Micron Technology is one of the largest memory chip makers in the world. It makes DRAM (Dynamic Random Access Memory), NAND Flash, and NOR Flash memory and other memory technologies. The company sells to customers in networking and storage, consumer electronics, solid-state drives, and mobile telecommunications, but its largest concentration (about – more... a quarter of sales) is the computer market. Micron's products are offered under the Micron, Lexar, Crucial, SpecTek, and Numonyx brands, as well as private labels. The company generates about 85% of sales outside the US.

Geographic Reach

Micron generates about 70% of its revenue from the Asia-Pacific region, including China (36%), Taiwan (12%), and Malaysia (7%). The US and Europe contribute about 15% and 10%, respectively. The company saw declines across all geographic markets in fiscal 2012, with the exception of Taiwan, which grew by a third.

It has fabrication and assembly facilities in China, Israel, Italy, Malaysia, Singapore, and the US.

Sales and Marketing

The company's products are marketed primarily to OEMs and retailers via a direct sales force, third-party sales representatives, and distributors. Intel and Hewlett-Packard are its top customers, accounting for 12% and 8% of sales, respectively.

Financial Analysis

After rising nearly 85% since 2009, revenue in fiscal 2012 (ended August) fell by about 6% to $8.2 billion as average selling prices dropped across all of Micron's segments. The company saw double-digit sales declines in its DRAM and NOR segments; NAND was a bright spot, growing nearly 15% year-over-year, in part as customers transition to NAND Flash from NOR Flash.

Net income, which has swung wildly in recent years, fell from $167 million in 2011 to a loss of $1 billion in 2012 as the decline in average selling prices hit overall gross margins, which fell to 12% from 20% the prior year.

Strategy

Micron, like most chip makers, spends a significant amount on research and development. In order to recoup some of that investment, Micron forms partnerships that share in the cost of development. Many of its joint ventures either supply or buy Micron products. It also sells or licenses intellectual property to partners and other third parties.

The company is engaged in joint technology development ventures with Taiwan's Nanya Technology. The two memory device makers cooperate on DRAM development and design, focusing on sub-50 nanometer (nm) process technologies. The Inotera Memories joint venture between Micron and Nanya is competitively significant in the semiconductor industry, as it was previously a JV between Nanya and Micron rival, Qimonda. After a public offering by Inotera, Micron holds around a 30% stake in the venture.

In 2012 Micron and Intel agreed to update the terms of their NAND Flash memory partnership, initially formed in 2006 when each company contributed roughly $1.2 billion to create IM Flash Technologies (IMTF). The new terms include an expanded agreement for Micron to supply Intel with NAND flash memory products. Micron will increase its share of NAND output by purchasing the assets of both IM Flash Singapore and the IM Flash Technologies facility located in Virginia. Micron gains added production capacity and the joint development program is extended to include emerging memory products.

Mergers and Acquisitions

Micron bolstered its enterprise storage offerings in 2012 when it purchased Virtensys, which provided peripheral component interconnect express (PCIe) virtualization. The deal allowed Micron to develop virtualization for solid state disk storage.

In a move to expand its global scale and market share, in 2012 Micron agreed to buy Japan-based memory rival Elpida, which is in corporate reorganization. The ¥200 billion (about $2.5 billion) deal will pay off all of Elpida's secured and unsecured creditor claims and give Micron a strong presence in mobile DRAMs to complement its offering of networking and server DRAMs. Micron will pay around ¥60 billion (about $750 million) at closing, with an additional ¥140 billion ($1.75 billion) in annual installments paid for foundry services provided by Elpida through 2019.

In a related transaction, Micron will buy the 24% of Rexchip owned by Powerchip Technology Corporation for $334 million; combined with the 65% stake owned by Elpida, the acquisition will give Micron ownership of 89% of Rexchip. Combined, Elpida and Rexchip will increase Micron's manufacturing capacity by about 50%.

Ownership

Mutual fund manager FMR owns about 15% of Micron. – less