Micron Technology, Inc.
Fiscal Q3 2023 Earnings Call Prepared Remarks

Farhan Ahmad, Vice President, Investor Relations
Thank you, and welcome to Micron Technology’s fiscal third-quarter 2023 financial conference call. On thecall with me today are Sanjay Mehrotra, our president and CEO, and Mark Murphy, our CFO. Today’s call isbeing webcast from our Investor Relations site at investors.micron.com, including audio and slides. In
addition, the press release detailing our quarterly results has been posted on the website, along with the
prepared remarks for this call.
Today’s discussion of financial results is presented on a non-GAAP financial basis unless otherwise
specified. A reconciliation of GAAP to non-GAAP financial measures can be found on our website. We
encourage you to visit our website at micron.com throughout the quarter for the most current
information on the company, including information on financial conferences that we may be attending.
You can also follow us on Twitter at MicronTech.
As a reminder, the matters we are discussing today include forward-looking statements regarding market
demand and supply, our expected results, and other matters. These forward-looking statements are
subject to risks and uncertainties that may cause actual results to differ materially from statements madetoday. We refer you to the documents we file with the SEC, including our most recent Form 10-K and
10-Q, for a discussion of risks that may affect our future results. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels ofactivity, performance, or achievements. We are under no duty to update any of the forward-looking
statements to conform these statements to actual results.
I'll now turn the call over to Sanjay.
Sanjay Mehrotra, President and Chief Executive Officer
Thank you, Farhan.
Good afternoon, everyone.
Intro/FQ3 Highlights
Micron delivered fiscal third-quarter revenue within our guidance range, with gross margin and earnings
per share (EPS) above the range. The ongoing improvement of customer inventories and memory content
growth are driving higher industry demand, while production cuts across the industry continue to help
reduce excess supply. As a result, pricing trends are improving, and we have increased confidence that theindustry has passed the bottom for both quarterly revenue and year-on-year revenue growth. Our
technology leadership and strengthening product portfolio position us well across diverse growthmarkets, including artificial intelligence (AI) and memory-centric computing. Beyond this downturn, we© 2023 Micron Technology, Inc.

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expect to see record total addressable market (TAM) in calendar 2025 along with a return to morenormalized levels of profitability.
CAC Update
The impact of the May 21 decision by the Cyberspace Administration of China (or CAC) on Micron’sbusiness remains uncertain and fluid. Several Micron customers, including mobile OEMs, have been
contacted by certain “critical information infrastructure” operators or representatives of the government in
China concerning the future use of Micron products. As discussed before, Micron’s revenue withcompanies headquartered in mainland China and Hong Kong — including direct sales as well as indirect
sales through distributors — accounts for approximately a quarter of Micron’s worldwide revenue andremains the principal exposure. We currently estimate that approximately half of that Chinaheadquartered customer revenue, which equates to a low double-digit percentage of Micron’s worldwide
revenue, is at risk of being impacted. This significant headwind is impacting our outlook and slowing ourrecovery. Micron is working to mitigate this impact over time and expects increased quarter-to-quarter
revenue variability. Micron’s long-term goal is to retain its worldwide DRAM and NAND share.
Technology & Production
Turning to technology. Micron continues to lead the industry in both DRAM and NAND technology. We
are investing prudently to maintain our technology competitiveness while managing capital expenditures(capex), node ramps and wafer start reductions to reduce our bit supply and align it with demand. Our
industry-leading 1ß (1-beta) DRAM and 232-layer NAND nodes are achieving world-class yields, and theyield ramp for these nodes has been faster than any of our prior nodes. These leadership nodes provide astrong cost capability, along with best-in-class power and performance specifications that will be
leveraged across the portfolio of DRAM and NAND products. In fiscal Q3, we achieved several important
product qualifications on these advanced nodes and are well positioned to ramp them in fiscal 2024.
We are also making good progress toward the introduction of our extreme ultraviolet lithography (EUV)based 1γ (1-gamma) node in 2025. This node will be manufactured first in our Taiwan site, where wealready have EUV capability installed and operating in preparation for this ramp. We also recently
announced plans to bring EUV technology to our fab in Hiroshima, Japan, with support from the Japanese
government. Micron will be the first company to bring EUV technology to Japan for production.
Backend Investments
We are also advancing our global assembly and test network in order to support our product portfolio
and extend our ability to deliver on global customer demand in the future. In China, we announced aninvestment of approximately $600 million over the next several years in our operations in Xi’an. This builds
on our long history of significant investment in our Xi’an assembly, packaging and test operations. As a

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part of this investment, we have decided to purchase the assembly equipment of our partner Powertech
Semiconductor Xi’an, which has been operating inside our Xi’an facility for the last eight years. We also
intend to construct a new building at our Xi’an site to provide space to add more product capabilities.
This will allow us, over time, to serve more of the demand from our customers in China from the Xi’an site.
In India, with the strong support of the Indian government, we will build a new assembly and test facility
in Gujarat to address demand for the latter half of this decade. We are also increasing our investments inassembly and test capacity in Taiwan for high-bandwidth memory products as we gear up for stronger
demand in this segment driven by the AI wave.
End Markets
Now turning to our end markets.
Customers continued to make progress in reducing their excess inventory in fiscal Q3. Most customer
inventories in the PC and smartphone segments are close to normal levels now, consistent with ourforecast six months ago. Some of these inventory levels can get distorted by customer attempts toleverage current prices — which are deemed to be transient and unsustainable at these levels — topurchase additional volumes before prices rise significantly. Data center customer inventory is also
improving and will likely normalize around the end of this calendar year or somewhat thereafter,
depending on the growth in traditional data center spending.
Data CenterIn data center, we saw strong sequential revenue growth in both cloud and enterprise in fiscal Q3, driven
by some recovery from depressed sales levels in fiscal Q2. The recent acceleration in the adoption ofgenerative AI is driving higher-than-expected industry demand for memory and storage for AI servers,
while traditional server demand for mainstream data center applications continues to be lackluster.
Micron’s product portfolio and roadmap of innovative products position us to capture growth
opportunities from AI and data-centric computing architectures for both training and inferencing.
Increasingly large AI models with an exponentially growing number of parameters are driving demand for
dramatically higher memory content.
As we have said before, AI servers have six to eight times the DRAM content of a regular server and threetimes the NAND content. In fact, some customers are deploying AI compute capability with substantiallyhigher memory content. A striking example is NVIDIA’s DGX GH200 supercluster, which shows just how
memory-intensive AI workloads can be — it provides developers the ability to support giant models witha massive, shared memory space of 144TB. A significant majority of that memory footprint is enabled by ajoint development project between our two companies that extends Micron’s low-power DRAM
leadership to server class applications. We are proud to pioneer this differentiated low-power DRAM

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Fiscal Q3 2023 Earnings Call Prepared Remarks

innovation to deliver a significant reduction in data center power consumption compared to DDR-based
solutions — helping to support our customers’ green initiatives.
High-bandwidth memory (HBM), used in high performance computing, is seeing very strong demand thisyear, driven by demand for generative AI. We are working closely with our customers and have begun
sampling our industry-leading HBM3 product offering. The customer response has been strong, and webelieve our HBM3 product delivers significantly higher bandwidth than competing solutions andestablishes the new benchmark in performance and power consumption, supported by our 1ß technology,
Through-silicon via (TSV), and other innovations enabling a differentiated advanced packaging solution.
We expect to begin a mass production ramp for this exciting HBM3 product in early calendar 2024 and toachieve meaningful revenues in fiscal 2024.
Micron also has a strong position in the industry transition to D5, which is the latest generation of DDR
memory. Our D5 percentage of DRAM shipments has more than doubled from fiscal Q2 to Q3, and we
expect Micron D5 volume to cross over D4 at the end of first calendar quarter of 2024 versus midcalendar 2024 for the industry. Micron’s 1α (1-alpha) D5 modules are qualified and shipping to data
center customers. We are also making good progress on our 1ß-based, high-density 128GB D5 modules
using a 32Gb die that optimizes cost and performance to provide customers with a lower cost-ofownership solution for memory-intensive workloads like AI. We expect these high-density modules toramp in calendar Q2 of 2024 with significant cost improvements over today’s expensive TSV-based
solutions in the industry. Our 96GB D5 high-density module built on 1α technology, using 24Gb die, isalready shipping in volume and delivers equivalent performance for the majority of workloads versus themore expensive TSV dual-die package-based 128GB modules.
In data center SSDs, Micron’s entire portfolio is now on 176-layer or 232-layer NAND, demonstrating our
product and technology leadership. We are in a strong position to serve AI demand for fast storage asthese data-intensive applications proliferate. In fiscal Q3, we launched the world’s first 200+ layer NAND
data center SSD, and qualification is in progress at multiple key customers to support AI cluster
installations. In fact, we have already passed qualification of this product at a critical server OEM partner.
We also launched our “extreme endurance” data center SSD, which offers superior scalability andaffordability versus hard drives.
PCs
In PCs, we now forecast calendar 2023 PC unit volume to decline by a low double-digit percentage year
over year, with PC units expected to be below the pre-COVID levels last seen in 2019. We are excitedabout the ongoing industry transition to D5 and are well positioned for it with our strong D5 productlineup. Industry client D5 mix is expected to cross over from D4 in early calendar 2024.

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Fiscal Q3 2023 Earnings Call Prepared Remarks

In fiscal Q3, we achieved record quarterly client SSD bit shipments, driven by share growth in client SSDs
as customers adopted our industry-leading solutions. Our SSD QLC bit shipment mix reached a newrecord for the third consecutive quarter, with growth in both client and consumer. Last month, welaunched Crucial T700, the world’s fastest Gen5 PCIe consumer SSD, built with our 232-layer NAND.
Graphics
In graphics, industry analysts continue to expect graphics’ TAM compound annual growth rate (CAGR) to
outpace the broader market, supported by applications across client and data center. We expect customer
inventories to normalize in calendar Q3. We plan to introduce our next-generation G7 product on our
industry-leading 1ß node in the first half of calendar year 2024.
MobileIn mobile, we now expect calendar 2023 smartphone unit volume to be down by a mid-single digit
percentage year over year. While units are weaker, we are seeing stronger memory content growth driven
by a mix shift toward premium phones and elasticity. We expect sequential growth in fiscal Q4 ascustomers prepare for upcoming product launches in the back half of calendar 2023.
In fiscal Q3, we achieved key mobile customer qualifications on our 1ß-based LP5X and started highvolume revenue shipments to tier-1 OEMs. In addition, we achieved significant milestones in universal
flash storage (UFS) with the qualification and ramp of a high-capacity uMCP5 featuring 16GB of DRAM
and 512GB of NAND. We have also started to sample a new UFS 4.0 product based on our latest 232-layer
NAND technology, which enables industry-leading performance for flagship handsets.
Auto & Industrial
Last, I’ll cover the auto and industrial end markets, which represent over 20% of our revenue andcontribute more stable revenue and profitability.
Micron continues to lead in automotive, which is a key market and growth driver for us. In fiscal Q3, auto
revenue reached another quarterly record and grew by a high single-digit percentage year over year. We
continue to expect growth in auto memory demand for the second half of calendar 2023, driven by easing
non-memory semiconductor supply, normalizing customer inventory levels, and increasing memory
content per vehicle.
The industrial market saw early signs of recovery in fiscal Q3. Inventory levels are stabilizing at distribution
partners and at the majority of our customers. As a result, we expect an improvement in demand in thesecond half of calendar 2023. We are excited about our growth prospects in this market, as industrial© 2023 Micron Technology, Inc.

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customers continue to adopt and implement internet of things (IoT), AI, and machine learning in thefactory.
Market Outlook
Now, turning to industry outlook.
Our expectations for calendar 2023 industry bit demand growth have been further reduced to low to mid
single digits in DRAM and to high single digits in NAND, which are well below the expected long-term
CAGR of mid-teens percentage range in DRAM and low 20s percentage range in NAND. While the AIdriven demand has been stronger than our expectations three months ago, the PC, smartphone andtraditional server demand forecasts are now lower. We continue to expect stronger industry bit shipments
for DRAM and NAND in the second half of the calendar year, driven by secular content growth andcontinued improvement in customer inventory.
While the industry demand forecast for calendar 2023 is now lower, the significant supply reductions
across the industry have started to stabilize the market. We see both DRAM and NAND year-over-year
supply growth to be negative for the industry in calendar 2023 as utilization and capex cuts across theindustry impact supply growth. While supply demand balance is improving, due to the excess inventory,
profitability and cash flow will remain extremely challenged for some time. Market recovery can accelerate
if there is further reduction in industry production and these cuts are sustained well into calendar 2024.
In response to the industry environment, Micron has taken decisive actions to bring our supply back inbalance with demand. We expect Micron’s year-on-year bit supply growth to be meaningfully negative for
DRAM. We also expect to produce fewer NAND bits in calendar 2023 than in calendar 2022.
Our fiscal 2023 capex plan of $7 billion is down more than 40% from last year, with wafer fab equipment(WFE) down more than 50%. We continue to expect fiscal 2024 WFE to be down year on year.
Recently, we have further reduced wafer starts to approach 30% in both DRAM and NAND. We currently
expect reduced wafer starts will continue well into calendar 2024 as we remain focused on managing
down our inventories and controlling our supply.
I will now turn it over to Mark.
Mark Murphy, Executive Vice President and Chief Financial Officer
Thanks, Sanjay. Good afternoon, everyone.

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Fiscal Q3 2023 Earnings Call Prepared Remarks

Opening
Fiscal Q3 results were in line to better than expectations, with revenue coming in above the midpoint ofour guidance range and gross margin and EPS exceeding the high end of the range.
Revenue
Total fiscal Q3 revenue was approximately $3.8 billion, up 2% sequentially and down 57% year over year.
Fiscal Q3 revenue included $72 million from an insurance settlement disclosed at the time we provided
guidance.
DRAM
Fiscal Q3 DRAM revenue was $2.7 billion, representing 71% of total revenue. DRAM revenue declined 2%
sequentially, with bit shipments increasing in the 10-percentage range and prices declining by
approximately 10%.
NAND
Fiscal Q3 NAND revenue was $1 billion, representing 27% of Micron’s total revenue. NAND revenue
increased 14% sequentially, with bit shipments increasing in the upper 30-percentage range and prices
declining in the mid-teens percentage range.
Revenue by Business Unit
Now turning to revenue by business unit.
Compute and Networking Business Unit revenue was $1.4 billion, up 1% sequentially. Strong sequential
growth in server and graphics revenues was offset by a decline in client.
Embedded Business Unit revenue was $912 million, up 5% sequentially. On a sequential basis, automotive
and consumer revenues were strong.
Revenue for the Mobile Business Unit was $819 million, down 13% sequentially due to timing of
shipments. As Sanjay mentioned, we expect growth in mobile revenues in fiscal Q4.
Revenue for the Storage Business Unit was $627 million, up 24% sequentially and driven by increased
shipments across most of the portfolio.

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Fiscal Q3 2023 Earnings Call Prepared Remarks

Operating Results
Gross Margin
The consolidated gross margin for fiscal Q3 was negative 16%, improving 15 percentage points
sequentially. This result was negatively impacted by approximately $400 million or 11 percentage points
of write-downs associated with inventory produced in the quarter.
Opex
Operating expenses in fiscal Q3 were $866 million, down roughly $50 million sequentially. Opex benefited
from ongoing expense-reduction initiatives and gains on sales of certain assets.
Operating Income
We had an operating loss of roughly $1.5 billion in fiscal Q3, resulting in an operating margin of negative
39% but improved from negative 56% in the prior quarter.
Taxes
Fiscal Q3 taxes were $102 million, higher than expectations at the time of our guidance, driven by onetime discrete items. As mentioned in previous quarters, despite a consolidated loss on a worldwide basis,
we still have taxes payable in certain geographies due to taxable income levels reported in thosegeographies.
Earnings Per ShareThe non-GAAP loss per share in fiscal Q3 was $1.43, down from a loss per share of $1.91 in the priorquarter and earnings per share of $2.59 in the prior year. Fiscal Q3 EPS included approximately $0.37 oflosses from the impact of the inventory write-down associated with inventory produced in the quarter.
Cash Flow
Turning to cash flows and capital spending, our operating cash flows were approximately $24 million.
Capital expenditures were $1.4 billion during the quarter. We continue to expect capital expenditures tobe approximately $7 billion for the fiscal year, thus near $1 billion in fiscal Q4.
Free cash flow was negative $1.4 billion in the quarter and improved from the previous two quarters.

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Inventory
Our fiscal Q3 ending inventory was $8.2 billion or 168 days. Due to increases in process steps and productcomplexity, we now target inventory levels of around 120 days, which at present would equate toapproximately $6 billion. Our current inventories include strategic stocks of approximately $1 billion overtarget levels associated with build-ahead of product for cost optimization and risk mitigation.
Total Cash/Debt
At quarter end, we held cash and investments of $11.4 billion and had total liquidity of $13.9 billion,
including our untapped credit facility.
We issued $1.5 billion of long-term debt in the quarter and, with part of those proceeds, paid down $600
million of our term loan facility, resulting in a net increase to debt of $900 million. Our fiscal Q3 ending
debt was $13.2 billion.
OutlookNow turning to our outlook for the fiscal fourth quarter.
As mentioned in filings and our comments today, the CAC decision is a headwind to our outlook. We
expect the revenue impact to vary by quarter, with the impact in fiscal Q4 being less than the quarterly
impact in the first half of fiscal 2024. Over time, we have a goal of retaining our global market share inboth DRAM and NAND. In fiscal Q4, as the industry demand continues to improve and despite the effects
on our business from the CAC decision, we still see record bit shipments.
Fiscal Q4 gross margin will be impacted by costs from underutilization, weak pricing levels and productmix. In the current business environment, the gap between our DRAM and NAND profitability issignificant, and changes in the mix can drive large variability in gross margins. Our gross margin guidance
does not contemplate additional write-downs of inventory. We continue to aggressively manage ouroperating expenses and remain on track to exit the fiscal year at less than $850 million. Looking beyond
fiscal Q4, we expect opex to increase over $50 million in fiscal Q1 2024 on research and development(R&D) program expense timing and as reductions to employee compensation end.
Non-GAAP GuidanceWith all these factors in mind, our non-GAAP guidance for fiscal Q4 is as follows.
We expect revenue to be $3.9 billion, plus or minus $200 million; gross margin to be in the range ofnegative 10.5%, plus or minus 250 basis points; and operating expenses to be approximately $845 million,
plus or minus $15 million. We expect tax expenses of approximately $40 million.

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Fiscal Q3 2023 Earnings Call Prepared Remarks

Based on a share count of approximately 1.1 billion shares, we expect EPS to be a loss of $1.19, plus orminus $0.07.
Closing
In closing, we continue to act quickly and tenaciously to navigate this downturn, making the investments
to maintain our leading capabilities across technology, products, and manufacturing while preserving oursolid balance sheet. In this environment, we remain sharply focused on improving our profitability andfree cash flow. As market conditions improve, we will continue to drive efficiencies to hold on productivity
gains. Despite the impact of this downturn and effects of the CAC decision, we remain confident in our
financial model and our ability to deliver long-term profitability, cash flow and shareholder returns.
I will now turn it back over to Sanjay.
Sanjay’s Closing
Thank you, Mark.
I am proud of the execution of the Micron team and the progress we made this quarter. The leadershipproducts we released and qualified are strengthening Micron’s portfolio across multiple key markets.
While there are near-term headwinds, I am excited about the new product introductions that we haveplanned for the next several quarters, which will further enable us to leverage the dramatic growth in AI
that is ahead of us. I am confident that this portfolio momentum — combined with our technology
capability, manufacturing excellence, financial discipline, and excellent customer relationships — will
position us well for the future.
I also want to call attention to Micron’s 2023 sustainability report, which published yesterday. The reportunderscores our continued commitment to innovation, the environment, our people and the communities
where we operate, outlining our progress and aspirations across our environmental, social andgovernance (ESG) programs. I encourage you to review the full report on Micron’s website.
Thank you for joining us today. We will now open for questions.

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