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Micron shows how the cloud is saving chip makers



Memory chip maker Micron Technology Inc. was saved from a boom in data centers, increasing the growth of chip makers as the pandemic forces more companies to expand their cloud computing capabilities.

Monday, Micron
MU,
+ 1.35%

posted better than expected second-quarter tax earnings and had a stronger outlook for the next quarter, despite some problems with the global supply chain due to the COVID-1

9 pandemic. Micron’s shares rose nearly 6% in after-hour trading. As of Monday’s close, Micron was trading at $ 49.15, down 8.62% for the year, but a huge recovery from its slump in March, when it hit a low of $ 31.13 in the early days. days of the pandemic.

“We continue to see positive demand in the cloud in the second half of the year,” Micron CEO Sanjay Mehrotra said in a conference call. “The cloud is still actually in the early innings and the long-term cloud trends are strong.” In the second quarter, the company said that the home business economy, e-commerce and video game streaming resulted in a sharp increase in demand for more cloud computing capabilities.

Micron’s comments echo those of other chip giants such as Intel Corp.
INTC,
+ 1.33%

and Nvidia Corp.
NVDA,
+ 0.49%

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+ 0.49%
,
done in the last quarter. Monday, Xilinx Inc.
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+ 1.03%

He joined the crowd when he updated his guidelines for his first fiscal quarter, noting that strong wireless and data center performance made up for the weakness of the consumer segments.

In the second half of the year, Micron said it expected an improvement in demand for consumer technology products such as PCs and smartphones. This is partly due to the ongoing implementation of 5G networks, which will drive the demand for new smartphones with more dynamic random access memory (DRAM) chips, compared to 4G network phones. The company said that the average sales prices of DRAM chips and NAND flash memory have increased sequentially compared to the previous quarter.

A problem that hovers over the company, and indeed most of the chip makers, is the growing increase in inventories, both by Micron and its customers, particularly in the smartphone market. When asked by an analyst about growing inventories, Mehrotra said that his customers are trying to prepare for the return of consumer demand.

“Customers want to be ready to meet smartphone demand” when it returns, he said. “So overall, you know, it’s a mixed picture of customer inventory. Cloud inventories are in a decent shape,” while mobile inventories are “somewhat anticipating demand.”

NVDA,
+ 0.49%

The chip industry was incredibly tough during the coronavirus pandemic and most of the demand is due to data centers and the demand for more cloud computing. If the PC and smartphone markets return to growth, there may be even more benefits for chip makers like Micron. But for now, the certainty is focused on the data center.


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