Micron Technology (MU)

Farhan Ahmad Head, Investor Relations
Sanjay Mehrotra President and Chief Executive Officer
Dave Zinsner Chief Financial Officer
C.J. Muse Evercore
Mark Newman Bernstein
John Pitzer Credit Suisse
Ambrish Srivastava BMO Capital
Chris Danely Citi
Harlan Sur JPMorgan
Timothy Arcuri UBS
Blayne Curtis Barclays
Call transcript
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Good day ladies and gentlemen and thank you for your patience.

You've joined the Third Fiscal Quarter 2019 Financial Call for Micron Technology. [Operator Instructions] As a reminder, this conference may be recorded. I would now like to turn the call over to your host, Head of Investor Relations, Farhan Ahmad. Sir, you may begin.

Farhan Ahmad

to third welcome financial quarter and call. conference you, Micron fiscal Technology's XXXX Thank

with are being Today’s me and call and at length. the On today investors.micron.com. the including our Dave approximately minutes audio Chief Investor This be website call, CEO; is Sanjay Zinsner, Financial from will Officer. also call slides, XX in webcast and President Mehrotra, Relations

be a presented website to contains be a reconciliation financial the short filed while and along website, our release, of A ago. on a addition, found basis In results non-GAAP financial convertible capped press will on non-GAAP specified. may unless debt discussion Today’s dilution earnings call our with financial otherwise measures GAAP of table.

from be replay remarks today. and As website later the this available our a will prepared webcast on call reminder,

monitor the for quarter company, We website encourage the including financial on be you various information will conferences information most to throughout at we attending. the micron.com the on our current that

at can us You follow MicronTech. on Twitter

As uncertainties forward-looking and statements. made materially a statements statements discussing today the risks forward-looking to we include matters from are subject may results reminder, to These cause today. actual differ be that will the

the most you that XX-Q, documents with refer specifically our file future our affect may to We a discussion SEC, recent the Form and risks XX-K we for of results.

we Although we achievements. believe guarantee future cannot forward-looking reasonable, levels that in results, activity, are reflected the or expectations statements of performance, the

of to any these today’s duty the no to to under update statements statements are results. forward-looking conform We date actual after

to call over the turn now Sanjay. will I

Sanjay Mehrotra

performance and discipline. from price cost headwinds delivered technology Good strong third Farhan. results fiscal declines. reflects industry pricing despite reduction, execution continued and you, product everyone. on oversupply Micron steeper-than-expected advancement, our solid Thank afternoon, This financial quarter

even profitability, and Our healthy the emerge foundation industry team winning for when sheet, the environment to us structurally recovers. stronger set balance improved

IoT. The autonomous demand relationships memory responsive products, and advantage new a storage these and take innovative We the well positioned supply driven as trends such AI, that with is are is broad vehicles, chain, secular to and worldwide. compelling, for confident of outlook with customers XG, long-term by trends, Micron well-established

healthy few reinforces for have progressed our This of bit that inventory last largely year-over-year declines bit second growth our markets. expectations the is the in will with elasticity in, confidence most most XXXX. in increasing half response in NAND months, return to end demand markets Over line in in over demand year. DRAM calendar the kicks improvements price to last also customer as

end are customer of as most elevated. Even inventory producer NAND across levels levels inventory improve markets, DRAM and

industry cuts Although will CapEx discuss provide second will an CapEx to overview previously results. of but on is will supply return to cuts shortly, start I healthy be first, our let industry the calendar required supply-demand of to impact in balance. bit a announced that actions this assessment our further half FQX supply front the and our in year, the me

technology, XXXX Day, our solutions. related our and high-value priorities discussed At cost to we competitiveness, Analyst

Unlike of basis improve. has the downturn margin in peers profitability declined, relative profitability last improvement on our these now XXXX. yielded execution during to strategies continued relative to points since relative X,XXX Solid Micron’s has downturn which over our EBITDA this

deliver fiscal track DRAM, to In XXXX. good on declines are cost we in

cleanroom Taiwan, on of expansions year. wafer we opening the month in enable XY to making nanometer toward Japan. In our These Taichung, the node fiscal of DRAM XZ continue ramping cleanroom progress new and cleanroom increase next we of in capacity. new this April, our will future earlier We mix and transitions are ground Hiroshima, excellent existing a broke announced

healthy on cost to fiscal XX-layer achieve our NAND are track we XD XXXX. NAND, In ramp in continue declines to and

XXX-layer gate technology. We our uses which NAND, continue on XD to make replacement progress

the with expect we discussed this replacement node, we occurring the gate the node. on last call, transition As on partial full a portfolio to second-generation transition

DRAM the account products facilities In cost total these assembly NAND, are also requirements. transitions than half packaging improving by structure facilities. for we of more our our These in produced percentage now and through of addition node increasing to captive back-end

are captive with integrated front-end demand, Our product responsiveness in tighter greater and costs. enabling customization, control, shifts tightly back-end to lower operations our quality improved systems,

High-value the shipments than account SSD of to solutions cloud our for further large enterprise NAND new in of markets. for data more NVMe now OEMs, launch qualifications X,XXX progress. our strengthening portfolio NVMe are in SSD of SSDs center made customer We doubled more progress two-thirds revenue over revenues. We and PC and client our with

this our reminder, technology. new with As is NVME own controller built drive a

driven bit shipments Micron NVMe SSD well SSDs. on and team QLC continues consumer reductions cost our execute by increased to the solutions. sequentially, of approximately on growth high-value XX% Overall,

we ability operating our industry difficult progress in our visible While shareholder our are drive in our to and a environment profitability confidence is value. reported in increases today, long-term

Now highlights end turning to by markets.

which later and call. will Dave the was discuss mobile by restrictions, trade Our I in impacted business U.S.

as will foldable such and advanced drive innovations ahead, growth XG, cameras products. our Looking for phones,

DRAM in Our recently low-power the DDRX, Mobile started the are and portfolio market. of leading we the On sampling best-in-class power consumption. products industry features highest-density die

make progress products our UFS on to managed second-generation good our as product with endurance. NAND launched best-in-class recently continue well, We and

most are inventory customers corner Within normal the center turning on approaching levels. and the are data market, cloud inventories,

for and sequentially our early expectations, cloud quarter, sequential suggest in DRAM FQX. shipments the growth grew strong fiscal exceeding the Our bit trends third

customer normalize are Enterprise taking than previously inventories somewhat expected. we to had longer

for secure well customer In built qualifications DRAM. server GDDRX, with We the second gigabyte expanded growth for robust inventories XY of our our as normalized. DDRX XXXX. sample XX strong us in sequential on high-performance nanometer half positions and we modules saw calendar growth customer graphics, our continue base which to We

CPU started PC In returned growth improve. shortages shipments bit market, DRAM to as the to

fiscal improve. quarter In remains Looking growth driven ADAS auto ahead, strong, in infotainment systems. by slow, bit are automotive, we sales content sales DRAM expect strong sequential in our while laptop as and innovations global fourth growth

low-power products. in opportunity deep the of We industry-leading OEM this began DRAM. growth an uses autonomous benefit our leading their for recently which system, market with Micron ramping shipments high-quality from given relationships, is market most XX advanced share, and our well-positioned to gigabytes customer

want the to Before Huawei. provide about I market comments related talking to some outlook,

As you the added of List. to effective Department’s and of Entity “BIS,” Huawei non-US and Bureau the know, XX BIS Commerce XX, affiliates US or Security, its May Industry

Micron Regulations To to restrictions. Entity suspended not shipping because subset immediately of Through current review, that began they to determine ensure Huawei lawfully determined whether List subject of could the are we and to compliance, resume to a we and products Export Administration subject shipments sold this Huawei a products to imposed are restrictions. review they Micron

last to shipping the Huawei have some We two started weeks. those orders of products in

uncertainty Micron the situation, we are government ship Huawei our unable operations all over continue considerable comply surrounding with or is requirements, be do as to there globally. Huawei. in all periods volumes we’ll and predict and to legal products to will to However, which we able the ongoing time just

actions we additional government further ability ship course, whether cannot our predict Of to Huawei. may to impact

Now turning DRAM. to the market outlook for

As the compared early seen for second demand DRAM to assessment I most industry on demand the mentioned of in in calendar first have the half year, end in of growth improvement, robust our the Based signs we earlier, the bit of markets. recovery we inventory demand bit half. weak anticipate customer

recovery the levels with and growth DRAM resulting excess is Our in supply challenging Despite bit demand producer in inventory growing a have view industry supply calendar pricing the of bit DRAM mid-teens, higher XXXX signs teens. the mid-to-high created industry demand, of environment. early

in that growth the contribute expect trend begin XXXX. later strengthening demand an to calendar will in to We inventory improving producer

the on bring prudent DRAM market Turning to stabilization. to steps to to continues our help be supply, at taking Micron our focus back

expect we calendar supply We remains The the wafer driven X%, are bit growth transition bring XXXX accelerated start growth XD DRAM market the continuing previously the of industry which by supply will to demand announced growth. oversupplied NAND. approximately from to NAND our XD close production NAND market from reductions overall for

unchanged demand Our calendar expectations NAND bit are industry the range. at for growth mid-XX% XXXX

target to adjust in industry approximately announced our close be to growth of starts to the we shipments the from XX%, wafer further reduction We supply call, which lower earnings continue the to taken our in to now rate. half bit result X% will Since actions last growth year. have previously calendar second the demand

both well reductions as to the which NAND of XX-layer legacy our our are capacity, existing for of equipment some capital result lowering conversion, optimizations more as These reuse

previously. announced we

demand recent price from believe industry While is NAND still market stemming supply the the year, is elasticity above this growing we declines. of increased signs showing

are We calendar start of overall NAND the market XXXX. to will optimistic second the that stabilize half in

high are taking the With of production. to macro on manage and balance NAND decisive higher and levels we bit inventory sheet, action our the uncertainty our DRAM of relatively levels

wafer discussed that In reductions action addition taking start to on also are we the we

approximately or from $X minus a this CapEx. Earlier fiscal reduction billion the year, now. of announced to the in XXXX $XX.X at start X% plus we CapEx billion forecast year,

For fiscal be fiscal meaningfully for we plan lower to than XXXX, CapEx XXXX.

free are plans flow objectives. to being still balance we with our While finalized, manufacturing our seek cash CapEx our investments

I’ll to quarter. results now the guidance to quarter for financial fourth turn and over of our it fiscal provide Dave third

Dave Zinsner

fiscal quarter on that the range call. we Sanjay. provided last guided EPS Thanks, guided third range and were within results Micron’s the revenue above our

at levels We and approximately a cash billion XX% sequentially was flow guidance and FQX. revenue down Total down of the basis of further our on also of progress on from quarter was share program. free generated healthy $X.X third year-over-year range fiscal and made repurchase midpoint XX% our

while XX% our we sequentially Huawei, and approached restriction DRAM reached fiscal Both negatively would XX%, $X prior XX% Compared impacted DRAM second quarter, high were on the of roughly ASP bit from of revenue representing without flat. and by quarter. revenue XX% revenue. DRAM revenue shipments the guidance. DRAM which total NAND revenue were approximately the was billion, year-over-year declined decline to to end have sales

the last to as shipments fiscal impact third was XX% declined of the we revenue. NAND sequentially approximately quarter. bit billion, sequentially representing from guided XX% DRAM fiscal in quarter had increased XXXX revenue on call. relative second declined earnings XX% $X.X would and If for our not Huawei, total revenue have quarter’s NAND of

percent Huawei component expectation to quarter. than Overall range, impact, bit mid-single-digit NAND stronger mid-teen’s percent the in Adjusting prior better the shipments while the for to ASPs the compared sales. came declined shipment quantities range in declined our due in

quarter. of to business be market unit. was revenue our segments Business the the continued major cause Unit Networking across down to prior turning billion, Revenue Compute $X.X by pricing Lower leading for year-over-year trends revenue. XX% lower Now the XX% from and and

volume fiscal graphics in growth to levels inventory client. in customer shipment third normalized and particularly quarter, led However,

Revenue fiscal quarter $X.X down due to shipments XX% to for was volume down part DRAM and pricing drove Lower Unit quarter-over-quarter lower billion, decline. year-over-year Huawei. in XX% and the Mobile Business second from the

fiscal managed to quarter portfolio bit Our increasing strength by show with NAND third in continued shipments

over year-over-year. XXX%

from adversely of was and XX% XXX impacted second almost Revenue adjustments The and by Embedded XX% revenue down margin from was quarter. macroeconomic inventory of represented margins quarter. EBU million segment. fiscal weaker prior the consumer year industrial, XX% in the down Automotive broad Unit and gross pricing, $XXX basis only revenue with down Business showed weakness, the points fiscal strong which resilience, last from

third quarter The the unfavorable completed Business pricing and on comparison revenue Finally, in was and sequential by quarter. down fiscal we volumes Storage $XXX quarter-over-quarter. large off Unit driven decline component one-time an prior was XX% XX% sale down competitive million, year-over-year a the coming

XX% Gross margin The for related year fiscal approximately was to quarter. impacted NAND to was Lower DRAM both the in prior in the IMFT. XX% consolidated lower and quarter basis charges margin fiscal driver primary XXX points, underutilization were gross negatively third the second to due of pricing by quarter. the also in XX%, fiscal and margins in compared

were China from XX%. imports tariffs. XX% to as XX successfully margins, from point margins gross mitigated remained on approximately Fiscal above the tariffs have than quarter gross impact NAND of impact less we basis U.S. third

$XXX of million within our well were expenses guided Operating range.

to from execution future strong cycle. while prior goal is on nanometer also OpEx mobile-DRAM expense our product on of internal invest benefited our our expenses to products control, calls, and throughout said to Operating the with of qualification XZ we’ve in remain technologies with ahead respect As disciplined continuing schedule. market the

tax points from in due margin billion, XX% points profitability XX benefits down solid FQX, operating delivered included and is representing of change percentage to revenue. XX.X% tax change in income in law a FQX. annual the This of million and to XX Non-GAAP fiscal state We $XXX taxes from a of $X.X year-over-year down our X%. with rate third favorable percentage quarter

the down year-ago and the higher Non-GAAP in quarter. earnings prior was of $X.XX from the to tax EPS in $XXX down $X.XX, per quarter non-GAAP was quarter third fiscal share Fiscal the in quarter $X.XX million $X.XX due third from benefits.

from in contributions, capital of flows still CapEx cash billion, meaningfully lower third-party prior $X.X cash to $X of XXXX. and we billion CapEx the at was quarter. however $X.X expect quarter, in billion, spending, net fiscal generated spending, approximately representing third billion we revenues. from in Capital Turning We $X.X in approximately down operations XX% expect XXXX fiscal fiscal the

flow the approximately net X.X approximately $X.X fiscal second In representing compared quarter, in fiscal quarter back cash from defined in $XXX $X of free quarter, shares. operations less bought adjusted flow, the to million, fiscal the cash quarter. in our and third as million third billion stock $XXX year-ago was the CapEx, billion We million

we’ve share converts, the shareholders since fiscal we outstanding buybacks, the XXXX. fiscal Combined billion third by year-to-date, of share of to free redemptions the $X.X returned approximately flow. our quarter year-to-date outstanding For of over which in reduced have count cash represents X% form with XX%

and enable competitiveness, cost-effective philosophy returning throughout of XX% to transitions We maintaining to cycle, liquidity shareholders. of in back-end to cash capital free investing over and will continue prudently to cost assets node flow the according capital manage our

increasing Inventory the of or at second fiscal quarter. with inventory ended at fiscal inventory the fiscal of outstanding, using ended quarter $X.X the days quarter. $X.X third end for third the XXX from our The billion average balance XXX quarter billion, days

constrained bit we calendar supply make will be to As gate. XXXX the on the as last transition mentioned replacement we call, NAND

growth, demand XXXX of are bit higher levels expected XXXX. calendar NAND in meet carrying we To inventory and

We higher-than-normal to inventory supply of balance. work and project getting industry demand calendar in levels XXXX also DRAM as toward into carry

$XX quarter a quarter-over-quarter, our at Total while billion a Total cash announced FQX. quarter ended $X.X sheet. $X.X the of we and balance largely of completed liquidity G quarter-end, billion, healthy exceeded our billion convertible at notes down in maintained as last Series redemption result

announced of joint venture XX, quarter quarter, October close that the will acquisition is XXXX. during we the the In fiscal of IMFT be which first our

third financing, $X.X We be expect of for also to of debt was used Intel’s end the the share which repay A member approximately to billion at payment approximately $XXX quarter fiscal IMFT. the will portion pay million. of

NAND Now, that, over-supplied. turning to bit outlook. our see to markets said financial remain signs of DRAM starting some Both and are improvement. Having the demand we

strong for bit shipments As we the quarter. graphics, bit fourth fiscal the DRAM expect quarter, Sanjay in more by mentioned, followed our markets normal PC growth first cloud, growth fiscal in in and

in growth benefitting from for elasticity limited, our mind, while will of fiscal shipment in, non-GAAP is the In SSD NAND, is that as industry to the kicking With our FQX guidance fourth ongoing the in transition due bit our be portfolio. quarter follows.

million, Based of $XXX be plus in expect be diluted $X.X be We basis billion, fully plus gross in we expect shares, $XXX to range a $X.XX, to count plus plus million. million; of minus revenue minus margin expenses the or points; to to and be of minus share XXX or XX% billion the range operating on or EPS $X.XX. or X.XX approximately $XX approximately minus

strong geopolitical execute and initiatives continues to industry the despite closing, key challenges, In remains on and on Micron our footing. financial

free cash relationships with and margins focus our a will gross We cycle customers to flow. draw manage strong on our with and this on through continue

Sanjay now to some remarks. concluding I’ll turn over the for call

Sanjay Mehrotra

Micron for the been industry. Dave. you, fiscal challenging has Clearly, and both XXXX Thank

that While that fared the the on we and we the solutions. costs, year of confluence impacted our due the events stronger, high improving to technology, advancing product increasing is we believe value continue structurally unprecedented. have our industry progress was better tremendous to have this made mix Still, of

said Having not continuing that, Micron’s ourselves. are for on Recent the are recent profitability raise resting accomplishments our and sheet we that balance industry best-in-class. show financial bar and results are to

reflect and Our and cash free CapEx focus on controls expense our flow. profitability

term the the continues beyond future. about I’m industry, challenges, excited to looking But challenges the uncertain. Micron’s facing economic With trade be near these and

in and autonomous the the lives, value in customers. the XG, innovative, and improvements secular innings drive drive bringing of the economy significant to will solutions to IoT in cloud value our new forward to AI, numerous computing, going applications. look our early of We in growth data storage-intensive is memory we and market-leading growth of our are and in vehicles,

and audits fourth to facilities scores our which the our live and world we In XXXX. Micron’s our annual practices. our April, details industry-standard business of perfect we products We environmental XXXX through and sustainability social in issued on in report, achieved enhancing commitment

is Our our both sustainable of driving I’m improvements at an practices ongoing important we execution and and the potential part culture differentiator the our building. are the and competitive of us employees, a energized ahead are by that we and focus proud in of Micron. and for transformation customers of innovation

We questions. will now for open


line C.J. Evercore. Thank of you. first [Operator the from question of Instructions] comes Our Muse

open. is line Your

C.J. Muse

the granularity question. first you Good for taking hoping more could little guess question, afternoon. Huawei. you a I provide I on Thank was

where you you fiscal expect the both proceed through, at believe ability impact of and guess, year. I you least about They a in talked of to walk kind we sell are, where subset are do quarters as customer can coming NAND? products, What not? I across the you allowed, [XX%] are You quarter DRAM

Sanjay Mehrotra

a So, the as subset could of of you and Huawei list, analysis the to compliant Dave And of certain it ship review that administration we because on of after regulations. shipping we noted. our regulations had remarks, lawful against our began is prepared through determined that we export it I said course, in required placed Huawei those it impact entity products to products the as was to were products, that know export our previously continue is

our beyond what because FQX is, In And of them ship with would we be year the XXXX ahead could we look impact that if course, were that on revenue. revenue be been nearly list have to then I revenue What entity And what our our well, FQX, on to was with an say time have listing. our not would have product FQX, less as FQX, entity if than there they it to Huawei in otherwise compared we impact million. had would continues would be $XXX it fiscal Huawei would if an for would not any been on to the the at not listing. entity in of impact as Huawei Huawei

though the of and supplier all we across in there. is there, growing of in share terms course, terms penetration full it to continue we work of to our customers the we our customers in other up those, in XXXX of were part to And through adjusting be and shortfall plan and will end but – we all all parts continue with are make able make this markets Of a a the to of on other would fiscal globe several presence business. year will if not to our those we

C.J. Muse

very And I if helpful. That's could …

Sanjay Mehrotra

it And the as NAND our of as affects side business. both DRAM, the well

C.J. Muse

implications you. And up more a CapEx, cut. part Thank if guess, And could we of great. on focused there? Thank meaningful on Okay, meaning territory? I talked as you. follow about DRAM, how I the both, is is about should you that, NAND, think it meaningful [indiscernible]

Sanjay Mehrotra

So, the CapEx, finalize we levels. next more in call with our as reduction from fiscal details provide we we respect said to the in XXXX plans. CapEx have year will meaningful And

to and growth. technology growth with with mind goal product our cost aligned demand in of have respect our to course, our most Of have considerations to bit bit our long-term is capability, importantly supply expectations but

requirements year XXXX year of applies fiscal demand in and both the course, help when CapEx carrying as inventory in growth, at fiscal reduce management, And our DRAM, NAND, fiscal NAND, some XXXX the our supply will as supply well well look in XXXX as we we DRAM. us both of to we that for of enable year course, and year from CapEx XXXX to which are fiscal bit into as requirement mind keep us


Thank you.

comes of Our Bernstein. of line Newman from next question the Mark

please. question Your

Mark Newman

you follow-up more XX% the on be for first a the call, guidance, hi. can mentioned my able I continue growth also really on quarter? following don't some your next you expectation yet question. for guidance to so And export taking can mention my the bit think And us on a have Yes, little Thanks can the if growth give revenue bit you And or about that you Thanks. I quantification much your – for have give Huawei, to you for this Huawei? expect bit taking to following the how question will quarter? on question. earnings you for

Sanjay Mehrotra

our I've entity as is So, without list. Huawei to with respect would in than before, been said being fiscal less it the expectation revenue what on have Huawei, QX

in we basis. of customer terms get customer that by revenue a Beyond don't on etcetera really into specifics

Of with $XXX revenue expectation billion guidance, baked for And is of Dave course, second Huawei with minus question, our your the guidance to FQX revenue provided into … $X.X that or respect plus million.

Dave Zinsner

be bit environment. be more on growth, fourth meaningfully the will So, would NAND we modest in it DRAM up quarter, given said the

Mark Newman

severe very looking year thanks clearly quite Thanks, question and with step My you know at much taking challenging but a has just Okay. looking year, your level Dave outlook, economic little XXXX, and XXXX forward not been the industry, on you utilization moment, back of depends danger oversupply, looking potential much supply a seems but final of some Sanjay. a like coming, some could to be CapEx guess from really next utilization very competitors the next at this the unpredictable pretty year, about is there think it under curious the I and making will be think it on bit the forward just the because point for a to curious at there are similar guys I'm with with and you you of that you're just cuts, year? and which cuts what I'm period in is CapEx, thinking to of inevitably how it do time. a under me, supply just that this matter Asia, of

Sanjay Mehrotra

to in with for both demand CapEx are we supply and line we in expectations as growth, as and as managed both it's persist well. and the as bit industry well therefore well situation over as while bring talked to have made, oversupply well as does the growth environment the bring is that pricing NAND supply said, increasing as cuts now, inventories challenging with growth line the in about is time important bit And oversupply as has So, second in DRAM, in right have demand in NAND. DRAM, in the DRAM, half

year this So, we few next we of guidance industry are are demand quarters. of providing supply but not targeted the the here all to really and over a the fiscal taking at point, are XXXX balance that restore course actions

Mark Newman



you. Thank

the next Pitzer Our question line from of Credit comes of John Suisse.

Your line is open.

John Pitzer

for questions. ask on execution the given the industry solid me Sanjay, letting Thanks congratulations the conditions. guys. Hi,

going your Just the to clearly that, I CapEx biggest CapEx up that CapEx relative back the XXXX down. the just year are to of you with to gaps in that to cost kind peers. questions, year Sanjay you're still with much some the the us for of fiscal closing plan level get comfort that curious, initiatives strategic actually which fiscal had actually about cuts of talking been important peers you're slightly bucking help the very it versus one And cost despite tool have peers? do would your those you’ve trend has guys gap taken try on sort argue close is I'm with this a pretty to

Sanjay Mehrotra

our have you as made with in in noted, and position performance. that tremendous So, improvement to our certainly and reflects we respect our financial peers cost

As value course, solutions relative by portfolio. solutions X,XXX to cost remarks, And to well in we has that's our the cost as high previous well really improvement noted front. of have respect go points and our as front, on execution with room margin because on high competitiveness, as strengthening more prepared value execution the basis the was improvement, on the improved margin times our of from as

feel make keeping future and make free on supply with flow coming our our extremely of side, you the going cost when are the should and we our XY the know our we good supply our forward on on coming about we this important and course quarters feel most and total cost we driving course course, DRAM, we us as our the inventory we and But supply to good in XZ in be expectations we few to inventory of our look them opportunities, next matching decisions, that from focused well based bit considerations our CapEx So, over our demand on growth improve about to cash our continue competitiveness position. mind is and very from future as as available progress XX-layer. off at of

And talking a the next year. even in and CapEx cost in both about, DRAM be with reductions to that position we'll we’re good with overall, respect NAND

Of replacement deployed gate first not the it will course have NAND, be talked sense generation be node, node across small a in products set in small we will and a about will that we our of that significant generations first meaningful generation us benefit cost generation will second have the the floating node. compared to node, benefit, node gate cost but of any gate gate replacement give last from replacement

we objectives. are managing terms top game on So, of of in cost the absolutely to our

Dave Zinsner

think we example, being acutely in regard bringing example the that was structure back-end high doing affect I'd the to. know, that isn't our of very cost some We and one of only solutions. outsourced that activity node back-end improve drive product the cost to the Sanjay were focused just this that we we can the also but we're are already so on for is, way In improve way add that, we the internally. you mentioned value other we can our transitions margins, gross

drive many can the cost to it. there So, improve we are ways

Sanjay Mehrotra

space And is, was prepare this of technology capacity, to one that actually of of to And know part. from part one you mentioned, thing technology our in add billion that tied before, for CapEx the be year I transition. that may cleanroom of meaningful would facilities, meaningful was the remarks for facility fiscal transitions. a as expansions our that that really any for had cleanroom us transitions course, technology around CapEx us for but XXXX, but we not enable and Again, in same to manufacturers, terms $X overall other not spend, in our manufacturer you to as any targeting meaningful noted

John Pitzer

on of David, as build are answer quarter? clearly NAND reflection gate. exiting make of inventory we inventory, cycle, Thanks as a I'm fiscal but how question, should you is transition the that are think is investors wanting burden it's added the just of about And a the metric then key you somewhat levels Sanjay. at. looking to clearly we fourth of where And curious got inventory you've sort to replacement some the in the inventory this kind

value controlling So, thinking as write-downs, this utilization that? how so I if coming about environment? And is inventories way good then of apologize, the of the sort a of sort down you're question, potential just normalize part for was lastly talk down, of CapEx in look the how of coming about you you can the would for inventory, inventory

Dave Zinsner

John. A three-part question,

so inventories the now. obviously right Okay, are elevated

As kind one our the in And of design inventory of you us. for out, level is drivers of point by big is that NAND. increased

trying inventory XXXX gate. up transition in gate replacement going make first fiscal much doesn't to very are bit replacement the XXXX, us to going because this build for Replacement growth we drive to We into node some are us gate. for in

need – terms so, of exact on to [overage] of And our don't that's know the demand, chunk in I inventory days. in decent draw a meet and order we'll to but the that's number,

now couple building cloud of pretty space, inventories in of a to place space. was place, course growth their our we the in sheet. PC up inventory that down space, calendar the XXXX a first of inventory had other working in be so inventories a expect Sanjay little more bit the do a of year get in The of DRAM. mentioned we're was good the elevated quarters graphic bit balance is had of seeing we're and good in in level customers in We aspect That that in the function the of and

come to start now. And to so, to we see would start expect down inventories

may a the that calendar don't We then any look at optimal place perspective, really but by levels, the get inventory not spot carrying. a write we about that, think kind reserve We would certainly that's relatively inventory see from with quick down a we're be that quickly $XX in From be of the to DRAM to perspective, a did with we expect a specific of healthier does not Huawei that. quote and year, unquote inventory Huawei. finished like goods did to be Outside place. down so end good sold, quarter write we'll of good million in an I of this after risk obsolescence going we in

with very a position, good got it very it's think good inventory. demand We cost good that inventory,

So, to relates have obsolescence. any unlikely it to issue as

any to with you with lower have to sort cost inventory. the is course concern of market other issue the, yourself of The area,

you cost can in danger I really write-down quality think of with gross lower by having kind the to of associated market. we margins any of not guess that are our

don't really a reserves. that kind of big outside quarter with we terms we with time of to Huawei So, issue inventory time, issues in or deal with write-downs I see like of from these one-off did this

Sanjay Mehrotra

that approximately XX% So shipments shipments just the before going were to that In next were QLC mentioned I quarter-over-quarter. up comments, question, to I small say to correction. up a QLC bit wanted prepared I the make meant XX%,

So, just to think wanted And that to now next I can the make correction. we on question. move


you. Thank

Our line next Srivastava of Capital. comes from the question Ambrish BMO of

Your question please.

Ambrish Srivastava

and and was CapEx the best free that little make about customer, single-digit. the mean we see I this. want appreciate specific at you back much. want quarters last If to up talk on very here two good a go bit exclude on will reported you if be any – shipments that discipline that if triangulate understood Huawei I and thank go you that to Sanjay, sure confused, the you if I Dave’s to don't also I focus you with just flow. but cash would Hi, to

you CapEx that, had of is hence the right certain lower think And because and being be for to Are what's it? to handicapping about your of the capacity you a So, list way that impact? expecting follow-up. are your includes taken a amount CapEx, offline Huawei the then to how question CapEx thinking XXXX, continue I this in fiscal on quick

Sanjay Mehrotra

I So, XXXX be in able just there uncertainty you to point think next our etcetera I we obviously fiscal year earnings call. more related would will out details is to that considerable here. CapEx provide

as on Huawei, with can control, really and in well rather China U.S., staying As respect optimizing to situation respect as the of see from you we can actions. we all fluid our are what just course matters focused trade remaining to and nimble with

XXXX we plus, from down that last our You now. year course billion have CapEx to $XX.X over minus of one for have managed how fiscal seen X% billion the $X year

and vigilant at provide in respect But to meaningful to decisive stay a CapEx fiscal to are with XXXX. details, better the continue be in So, you with information year we call. actions we reductions making respect position we further to will earnings next the

Ambrish Srivastava

as I target be Thank that should the thinking for and you. appreciate you, day not about we of it's Okay, a a go next that what's the Sanjay. we through DSO multi-part And quarters? or couple then follow-up, as AR quick

Sanjay Mehrotra


So, this we it it got quarter. and work did up of kind there down

there it is that have I drove kind that to the challenge should quarter it like a couple somewhere it this the would about little say got of we that a hit we'd up down customers And point, of to think ideally, ideally, it us be extended a and bit. of they terms bit at kind in mix be XX mid-XXs. in a of I but days. was XXs,

Ambrish Srivastava

Okay, thank you. Good luck.


Thank you.

comes Citi. Danely next from Our of Chris question

Your question please.

Chris Danely

Thanks guys.

tariff mitigated I of the think XX% you've said so You far.

looking $XXX estimate Now goes to Can impact business we're your at in that you if tariffs. approximate the another through? billion

Sanjay Mehrotra

I say list we like. that what for looks don't sure we the as course, know would of

from the XA, list. second We is the XB, what on minimal us based and incremental the affects first in have contemplated of general seen two there what we've then a Most sense was list. impact

Chris Danely

impacting is driver follow-up. and issue development the change XG, Got ongoing Sanjay have of big development that about of any the you XG it. Huawei for And like then the my in with out talked standards seen there? the the

Sanjay Mehrotra

leading be than that for course in there countries started And to certain I is mind keep such and soon has XG as in are Korea to XG. already other So, well as suppliers, Huawei think of deployed, tell. too it

how course memory doubt So, of the in will bring but in is know storage, IoT the on machine-to-machine will quarters, But you deployment here. and this front. be smartphones, greater no that to over applications about only occurs XG remain also seen for next not in particular few there

course storage this of the meet tell. the we absolutely really course, years. to all of And requirements a That we happens will with exactly over the what and term, drive I aspects, of is and in respect greater of But remain think for well in fashion XG, Huawei many demand business. for it growing prepared, terms next think near to provide to flexible too demand soon will memory

Chris Danely

thanks Okay, a lot, guys.


Thank you.

Our next question comes JPMorgan. from go of Harlan ahead. Please Sur

Harlan Sur

and question. cost second just compare early us can first understand reduction DRAM, this transition thanks downs the qualitatively Good this XY in you of to guys move to year. profile the your Maybe the calendar versus as for given afternoon you XZ move, half help that the my of taking In and year? cost half

Sanjay Mehrotra

cost talked terms on cost are these ramping the of to continuing drive nodes I don't nodes as about, with transitions, well continuing and as second execute well. respect And to break we we nodes reductions cost you the said that as XZ of the XY out versus and we to With course, respect our well half to declines, first are up on as in plan before, half. declines

guidance, reductions that FQX, as into cost for takes expectations the decline gross margin baked as price assumptions course, account FQX. as of Of for course of well are our our into well

cost but into to it keep and baked as nodes wafer the really given scaling and give we challenges is that per the the of – explained technology just capability. less have in reduction we break compared from less is prior it, technology that bit less the cost don't reduction coming several nodes down, times because you advance, capability naturally nodes new as growth mind before they of less all So, new

Harlan Sur

Yes, enterprise, is thanks team XXXX the the SSD new its insights family. And in then the there. cloud announced for series this their in NVMe, back April,

that's better think for sustain helped your NAND and SATA profile a business. solid enterprise with you the I margin cloud had to in guys have momentum family and

been So, like customers anticipate and design momentum start do what's XXXX series products? on these ramping to Thank when cloud NVMe the you. new you win the your

Sanjay Mehrotra

terms to will year time from that these NVMe would products and of and actually introducing over traction have talked with calendar And of and SATA enterprise NVMe over discussed gaining basically had course months As fiscal year getting next we some we during later consumer period that of our OEM for also a be XXXX, of today. with that we now that mentioned qualified in our of and the first we started be in customers, cloud will applications transition NVMe. why customers for the with year XXXX, and NVMe of drive the we our past XXXX NVMe that's few take by about course in terms us

these investments well to to not very product and want in years remind just couple We that I have in do continuing to noted, and Micron of significantly ago, investments in began well did increase marketplace. we couple actually development. you are NVMe of you did as products it very SATA in NVMe the development to takes and product a years ago, our while have

we expect our as the share get gaining ramp NVMe all and as production, with customers adopted XXXX, NVMe solutions to those in into be XXXX So, throughout by timeframe. do our we

Harlan Sur

Thanks Sanjay.


you. Thank

Our of next question the Arcuri UBS. Timothy from of comes line

please. question Your

Timothy Arcuri

a you're bit, cut couple does a have to starts you're quite CapEx, CapEx cutting out lower how wafer on ultimately of trying asked going think NAND. negative and been that for good low I year billion and in couple that's mid-XXs impact XXXX cost kind maybe figure been times. expectation And you've that down to some you'd of DRAM, And costs? by how somewhere down like your I'm another was just a to certainly be the that in you've be would kind DRAM downs down costing been of and mid-teens of

trying fit those sounds does just saying it of I'm your effect yet so costs, like Thank So, an on to it having that two things? much you're you. not

Sanjay Mehrotra

in we'll view, know you position good gives smallest the you industry us the remind to I'll we array implications has with cost and that under Overall, be have. of capabilities node What one we to I'm not will with it from point our cost cost that on our saying node. meaningful effect that reduction underlying just die cost. have not competitiveness technologies will respect position saying give that that – cost I'm good in the next good be from our NAND CMOS in is the and No, us the size technology for because technologies,

as So, in remaining as expectations, production we cost meeting feel fiscal fiscal well demand year will and about remainder driving overall, of competitive. well XXXX that technology year mix good we terms the as through the the XXXX, as our be through of

Timothy Arcuri

in I much year-over-year? almost of it? just all is CapEx fiscal cut down year this sort maybe you maybe of how year for it to to building that equipment, Thanks. how be is infrastructure And was Is Thanks versus smidge, Dave, going sounds WFE about Is there XXXX. down that. kind guess flat is so in kind to the that billion that think then next to like of buildings related X break that can roughly

Dave Zinsner

So, Sanjay spend, was getting just what kind XXXX clear, $X FY rest said back-end. to was about the of the front-end billion be to is back related construction and

So, capital some for there R&D group and miscellaneous and spend – some forth. is so

that. is more you for I'll year. to have we next honest of kind you, there budget than even not, it CapEx be with completely So, finalized

were not it is but going, there We all have a of pieces good where directionally pretty yet. sense specifically the quite

have like some that I them. that what areas reduction both anticipate and But to is quarter's would wait in call. more so, to do And we'd you granularity around next the give would

Timothy Arcuri

awesome. Okay, Thanks.


comes Curtis from Blayne question next our of And Barclays.

is open. line Your

Blayne Curtis

thanks for my question. taking guys, Hi

of up point. Huawei on the follow Sort

components impacts I'm an I'm encapsulated don't downstream kind from go trying there's be Just whether look want all ship? your sure so country? And to curious to going IP make Just have to as are thoughts phones some able you kind other saying. you just you able then Are just that? of curious sure how another of that to out, to you're exactly that what ability to into these I of ship ship, kind you've and resides understood to continue on understand the because in vendors

Sanjay Mehrotra

complex assess I what And we actually regulations. you ship able can are as that to said that, or mentioned, and are mean two able aspects you such know look what go we aspects considerations ship those and to shipments the interested several criteria to to to before you administration export we as Huawei, if I any limited in ship assess Huawei as is and said, export BIS site we several we those administration regulations not we that's that what we and our began what have for able to and considerations we, made have to our versus they products ship certainly and are weeks. determination and and those or to not through, respect are have just with versus you're you in last have those can various the aspects two these we go shipments products what one is that So, to under

is Huawei to company question and own its decision has obviously this its components situation to respect company With course each etcetera, your around and by a at of evaluate company own other has supply chain. look to

products the products, what to we guidance. baked FQX respect what on is their latest our that to with with understand So, is into that ship demand those is them can we them, and to work closely

as asked out consumers mobile ecosystem know, models, share to point customers the well same. features, to is that may they're the be that that demand end some going mean, buying be of suppliers here going like will across is view consumers that phones of from would to the various at the overall the I and about the smartphone new you phones. I to to The between all as the we be are point What you since smartphone on day the are be with supplier question bought them. really of of based buy, going the there shift occurring smartphones maybe engaged a

all with continue to And our had always other we laws and to comply that know of with and other comply as course best engage well. US Huawei while look and regulations our have to in one continue we'll for was and with we opportunities we growing presence for customers customer, you business customers course, operate in. we continuing countries those with to Of laws number always matter optimize that regulations

Blayne Curtis

just channel segment data and of the center, what curious then thought of ago, maybe pace kind have there. that just of had quarter I important you kind you the health pace encouraging Thanks. on just versus to you ask did comments, a Thanks. cloud and an the the some And on recovery recovery obviously wanted of of

Sanjay Mehrotra

… recovery of Pace

Dave Zinsner

In data cloud and center.

Sanjay Mehrotra

in of the of the said and data that Except year and worked quarter I as late in noted our NVMe remarks as portfolio our as had with inventory we high operated fiscal enterprise, mean, to bigger last well center. cloud levels. as course, first to you as area the solutions robust well inventory bring levels starting in customers the such course to in – and we levels look I product cloud and forward half other continuing year think normal we have several cloud of For are, largely fourth been we through prepared future this know with those opportunities broaden growth customers, well. of in as solutions of will us as in for and

Blayne Curtis



for have Thank you, participation you this ladies your and gentlemen, conference. a concludes Thank and today's wonderful day.

may time. your You disconnect this lines at