Memory leader Micron opened semiconductor earnings season. FY23Q4 corresponds to June through August 2023.
Micron FY23Q4 Earnings:
Revenue was $4.01B, down 40% year over year and up 7% sequentially; revenue has recovered for 2 consecutive quarters; guiding FY24Q1 revenue of $4.4B, up 8% year over year and 10% sequentially (revenue peak was $8.4B in FY18Q4).
GAAP gross margin -10.8%, sequential loss narrowed by 7 percentage points; guiding FY24Q1 gross margin -6%, FY24Q3 gross margin turning positive (gross margin peak was 61% in FY18Q4).
Operating cash flow was $249M; operating cash flow trough has passed (peak was $5.2B in FY18Q4); free cash flow negative for 4 consecutive quarters.
GAAP loss of $1.43B, previous quarter loss of $1.9B; non-GAAP loss of $1.177B; guiding FY24Q1 GAAP loss of $1.358B (net income peak was $4.3B in FY18Q4).
Business Segments:
DRAM revenue was $2.755B, down 43% year over year, 69% of revenue; DRAM bit shipments up mid-teens sequentially, DRAM ASP down high single digits sequentially.
NAND revenue was $1.205B, down 29% year over year, 30% of revenue; NAND bit shipments up 40%+ sequentially, ASP down mid-teens sequentially.
Guiding FY24Q1 demand recovery, customer inventory continuing to normalize, DRAM bit shipments to hit a new high, NAND bit shipments down sequentially but ASP up sequentially.
Data center performance weak; traditional server demand remains sluggish, but AI demand strong; this year server unit shipments will see their first year-over-year decline since 2016, expecting a return to growth in 2024; high-density 1-beta 128GB D5 uses 32Gb single die, expected to contribute revenue in 2024Q2; expect Micron D5 mix to exceed D4 by early 2024, leading the industry; launched 128GB/256GB CXL 2.0 modules; data center SSD market share hit new highs for 2 consecutive quarters, FY24 market share to continue growing.
HBM3E to volume produce in early 2024, undergoing NVIDIA qualification, expected to contribute ~$700M revenue in FY24.
Expect 2023 PC unit volumes down low double digits year over year, 2024 up mid single digits; this quarter notebook LPDRAM demand surged sequentially; first 1-beta D5 notebook to ship next quarter; 232-layer NVMe SSD begins volume production; QLC SSD bit shipment mix hits record for 2 consecutive quarters; SBU business bit shipments hit a historical high for the same quarter.
Smartphone market expects 2023 unit volumes down mid single digits year over year, 2024 up mid single digits; one-third of shipping smartphone products start at 8GB DRAM + 256GB NAND.
Auto revenue down slightly sequentially; auto design wins remain strong; industrial revenue down slightly sequentially; industrial showing signs of recovery, expecting demand improvement to continue through 2024.
Earnings Call Highlights:
FY23 Greater China + Hong Kong revenue accounted for 16% of Micron revenue; China ban primarily impacts data center and networking markets; reflected in guidance.
Industry-wide pricing has bottomed; FY24 will see gradual recovery; 2025 industry TAM to set a new record.
HBM3/3E will crowd out traditional DRAM capacity; FY24 DRAM/NAND bit supply growth to lag demand growth, expect FY24 DIO to decline further; legacy-node product utilization to remain low, advanced-node product demand to exceed supply.
FY23 capex $7B; FY24 capex to grow slightly year over year, but front-end equipment capex expected to continue declining year over year; capex concentrated in CHIPS Act-required Idaho and New York advanced-node fabs; assembly and test capex expected to double year over year, primarily for HBM; currently moving legacy equipment to support advanced-node lines, saving capex; advanced-node lines such as HBM have die size 2x others, so overall company wafer capacity will decline significantly.
Overall, this Micron report had no real highlights, largely in line with prior guidance, and the market barely reacted. While the memory cycle bottom is confirmed, the overall recovery pace is slow; TrendForce expects Q4 DRAM prices to begin a broad recovery. Micron gross margin doesn't turn positive until mid-next year; next we'll see how SK Hynix Q3 earnings (Oct 26) benefit from HBM.
Next week has ASML (Wed) and TSMC (Thu) Q3 reports, worth watching.