Micron Technology, Inc. (MU) develops and manufactures memory and storage technologies used in personal computers, networks, data centers, and the automotive industry. Across its major brands including Micron, Crucial, and Ballistix, the company produces memory cards, drives, and infrastructure technology. As one of the leading semiconductor companies, Micron faces major competition from Intel Corp. (INTC), Taiwan Semiconductor Manufacturing Company (TSM), and other chip producers.

Key Takeaways

  • Micron Technology is a semiconductor company that develops and makes memory and storage solutions.
  • Micron products are used in automobiles, consumer electronics, communications products, servers, and computers.
  • Its Compute and Networking Business Unit accounted for more than half of operating income in FY 2019.
  • Micron recently has been centralizing manufacturing in Singapore and Taiwan, and other locations.

Micron's Financials

In FY2019 ending August 29, Micron reported $6.4 billion of net income, down 55% YOY. Revenue fell 23% to $23.4 billion in the same period. Micron has struggled in the most recent quarter as well. For Q1 FY 2020, ended November 28, 2019, Micron generated $5.1 billion in revenue, down from $7.9 billion in the same quarter in FY 2019. During the same period, the company generated only $0.5 billion in net income, down sharply from $3.3 billion in the same quarter a year earlier.

Micron's Business Segments

Micron breaks down its revenue and operating profit into four major 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 to cover other revenue sources. As a company focused on memory and storage products and solutions, Micron's business segments are distinguished primarily by the markets and clients that each one targets. The data shown in the pie charts excludes segments with negative revenue or negative profits.

Compute and Networking Business Unit (CNBU)

Micron's CNBU segment includes memory products which are sold into markets for cloud server, enterprise, graphics, networking, and other clients. Within the CNBU segment, the client market is the largest component, thanks in large part to sales of the company's DDR4 DRAM products. For FY 2019, CNBU generated $10.0 billion in revenue, accounting for nearly 43% of the company's total revenue and about 57% of operating income. While this makes CNBU the largest source of revenue for Micron, the segment accounted for an even larger percentage of revenue a year earlier. CNBU revenue declined by 34.6% YOY in FY 2019, the single largest decline of any segment.

Mobile Business Unit (MBU)

The MBU segment includes memory products sold into the mobile device and smartphone markets, such as flash storage drives, and discrete DRAM. For FY 2019, MBU generated $6.4 billion in revenue, or about 27% of Micron's total revenue. This was down from $6.6 billion in revenue for FY 2018. Because of the overall decline in revenue across all segments, the proportion of revenue generated by MBU increased from FY 2018 to FY 2019. In FY 2019, MBU's operating profit comprised about 32% of total profits.

Storage Business Unit (SBU)

Micron's SBU segment includes solid state drives as well as component-level solutions sold to cloud, client, enterprise and other storage markets. This segment is known primarily by the company's flagship SATA 5200 and 5100 series SSDs. For FY 2019, SBU generated $3.8 billion in revenue, more than 16% of Micron's revenue for the year. SBU revenue fell by 23.8% in FY 2019 as it posted a $0.4 billion operating loss.

Embedded Business Unit (EBU)

The EBU segment covers memory and storage products used in a variety of industries, including automotive, consumer markets, and industrial applications. These products help to power applications including voice and gesture control in automobiles, machine-to-machine communication, and automation processes. EBU accounted for $3.1 billion in revenue for FY 2019, or about 13% of Micron's total revenue. Revenue was down by 9.8% YOY. In FY 2029, EBU operating profit made up about 11% of the total.

Micron's Recent Developments

In its shareholder letter for Q1 of FY2020, Micron management said it anticipated that Q2 will be the cyclical bottom for its weak financial performance. To capitalize on an upturn, the company has poured additional resources into research and development (R&D). R&D spending rose by 14% YOY in FY2019 and by 17% YOY in FY2018.