which came out, which is going to create a whole new wave of demand for silicon for XR, and the Metaverse, which is apparently coming back to life, maybe possibly if Apple decides to drop the price below the monthly payment of a Ferrari for one of those things. But anyways, the fact is that what you’re starting to also… And if you’re sort of a market prognosticator, memory is a really important watch item to understand what’s going to follow because the demand for memory starts to jump as the expectation for volume in certain areas starts to rise.
And so memory has been pretty much attached lately to just compute cores that tie to AI. And I’m talking mostly the data center, which has really, really created a lot of friction for Micron and Samsung and SK and all these companies. So Pat, I think you nailed it on their results themselves, but I think Micron’s done a lot more innovating in the last several years. I think they’re well set up for these trend lines that are coming. And good report, overall good momentum, not a great report, but a good report and their momentum is good. And it looks like the outlook for memory as part of this silicon ecosystem is going to have a better year in 2024.
Patrick Moorhead: Yeah, although most of the times I don’t think the stock market knows what they’re talking about. They’re up 70% this year, so I think they get it even with negative gross margins.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
