Micron Technology's (MU) Management Presents at Citi 2017 Global Technology Conference (Transcript)

| About: Micron Technology (MU)

Micron Technology Inc. (NASDAQ:MU)

Citi 2017 Global Technology Conference

September 06, 2017, 08:45 AM ET

Executives

Ernie Maddock - SVP & CFO

Analysts

Chris Danely - Citi

Chris Danely

So, it's semi cap analyst here at Citigroup. Next up is another one of our favorite stocks, I like today. The Cron, Micron bi-rated now. It is different this time. It's very rare, one of our top 15 axioms of semi-interesting is very rarely is it's different this time, but it is different this time. This is not your grandmother's Micron.

The industry is better. We've had massive consolidation in DRAM and more importantly, the company is better. I know Ernie doesn't like me talking about him in this way, but I think one of the keys to Micron's improved financial operations is the man sitting to my left.

So, Ernie will kick it off. You all know him as the CFO of Micron. That's his day job and really let's just talk about the industry. So, in your idea, in your opinion, what has been the big sea change other than consolidation detente over the last several years that's making DRAM better or is it just pure consolidation?

Question-and-Answer Session

A - Ernie Maddock

Well, I think first of all, you have to look at the demand market and demand environments and certainly the collection and use of data and the rate at which the collection and use of data is expanding and as you think about applications like autonomous driving and artificial intelligence, so every single thing we contemplate that's driving the economy, the future is reliance on data.

And when you collect data, you have to sort it and you have to process it and as more and more data is processed that becomes more and more DRAM intensive. DRAM is an essential part of harvesting and collecting insights from the data that so many enterprises are collecting these days. And then obviously you have to store it and that speaks very heavily to the demand environment on the NAND side and the storage world.

Relative to the supply side, I do think consolidation has been very instrumental in having a disciplined and orderly expansion of supply. We have certainly seen that now over period of a couple of years and we expect based on everything that we can see that you're going to continue to have a disciplined expansion of supply as we look forward into fiscal '18 for Micron.

And on the NAND side, the industry's continued conversion to 3D capacity will serve to allow bit growth next year that we believe will satisfy demand, but not be substantially in excess of the demand environment that we currently see.

Chris Danely

Sure. So, let's just jump into the DRAM and the CapEx and the capacity, make us feel a little bit better. Obviously, CapEx has moved up for the industry this year. What are you thinking as far as industry CapEx, make us feel a little bit better on the capacity coming online in DRAM it's not going to…

Ernie Maddock

Well, if you listen to the public commentary of the industry participants, the key message across the Board is that the investments are mainly for technology transition with the desire to keep wafer starts roughly flat and of course every time you do a technology transition, there is a wafer start penalty and so adding back those wafer starts does necessitate some level of capital spending. I know it does for Micron as well.

But if you look at that, that will allow the industry to grow bits at this 20% plus or minus range over the course of any given year and certainly that feels very well matched to what we believe the demand to grow from a supply point of view, which is in the 20% to 25% range.

Chris Danely

And can you just refresh us on your current CapEx plans and then those of the industry?

Ernie Maddock

Well, we haven't guided our CapEx for fiscal '18 and fiscal '17 for us is on the books at this point. So, we spent about $5.2 billion in aggregate for total CapEx, roughly 40% to 50% oriented around DRAM for fiscal '17.

We think the industry CapEx next year is going to increase, but certainly if you look at that in the context of historical levels, certainly right in the middle part of the range of how the industry has historically spent for CapEx. So, the final tallies aren’t in and again we haven't guided our CapEx. So, we don't want to give a specific perspective on the industry for 2018, but we believe it's going to be quite manageable relative to historical levels.

Chris Danely

And then I got a bunch of emails for questions to ask you, so I'll sort of insert them as we go along, but I'm sure you get this all the time is China, they're going to disrupt the DRAM industry. They're spending billion, zillions, trillions, quadrillions as my kids tell me. What are your thoughts on China spending and their potential of disrupting the DRAM market, just to get that out of the way.

Ernie Maddock

Sure. And there's no doubt about China's ambition to enter the memory market, whether it be NAND or DRAM. There's no doubt that they are building fabs and certainly equipment suppliers will suggest that there is equipment being ordered, but at the end of the day, being able to effectively produce NAND or DRAM, so the answer is the same for either technology.

It's a combination of knowhow. It's a combination of IP and a combination of experience and if you look at every major manufacturer of either technology, none of us has not encountered some technical issue or something with a technology migration from time to time that we have all successfully overcome.

And if you simply think about the fact that for DRAM there are thousands and thousands of people years’ worth of experience and for NAND similar level, even though NAND from a technology point of view is a little younger, you really begin to appreciate the complexity of routinely continuing to move down a technology curve and developing and rolling out cost competitive technology.

And so, the challenge of doing that without IP, without that level of knowhow is extraordinary and so you never say never. However, you do have to think about the fact that we are an industry that essentially obsoletes our self every year or every 14 months. You have a new technology transition. You had to go from planner NAND to 3D NAND.

Now your 3D NAND or moving from 32 layer to 64 layer, to third generation to fourth generation and that happens at a pace of 12 to 14 months. And so even if one were to learn how to do something at a point in time that doesn't necessarily speak particularly definitively about one's ability to continue to move down the curve and to continue to obsolete oneself every 12 to 14 months.

So, the challenges are quite formidable. I think there have been a number of reports out this week in fact that suggests that progress has been a lot slower and a lot more challenging than had originally been thought and it's very consistent with our view the what we do and what our competitors do is extraordinarily hard and not easily replicated.

Chris Danely

One question or rumor; old wives' tale, a James Bond stories again, is that -- there is this like a group of consultants out there that split off from Inotera and the Chinese Government is higher than its straight out of like Star Wars stealing the plans for the Death Star or something like that, but that they're going to attempt to build this thing or implement these plans in China.

So even if they left today and had the technology today, how long would it take to implement that and by the way is there any proof that there's these guys running around out there that are selling themselves to the Chinese?

Ernie Maddock

We don't have microchips inserted in every human being. So, I don't know where they are in any given time.

Chris Danely

My wife [warned] me the other day.

Ernie Maddock

Okay. Well, that's a different story for a different day, Chris. But I would tell you that Inotera did not own its own IP. So if engineers did do all of that, I don't know what the basis of the IP they would be using as they share that and to directly answer your question, it's probably two to three years before you get your first anything out and then the question becomes where is the rest of the industry in three years? And the answer is going to be at a lot different technology position, a lot lower cost position than we are today.

Chris Danely

Great. Thanks for answering that. Let's get back to something little more current [stories] the DRAM pricing, what can you say about how pricing has been over the last few months or the current pricing environment, maybe talk about contract versus spot?

Ernie Maddock

Well, you still see contract trailing spot and that's usually a good indication of where contract prices are going. We've talked before about the fact that there is no formulaic approach to this spot prices very well known. PC contract is more well known and those things tend to be a source of information as you're having discussions with your customers about the pricing environment and how you will be doing business over the course of the next quarter or so.

And we continue to see very strong demand from our customers, very willing to engage in those discussions. But in general, I would say the pricing environment continues to be -- continues to be good.

Chris Danely

Do you think that it may be softened a few months ago or has it stayed strong the whole time and then if you can approximate how much the contract is trailing spot right now?

Ernie Maddock

What it's -- a few months ago right, contract or spot pricing moves around plus or minus each week and so I don't keep track of 25 data points or 15 data points in my head. I would say that clearly there were weeks when it declines, there are weeks when it increased again. But it has been on a relatively steady upward progression.

Not meaningfully up, but week on week, it still feels slightly better than it did the week before and there's no specific reference I can give you to contract over spot because it's different across each of the commodities. But it is still meaningfully about spot.

Chris Danely

And would you say that…

Ernie Maddock

They're below spots, sorry.

Chris Danely

Would you say that the drivers of DRAM pricing have been the same over the last months that they were over the first six months of the year?

Ernie Maddock

I think in general right, mobile and server are the two big drivers of DRAM demand. May be mobile with the softness in the Chinese market has been a little bit weaker than we anticipated, but mobile in general is within the ranges of demand growth that we've estimated.

Server, I think has been quite strong and that's also been helped a little bit by PC unit growth being slightly above our rate forecast and the course on the other end of the continuum, autonomous driving, machine to machine communication those sorts of things, nice steady growth.

Chris Danely

Great. And then before we dig into the demand drivers, always get the question on inventory, inventory build, is there pockets of wafers being stowed away out there? What's your latest on inventory in the channel?

Ernie Maddock

We don't think there is a build-up of inventory. I know that this a question that has been increasingly asked and my only perspective on that is every comment that I have heard around inventory relates to dollars and if you dollar adjust inventories for the price changes, I think you get a very different answer in terms of quantity than you do when you only look at it with dollars.

Chris Danely

Great. And then there's of course the age-old question of de-specking. I can't believe you will see that ever in the server industry, especially if there is any sort of AIR machine learning involved. Any comments there and have we ever seen this in the cell phone industry and I know PC has tried it, but it seems like if anything they're just complaining and not de-specking these days?

Ernie Maddock

Well, I think you have to differentiate between de-specking, which I define to be producing a new model, but actually has less content than the model that exists. And we're seeing no evidence of that across the breadth of the demand environment.

I don't think you ever know whether you are having a slowing of content migration as a result of pricing because of course you never specifically had that content present in those boxes. So certainly, I would think that the current pricing environment is creating a situation where people are assessing the speed at which they'd like to migrate content and I would agree with you that it's least applicable in the server world. But in terms of de-specking, we're seeing none of that.

Chris Danely

Great. And then to just dig into the demand drivers, I guess we'll just start with server. It seems like it's been the -- exhibited the most upside out of the various end markets this year, is would you concur?

Ernie Maddock

I would agree with that. We believed going into the year that server demand was going to be quite strong. It's playing out probably at the upper end of our demand continuum. If we look at servers and aggregate probably 30% bit growth, if we look at hyperscale in particular you're talking about 40% plus or minus bit growth. So roughly double the aggregate industry overall.

So, I would say it's operating at the higher end of the range that we would've estimated for the segment for the year.

Chris Danely

Great. I'm very proud to say that I actually waited almost two hours in my conference before the first AI question. So do you think that it's been AI is the big driver? Is it -- what do you think has been the big driver for server demand this year?

Ernie Maddock

I think the big driver for server demand and I don't discount that AI has been an important driver, but I think that a far bigger driver is simply there are massive amounts of data that have been collected that have sat unused for a long time and you now have people using more and more and more of that data to try to form business insights and business intelligence and that is what is driving both the content increase in servers as well as what we see in this hyperscale environment.

So, AI is an important trend. I think I would actually think it will be more important on an ongoing basis than it is necessarily fully impacted at least to our 2017 view. So, this is a trend that will sustain demand we believe on a going forward basis.

But I think as important as AI today is simply that folks are beginning to have the ability to use the significant amounts of data that have been collected and create business insights and that in turn allows hyperscale guys to in some cases create business value and create business model changes for themselves.

And so, I think that is as much a driver as any of the buzzwords around AI or machine learning or anything else that we're hearing today.

Chris Danely

And in terms of the super high bandwidth DRAM that you guys view that goes alongside graphics chips, is that a reasonable portion of your business? Do you ever anticipate that to be a reasonable portion of your business and maybe talk about the margin premium there?

Ernie Maddock

It is a reasonable portion of our business. We don't expect it over the course of the next couple years to be anywhere near 25%, 30%, 40% of our business. This is a fairly specialized area for memory today. It is clearly growing faster than average. However, it is still on an absolute basis relatively small compared to the breath of the server market.

It is a segment of the business that we value. We have a technology leadership position in graphics memory. We intend to do everything we can to hold on to that and this is a business that throughout the course of a pricing environment tends to be among the most valuable pieces of business the company has.

Chris Danely

And can you talk about the margin premium you get for a product there versus garden variety [these are]?

Ernie Maddock

Well, the reason I said throughout the course of a pricing environment and in today's world, there is a relatively flat margin curve across the breath of the demand portfolio, simply because of the current supply-demand environment. In a demand environment that look like 2015 and '16 for example.

There was a significant premium associated with that. So, it is situationally dependent in the breath of the context of the broader business climate.

Chris Danely

Got it. And then in terms of the supply-demand continuum specifically in server, do you think it's continuing to get worse? Is it people pounding on you more and more? Do you think you have things under control there?

Ernie Maddock

Well, certainly we have talked with all of our key customers. We've tried to understand and interpret their requirements and are making decisions that we feel are supportive of their and our interests, we do not happen to believe that there is a dramatic under supply.

We think that in fact the industry will be able to keep up with the demand coming from that space as well as other. So, we don't perceive things to be out of control at the present time.

Chris Danely

And then switching gears a little bit to the cell phone industry, are we through the correction in China? How are things there?

Ernie Maddock

We're working through that. So certainly, I think the worst of it is behind us and we're beginning to see what was a slight inventory build in that world, working through that and would expect to continue to see that throughout the course of calendar 2017.

Chris Danely

And maybe you talk about if the iPhone 8 delay has changed anything for you guys or for the industry and then do you think that once this thing comes out, especially the OLED model that we're going to see capacity get sucked up there and have there been any pre-builds on the memory side?

Ernie Maddock

Again, we have very long-standing discussions with our customers and try to understand their requirements and certainly Apple would be one of those customers and we don't think that there are going to be any significant industry perturbations created by the results of the current schedules for the new iPhone.

Chris Danely

Great. Switching gears a little bit, let's talk NAND, maybe give us your latest thoughts there on let's see, how the market is going and you hear all these fears about things are something up or we have a correction next year or some of these crazy analysts out there, I don't know what they're talking about?

Ernie Maddock

Sure. So, we think that this year we're going to see supply growth that's in high 30s maybe as much as 40%. And Micron is at the higher end of the continuum that the industry participants are suggesting. There are some who are estimating supply growth to be in the low 30s.

In fact, we think that demand or supply growth of 40% is under what native demand would be. So essentially, we are demand -- supply limited this year. As we roll into calendar year '17, we think that in aggregate the industry will grow bits somewhere in the 50 plus or minus percent range in 2018 and we think that demand is very well matched to that.

We do believe that the industry's continued transition to 3D will have bit growth a little uneven over the course of the year. We think certainly toward the end of calendar '18 you would see slightly more bit growth than the front half that has been the case this year.

We've seen lower bit growth in the front half '17 than we expect to see in the back half of '17. This is an industry statement, not a Micron statement. And we think -- so naturally I think would end '18 at a run rate above 50% but in aggregate for the calendar year, we feel comfortable with that 45% to 50% range and think that that's very, very well matched to supply with demand, excuse me.

Chris Danely

Can you give us an update on your own 3D and layer transitions versus those of the industry are where you see yourself in the industry?

Ernie Maddock

Sure. So, we think we said, we have meaningful output at 64 layer at the end of our fiscal year and again we did deliver on that and we'll talk more about that when we do our earnings call in a few weeks. The industry we think is in the process of transitioning in aggregate to 64 layer.

Potentially one participant more transitioning to 48 layer, but the vast majority of the industry participants are going to be transitioning or are transitioning to 64 and we certainly think that as we exit 2017 and going to '18 that you're going to see a predominance of 64 layer output in the industry and then that will begin to transition to third-generation, which for many is a 96 layer product.

Micron hasn’t specifically announced its layer count for its third generation, but you're going to see that transition occur sometime in calendar '18, but I would say that 64 layer is likely the predominant production node for the -- at least for the first half of 2018 and likely for the full year of calendar that's correct.

Chris Danely

I don't think we touched on your DRAM tech. If you could just give us an update on your DRAM technology transition and where you stand versus the competition?

Ernie Maddock

Sure. So, we are again meaningful output at 1X node and we did achieve that objective and again we'll talk more about that at our call coming up. We believe that the other two industry participants are at a combination of 1X and 1Y. Micron will be transitioning into 1Y probably on about a 12-month cadence.

So, we'll see if we get fully there by the end of our fiscal 2018, but certainly that would be our objective and so we think that although we're slightly behind our counterparts that we'll certainly have caught up a lot of the gap that opened up in 2014 and '15 first with the 20-nanometer transition and now with our 1X transition.

Chris Danely

And I don't know if you're going to answer this, but would you say you feel better in the near term maybe next 12 months about the DRAM versus the NAND market and then maybe do you feel better about either market in the long term? I am more worried I guess.

Ernie Maddock

We actually think they're both great markets and we feel very strongly that the company is more competitive having both technologies because both are going to be in demand with the trends that are occurring today relative to the collection processing and storage of information and it's impossible to know in one year versus the other, which might be relatively stronger than the other.

But certainly, the trends in the industry relative to what our customers want to do with information, collection of information, more and more machine learning trying to be helpful to consumers, autonomous car or autonomous driving whatever it is, that all bodes very well for the consumption of both NAND and DRAM.

Chris Danely

Great. One other thing is management, I love being able to call you the old guard of Micron management now. Maybe talk about what Sanjay is bringing in. Is this -- you've talked about using DRAM to fund the NAND effort. Certainly, Sanjay's background is more on the NAND side. Is this just part of that long-term transition of Micron to a NAND company? Maybe share your thoughts there?

Ernie Maddock

Yeah, I would not say that there is a long-term trend of transitioning to a NAND company. I would say that we very much appreciate the DRAM business that we have. It represents a majority of our business and is likely to represent a majority of our business for the foreseeable future.

I think given that we believe NAND bit growth CAGRs are in the 40% plus range and DRAM bit growth CAGRs are in the 20-ish percent range, NAND is obviously growing more quickly than DRAM and we will be making decisions about where to position the company from a market perspective relative to those growth rates.

But I would certainly debase any idea that we're going to become a NAND company. We want to be excellent in both technologies and leverage the strength that having both technologies enables us to deliver. We are the only company outside in the Western Hemisphere that has both technologies and is able to offer those to our customers.

Chris Danely

And maybe talk about his mandate what if any changes that he's bringing to the company. What he's focused on?

Ernie Maddock

Well certainly I think he is the way I've described before is he is continuing to execute the strategy and speeding it up. The background and experience that Sanjay brings to the table together with some of the folks that Sanjay has brought into the company, really will be helpful to us in accelerating our penetration of the storage market for example, which is something that we have done a good job starting.

And I think that the expertise has been brought into the company will help us accelerate that transition. I think there is a level of structure and urgency and discipline that comes with a transition to a new leader that is also very helpful to the company. So, I think all of these things are completely positive and will be a strong benefit for the company over the long run.

Chris Danely

Can you expand a little bit on the penetration of the storage market?

Ernie Maddock

Well absolutely. Micron has had a stated objective around first getting our technology competitive and we certainly believe we have competitive technology and then penetrating the storage market with a broad family of SSDs and particularly SSDs that address the enterprise space.

That is an area where Micron had made some inroads but with the experience and talent and capabilities that Sanjay brings as well as Jeff VerHeul and Sumit, we think we're going to be able to make progress there faster and that's an important strategic thrust for the company and we believe that with the capabilities that now exist within the company, we're be able to more effectively capitalize on that.

Chris Danely

And maybe talk about external versus internally developed, but would be the options there, the advantages, disadvantages.

Ernie Maddock

Well I think a general statement is the company will likely always have both, but certainly as it pertains to markets that we believe are very critical to our success, which would include the enterprise SSD market, we would tend to orient more over time to internally develop capability rather than external.

Chris Danely

And then you maybe talk a little bit about the balance sheet and you guys have done a great job of continuing to buttress the balance sheet, paying down the debt. What are the plans right now, than how will that factor into your thoughts on the penetration of the storage market or any potential acquisitions?

Ernie Maddock

Well I think first relative to the commitments we made about using 50% to 75% of our free cash flow, we have -- we will essentially have done that. We've now retired somewhere in the range of $1.7 billion worth of the debt that we had on the balance sheet and that's certainly going to fall within the range that we had articulated.

We certainly think the business environment as we look at our fiscal '18 is strong enough to both support the transition of our technology into manufacturing, which is an incredibly important priority for the company as well as continue to strengthen that balance sheet and drive toward those interim debt targets of gross data somewhere in the $8 billion to $9 billion range.

Chris Danely

I have another question on that, but before I just wanted to open up to the audience, any questions here in the front.

Unidentified Analyst

I've a two-part question.

Chris Danely

Hold on. We going to use a mic.

Unidentified Analyst

Hello. I have a two-part question, earlier you mentioned that the company is more competitive with both DRAM and NAND. So the first part of the question is that, is the competitive advantage because of the ability to move tools between DRAM and NAND? And the second part of the question is how will that change with the 3D NAND? I think the tools are slightly different?

Ernie Maddock

So, no, it has nothing to do with moving tools back and forth. We manufacture our NAND in Singapore and our DRAM in Japan and Taiwan. So moving tools absolutely their corner cases where that might be an economically feasible thing to do, but that is typically not how I think about the competitive advantage of the company.

I think about the competitive advantage for having both NAND and DRAM being that many of our customers consume both and when customers consume both you have an opportunity to have a more fulsome customer relationship, which bodes well over time for beginning to try to differentiate the company from our competitors.

Unidentified Analyst

I had a question on clarifying some of the demand drivers for DRAM. You said a lot of companies are trying to look at their data and using more intensively. Is this being driven by in memory databases, things like HANA or…

Ernie Maddock

HANA is certainly one of those, but there are a variety of architectures that one employees when one does that. So, HANA itself is interesting. It is certainly an element of those demand drivers, but it is not something that can be considered to be a superordinate driver of the aggregate demand that we're seeing.

Chris Danely

There is one question over there in the back.

Ernie Maddock

There is also one back in the corner as well.

Chris Danely

There are so many lights in my face. So, I can't see.

Ernie Maddock

Yeah. It did come out of your mouth.

Unidentified Analyst

Ernie thanks. Just one quick question in terms of closing the technology gap on DRAM relative to Samsung. To the extent you can talk about what that takes from an CapEx investment standpoint and how long that could take in terms of you did a lot to get to 20 nanometer across all your capacity, but what is the next step in an investment there and how should we think about that?

Ernie Maddock

Yeah. I think it's a great question. I had the experience of being with the company in fiscal '16 when we spent $5 billion in CapEx and went $2.7 billion free cash flow negative because we believed in the long-term vision of closing this technology gap and all the benefit that we're seeing in 2017 or saw in 2017 is a direct function of that decision.

So, it was an unpopular decision among investors because it was an unpopular decision among management because no one likes to be $2.7 billion free cash flow negative, but it was absolutely essential to strategically positioning the company.

We have more work to do. We entered into 2017 fiscal '17 very clearly saying that we had set a CapEx plan that would allow us to be free cash flow neutral in the face of what was at the time a challenged business environment and we've been very transparent about how we were going to use the cash flow that's been generated in excess of that.

And so certainly as we look at our fiscal '18 look at the business environment that we see, we continue to believe that closing that technology gap will be important and as a result of that and as a result of the business climate we think that there's going to be an opportunity for us to lean in a bit on CapEx and as a result of that do a good job in closing that gap over the course of the '18, '19 timeframe in the midst of a business environment that we think is going to be supportive of that.

And in addition to that, be able to continue to make progress toward our deleveraging strategy. So, the two goals that we've been talking about for some time advancing and more rapidly transitioning our technology into production and strengthening the balance sheet for de-levering, we will be able we believe to make progress toward both of those in our fiscal '18.

Unidentified Analyst

[indiscernible]

Ernie Maddock

I think that there will be periods of time as there were in fiscal '17 where our bit growth was above industry, but if you look over a two or three-year period, essentially our bit growth aligns with industry and I think that it's impossible to predict in the context of any specific fiscal year other than by the information that we've provided how that CapEx will result in currying your bit growth.

But certainly, our objective over the longer term or intermediate term will be in DRAM to grow our bits through technology transition. So, there may be a year when we're slightly under. There may be a year when we're slightly over, but in aggregate, you would not expect us to grow bits faster than the industry in that context.

And in NAND certainly we think that the vast majority of our bit growth in fiscal '18 is also going to come from technology transition. We are still fitting out the balance of Fab 10X in Singapore but would not expect to materially outgrow the industry at all in terms of bit growth in fiscal '18.

Unidentified Analyst

Hey Ernie, on the NAND side, I am curious, given the things that you guys see in the NAND business and I'm sure that everybody sees in the NAND market over the next five years let's say, how are you managing around capital spending plans and where you want to be over the next couple years with every time you kind of get a call from an investor or from someone else who is worried about supply-demand imbalance that could occur in mid-'18 are in late '18?

And how might that be different from where the company thought about things a couple of years ago when we were so dependent on the mobile market?

Ernie Maddock

At the end of the day, we try to be sensitive to investor input, but we also have the -- have the responsibility for running the business and keeping the business in a competitive state. So, we have a definitive view of what we think the bit growth CAGR is going to be from a demand perspective.

We have the benefit as an industry and Micron as well of getting -- being able to get a lot of bit growth from technology transitions as they occur going from first generation to second generation to third generation, ultimately the introduction of QLC.

And so, we certainly want to meter our thinking around that to be sensitive. In fact, there's a lot of bit growth that is going to come from these technology transitions to about capacity additions if they are required, when they are required and we certainly don't expect that to be the case for us here in the next couple of years and make the capital investments necessary to do that.

But the reality is if we don't make those investments, we are actually damaging investors because we're damaging the cost competitive foundation of the company. We saw what happened in 2015 and '16 when the company encountered a tough industry cycle with uncompetitive costs.

We are never going to go back there again. We will make sure that the company is able to weather a storm like that and remain cash flow neutral or cash flow positive and every single month that goes by that we continue to make progress getting our costs aligned, we strengthen the ability of the company to be able to deliver results no matter what the business environment and we're going to continue to make the investments we think are necessary to strengthen the foundation of the company and at the same time strengthen the balance sheet via de-levering.

Chris Danely

Great. I think that's all we have time for. Thanks everyone. Thanks Ernie.

Ernie Maddock

Thanks.

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Tagged: , Semiconductor - Memory Chips,
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