Micron Technology posted a strong set of Q2 results in the last week of April. Revenue by storage business unit was 968 million in the Q1 of 2020 which has now grown to 1.26 billion in the Q2 of 2020.
Revenue of the segment computer and networking business shows a growth in the previous 3 quarters at 32.85% in Q4 of 2019, 38.47% in Q1 of 2020, and 41% in Q2 of 2020. This increase comes at a time when people are buying laptops and working from home, taking online classes buying more products online as social distancing is the new norm.
Whereas revenue from the mobile business unit which had jumped to 30.5% in Q4 of 2019 from 16.98% in Q4 of 2018, has fallen gradually in the previous 3 quarters from 30.5% in Q4 of 2019 to 28.32% in Q1 of 2020 and 18.14% in the following quarter. This is because of the disruption in the supply chain due to corona and the lockdown implemented in the manufacturing countries. Weak smartphone demand has led to the fall of revenue in the 1st half of 2020, from DRAM which is the main component of the mobile business unit.
Rising NAND prices are increasing the revenue of Micron as seen in the Q4 of 2019 at 23.94%, Q1 of 2020 at 27.64% to Q2 of 2020 at 31.56%, which shows the revenue is increasing every quarter.
Revenue from DRAM is at 3.08B in Q2 of 2020 a fall of 3% from the previous quarter.
The positive side of the supply chain disruption is that the prices of DRAM and NAND could keep increasing. The company can make the best of this situation when things start to get back to normal. So, you can take a calculated risk to invest in the company as it operates in a situation where corona would not impact its growth.
Micron has announced in its press release that it will ship the industry’s first DDR5 DRAM mass-produced for smartphones and will first be seen in Xiaomi’s yet to be released Mi10 phone. Looking at this development you can be confident that the revenue from the sale of DRAM will keep increasing in the near term for the company.
The spot price of 64Gb 8Gx8 MLC shows a sharp rise in prices since mid-April. Whereas the spot price of 32Gb 4Gx8 MLC is gradually increasing since October 2019. Analyst predicts that the price will continue to increase in the near term.
“Micron delivered solid second-quarter results and revenue at the high end of the guidance range, despite the unfolding COVID-19 pandemic,” said Micron Technology President and CEO Sanjay Mehrotra. “I am grateful to our team for the excellent business execution we have achieved during this unprecedented situation. Their resilience, together with Micron’s technology leadership, stronger product portfolio, and healthy balance sheet, give us confidence that we will emerge from this challenging time well-positioned to capture the robust long-term demand opportunities for memory and storage.”
So, what now?
Disruption in the supply chain due to corona has caused the rise of the DRAM and NAND prices, which although in favor of Micron can turn unfavorable and hurt the company’s business. The company is aware of this situation.
Investors should be prepared for the ups and downs of the company’s stock, on the occasion of weak demand or problems in manufacturing arises. For instance, Micron’s operations were disrupted in Malaysia when the country’s government ordered a lockdown.
Micron overcame this situation when the government added semiconductors to the list of essential services. Micron’s problem was not solved as the company had resumed operations on a limited basis and the Malaysian government had decided to extend its partial lockdown. The company might take some time to recover and return to normal.
Micron’s operations are spread across Asia in countries like Taiwan, China, Singapore, South Korea, and Japan. The possibility of supply chain disruption remains in these countries as the COVID-19 spread is not under control yet. Analyst predicts that Micron may not be able to match the demand if supply chain disruptions continue.
In the near term, Micron will keep benefitting from the rising DRAM and NAND prices.