Micron shows how the cloud is saving chip makers

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

On Monday, Micron MU,
+ 1.35%
reported better than expected fiscal gains in the second quarter and had a stronger outlook for the next quarter, despite some problems with the global supply chain due to the COVID-19 pandemic. Micron shares rose nearly 6% in off-hours trading. At the close of Monday, Micron was trading at $ 49.15, down 8.62% on the year, but made a huge recovery from its fall in March, when it hit a low of $ 31.13 in the early days of the pandemic. .

“We continue to see a healthy trend in cloud demand in the second half of the year,” Micron CEO Sanjay Mehrotra told analysts in a conference call. “The cloud is still in the first innings, and the long-term trends for the cloud are strong.” In the second quarter, the company said the home-based work economy, e-commerce, and video game streaming fueled a sharp increase in demand for more cloud computing capabilities.

Micron’s comments echo those other chip giants, such as Intel Corp. INTC,
+ 1.33%
and Nvidia Corp. NVDA,
+ 0.49%
+ 0.49%,
Done last quarter. On Monday, Xilinx Inc. XLNX,
+ 1.03%
He joined the crowd when he updated his guide for its fiscal first quarter, noting that strong performance in wireless and data centers were offsetting weakness in consumer segments.

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

One problem looming over the company, and indeed most chipmakers, is the increasing inventory growth, both of Micron and its customers, especially in the smartphone market. When asked by an analyst about rising inventories, Mehrotra said her clients are trying to prepare for when consumer demand returns.

“Customers want to be prepared to meet the demand for smartphones” when he returns, he said. “So overall, you know, it’s a mixed picture regarding inventory on the customer front. Cloud inventories are in good shape, “while mobile inventories are” somewhat anticipating demand. “

+ 0.49%
The chip industry has been incredibly resilient during the coronavirus pandemic, with most of the demand coming from data centers and the demand for more cloud computing. If the PC and smartphone markets return to growth, there could be even more advantages for chipmakers like Micron. But for now, the safe thing is focused on the data center.