Micron Technology (MU) survived the last economic recession in 2008-2010 that saw demand for computers and computer technology drastically decline. Businesses and consumers alike cut back expansion and upgrades in technology during this time. There were 2 important factors that contributed to Micron being able to weather the last recession: Apple was using Micron's chips and the need for faster, smaller memory chips with more capacity.
Apple was one of the few companies that had very good sales during the recession and this benefited Micron Technology as well. The recession has subsided, and economic growth has been around 2% to 3% in the United States. Apple sales have been so good that people might forget that the economic growth in the United States is only 2% rather than 6% or 7%.
Micron Technology produces NAND flash memory, a miniaturized memory component, which has been in high demand due to these strong sales from Apple. Micron Technology is already in the phenomenal iPhone 4, which sold an estimated 600,000 units the first day it went on the market. Micron Technology will continue to partner with Apple, and provide the flash memory for their phones. Apple definitely has the Midas touch right now and has success going back to the early 1980s. As long as Apple continues to sale well, Micron Technology will benefit from its partnership.
Apple also created a whole new type of product, the tablet, with new the iPad. All these new tablets will give Micron Technology additional opportunity to sale its miniaturized flash memory. Market research shows an explosion over the next five years in the demand for tablets. The estimates for tablet sales could top nearly 150 million units by 2015 up from 15 million units sold in 2010.
People really like the versatility and smaller size of tablets. You get functionality with easier web surfing, higher storage capacity and larger screen without too much weight or size. A lot of consumers will want to add or upgrade to the tablet, and that means more money for companies that produce memory, like Micron Technology. Micron can thank Apple for making it all possible.
The need for smaller memory chips that can fit into small devices has really been in high demand. Its not just miniaturization of memory that is needed, but its also faster speeds and higher capacity that is needed too. Remember when a smart phone was a phone that could text? Now you have radios, MP3 players, video internet, and touch screens. Add an Android or iPhone app and the cell phone can check heart rate and indicate distance walked during the day.
Micron is an industry leader in construction of these smaller, faster memory chips. Micron also provides digital camera sensors that allow cell phone cameras to be smaller, faster, and process more visual information. Micron Technology provides FLOS micro displays which integrate the LED display with the processor and memory all in one. People want to have a camera ready in every device. These camera sensors have even been going into the tablets discussed earlier.
Cameras in phones are here to stay, as even the cheapest phone to have some kind of camera. Owners of expensive phones have high expectations and now expect a camera with imaging that rivals a full size camera. Micron will continue to improve these camera sensors every couple of years to meet these demands.
Now I want to examine the DRAM business division of Micron and some of the competitors of Micron. Micron Technology also makes DRAM memory chips for larger devices like laptops and desktop computers. DRAM prices have been depressed because of lower demand during the recession. This has eliminated some of the competition in the DRAM memory field.
Elpida Memory (ELPDF), one of the DRAM competitors to Micron Technology, just filed for bankruptcy. Micron was able to buy some of the assets cheaply and has made a bid to acquire the bankrupt chip maker. HYNIX is in a bidding war with Micron Technology to obtain Elpida. Micron Technology, by adding Elpida Memory, can increase its capacity and market share in the DRAM field while limiting HYNIX's ability to do the same. Texas Instruments (TXN) and Intel (INTC) could not handle falling DRAM prices and got out of the DRAM business altogether, so now Micron is the only American DRAM chip maker left.
Micron Technology has a big enough market cap and balance sheet that it has been able to handle lower prices and compete with DRAM manufacturers in Asia, such as Samsung (SSNLF.PK). Samsung is Micron Technology's biggest competitor in the memory market. One of the ways Micron has dealt with Samsung is to partner with other companies to share ideas, technology, and production. For example, Micron partnered with Intel and got Intel to build Micron chips and collaborate on flash memory technology.
Further, Micron Technology worked with Xilinx (XLNX) to help with a new memory platform called RLDRAM 3. The new RLDRAM 3 technology will push Micron ahead of its competitors and is very bullish for Micron. Micron has a willingness to work with other companies in order to compete with Asian competitors. Micron Technology is smaller and more nimble than Samsung.
Samsung, besides being a much bigger company, also has the additional burden of selling the end products that its memory chips go into like cell phones, laptops, and tablets. Micron is able to concentrate on just making the components to go into the device and getting companies like Apple to sale the end product. If Samsung does not sell enough of its phones and tablets, it wont matter how good the components are inside the device.
So, what is Micron Technology's plan for the future, and where is Micron headed? Micron Technology has been gradually growing its business outside of DRAM manufacturing to include NAND flash memory like the chips found in phones and tablets. NAND flash memory works better than DRAM for small devices like cell phones and tablets. Micron will continue to develop NAND and make it smaller and faster.
The depressed price and lack of profitability of DRAM will eventually cause its demise. I believe DRAM will eventually be replaced by another memory chip platform in the next 10 to 15 years, and Micron will take the lead in this arena. Micron has a strong research division to patent cutting edge technology that ends up in devices of companies like Apple.
Micron is a well run company that looks ahead and is not afraid to change. Micron is not afraid to work together with Intel or Xilinx to share ideas and take advantage of cooperation. When Apple comes out with the iPhone 12, Micron will be there.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
