How Does Micron Make Money? Business Model Explained!

Micron Technology (Micron) is a multinational company headquartered in Boise, Idaho, United States, that manufactures many types of semiconductors. These include DRAM, SDRAM, flash memory, and SSDs. Its consumer products are marketed under the Crucial Technology brand.

Micron and Intel co-founded IM Flash Technologies, which makes NAND flash memory. Micron was named one of the top 100 global innovators by Thomson Reuters in 2012 and 2013. Micron Technology is also one of the top 5 semiconductor manufacturers in the world.

Micron’s Financials

In Q1 of its fiscal year 2021, which ended December 3, 2020, Micron posted a net income of $803 million, up 58.1% year over year (YOY). The company’s revenue rose 12.2% to $5.8 billion during the same period.

Strong end-market demand contributed to the robust performance.

In Q1 FY 2021, the company built on its strong financial results from last quarter, delivering a sharp turnaround after a string of poor performances in 2019 and the first part of 2020 caused by a global supply glut.

Micron’s Business Segments

Micron segments its revenue and operating profit into four main categories: Compute and Networking Business Unit (CNBU), Mobile Business Unit (MBU), Storage Business Unit (SBU), and Embedded Business Unit (EBU).

It also reports an additional miscellaneous category covering other revenue streams. Revenue from the “All Other” unit is negligible.

Micron’s business segments, as a provider of memory and storage products and solutions, are distinguished primarily by the markets and clients they cater to. 

Compute and Networking Business Unit (CNBU)

The CNBU segment of Micron includes memory products sold into cloud servers, enterprise, graphics, networking, and other markets, as well as 3D XPoint products.

In the first quarter of FY 2021, CNBU generated $2.5 billion in revenues, accounting for more than 44% of the company’s total revenue. In the quarter, operating income amounted to $483 million, or about 50% of total income.

Thus, CNBU Micron’s revenue and operating income are the company’s largest sources. Revenue in the segment increased by 28.7%, while operating income increased by 20.4% over the year-ago quarter.

Mobile Business Unit (MBU)

Mobile device and smartphone memory products, such as flash storage drives and discrete DRAM, are included in the MBU segment.

In Q1 FY 2021, Micron’s MBU generated $1.5 billion in revenue or about 26% of the company’s total revenue. The quarter’s MBU Operating income was $370 million, which was about 38% of the company’s total operating income. 

Revenue grew by 3.0% and operating income increased by 25.4% over the same three-month period last year.

Storage Business Unit (SBU)

Micron’s Storage Business Unit includes solid-state drives as well as component-level storage solutions for the cloud, client, enterprise, and other markets.

SBU generated $911 million in revenue for Q1 FY 2021, about 16% of total revenue for the quarter. The segment’s revenue fell 5.9%. Operating income was $4 million, a significant improvement from the $217 million operating loss in the year-ago quarter. Micron’s SBU operating income accounts for less than 0.5% of its total operating income.

Embedded Business Unit (EBU)

The EBU segment consists of memory and storage products used in a wide range of industries, including automotive, consumer, and industrial. Among the applications powered by these products are voice and gesture control in automobiles, machine-to-machine communication, and automation processes.

EBU generated $809 million in revenue in Q1 FY 2021 or 14% of total revenue. Segment operating income was $116 million, or nearly 12% of the company’s total operating income. Revenue for the segment increased 10.2% while operating income increased 2.7%.

Micron’s Recent Developments

Micron announced on November 9, 2020, that it had begun shipping its 176-layer 3D NAND flash memory. The company says the new 176-layer technology is a breakthrough that enables enormous gains in application performance across a range of different storage use cases. According to Micron, its product is “the most technologically advanced NAND on the market.”

Micron announced that it was partnering with Tata Communications Ltd. (NSE: TATACOMM) to develop a cellular-enabled connectivity solution that will help to accelerate the global deployment of Internet of Things (IoT) devices. 

According to Micron, the solution will be powered by the first cloud-based embedded subscriber identity module (eSIM), which uses the Authenta Key Management Service. The solution will be available in 2021.

Micron Touts Next-Generation Memory Chips

Micron Technology claims to be several quarters ahead of its competitors with its new memory chips. 176-layer Nand and 1-alpha DRAM are the company’s industry-leading memory and storage technologies.

On a Sept. 28 conference call with analysts, Micron’s Chief Executive Sanjay Mehrotra said that for the first time in Micron’s history, they had established technology leadership in both DRAM and NAND.

Mehrotra said, “With the secular demand for memory and storage, Micron’s focused execution, and our rock-solid balance sheet, we are well-positioned to create significant shareholder value in fiscal 2022 and beyond.”

Micron announced in January that it had begun shipping 176-layer QLC Nand chips in volume. QLC stands for quad-layer cell, meaning four bits per cell. TLC chips, or 3 bits per cell, are manufactured by the rest of the memory chip industry.

Micron will next develop memory chips that support Compute Express Link or CXL. CXL is an industry standard that provides high-speed links between central processing units and system memory within data centres. It is likely that CXL technology won’t ramp up until 2024 or 2025 because it will need a new ecosystem of hardware and software.

Micron announced on Aug. 2 that it would start paying quarterly dividends. On Oct. 18, qualifying shareholders received an initial dividend of 10 cents per share. The stock price of MU rose 4.2% as a result.

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