The computers and semiconductors that drive them have been a driving force in the global economy for decades. It is not surprising then that investors have long sought to secure some of the billions of revenues the industry generates each year.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "A title that was the first to offer the market of computer memory and helped investors become aware of the benefits it generates, & nbsp;Micron Technology (NASDAQ: MU). The company manufactures many types of memory chips and semiconductors for a wide range of applications, including NAND flash memory for storage, dynamic random access memory (DRAM) for main system memory, and 3D XPoint, a type of memory much faster than NAND memory (although slower than DRAM) but non-volatile (which means that it can store data even without being connected to power), unlike DRAM. "" data-reactid = "12"> An action that has paved the way for the computer memory market and helped investors become aware of the benefits it generates Micron Technology (NASDAQ: MU) The company manufactures many types of memory chips and semiconductors for a wide range of applications, including NAND flash memory for storage, DRAM for main system memory and 3D XPoint, much more memory faster than NAND memory (although slower than DRAM). is nonvolatile (meaning that it can store data even without being connected to the mains), unlike DRAM.
If you are planning to invest in Micron – which began more than 40 years ago in Boise, Idaho – it is important to understand where the company gets its money and how each type of product and each final market motivates its activities.
Source of the picture: Micron.
DRAM vs NAND
Micron's two main revenue generating products today are DRAM and NAND flash memory chips. Although the company has XPoint 3D manufacturing capabilities, this business does not yet generate enough revenue for the company to generate such sales in its financial reports. So, the way of thinking about Micron today is as a company that sells flash DRAM and NAND flash.
During the first quarter of fiscal 2019, 68% of its business turnover came from DRAM sales, while 28% came from Flash NAND. It follows that the company is much more sensitive to fluctuations in the DRAM market.
<p class = "canvas-atom web-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "In the sector, DRAM sales are expected to reach 100 billion in 2018, the total addressable market (TAM) NAND seems much smaller. Western Digital & nbsp;(NASDAQ: WDC), Micron's competitor, set its NAND flash-linked TAM at about $ 56.4 billion in fiscal 2018. Industry-wide DRAM sales are expected to reach $ 100 billion in 2018, total addressable market (TAM) seems much smaller. Western Digital (NASDAQ: WDC), a Micron competitor, estimated its NAND flash memory TAM at about $ 56.4 billion in its 2018 fiscal year.
While the DRAM market is much larger, the NAND market is much more competitive. During its day of analysis, Micron noted six major manufacturers of NAND flash memory, but only three major manufacturers of DRAMs. With fewer competitors, profitability is generally better in DRAM.
<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Micron does not disclose anymore Gross margin by product type, but when reporting its fourth quarter results of fiscal year 2018, the company reported a gross DRAM margin of 71%, while the NAND gross margin of trade of 48%. So, while both types of chips are important to Micron, DRAM significantly contributes to learning more about Micron's bottom line and bottom line. "data-reactid =" 31 "> Micron no longer discloses its gross margin by product type, but in its fourth quarter results of 2018, the company announced a gross DRAM margin of 71% of business revenue While the gross margin of the NAND trade was 48%, DRAMs make a significant contribution to Micron's profits and profits.
Mix of business
It is also important to understand that DRAM and NAND have different end markets (and different product requirements) and understand the importance of each of these market segments for Micron's business.
Micron has four main divisions: Compute and Network Business Unit (CNU), Mobile Unit (MBU), SBU (Storage) and EBU (Integrated Unit). The table below provides a brief description of each unit from the company's latest annual report, the latest income figures, and the percentage share of revenue generated by each unit. By far, Micron's CNBU is the largest, with MBU far behind.
Data source: Micron 2018 10-K repository.
The story continues
Take away food
Micron is a pure-play memory company that primarily sells DRAM and NAND memories, with DRAM being the company's main revenue and profit engine. Over time, the company could also see significant revenue growth from the sale of 3D XPoint-based products, although it is still unclear how much of its business could come from this technology.
Micron has made progress in sales across a wide range of markets, including personal computers, data center servers and mobile devices. All areas where you would expect DRAM and NAND flash memory to be important. The company is also positioned in the automotive market. While cars and trucks are increasingly dependent on smart computing to function, DRAMs and NANDs should be widely needed to provide this computing power. This could be a significant long-term growth opportunity for Micron and the semiconductor industry in general.
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<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Ashraf Eassa has no position in the mentioned actions. Motley Fool is a short part of Western Digital. The Motley Fool has a disclosure policy."data-reactid =" 53 ">Ashraf Eassa does not hold any of the shares mentioned. Motley Fool is a short part of Western Digital. Motley Fool has a disclosure policy.