Micron Technology, Inc.
Fiscal Q2 2019 Earnings Call Prepared Remarks

Sanjay Mehrotra, President and Chief Executive Officer
Micron executed well in the second quarter, delivering solid results and healthy levels of profitability andfree cash flow, despite a challenging industry environment. We continued to strengthen our balance sheet
in the quarter by increasing our cash position and total liquidity. Although we expect industry headwinds
in the near-term, we continue to grow and diversify our product portfolio, improve our costcompetitiveness and lay the foundation to emerge stronger — both financially and operationally — fromthis environment.
I would like to start with a review of two important pillars of Micron’s strategy: improving costcompetitiveness and increasing high-value solutions in our portfolio. Our strategy positions us for thetremendous opportunities ahead, while also enabling us to better navigate near-term headwinds. Strong
execution against this strategy has improved our annualized profitability by over $6 billion from fiscal
2016 to fiscal 2018. This has improved our EBITDA margin by more than 15 percentage points relative to
our competitors over the same period.1
We expect further progress on cost reduction this fiscal year, including healthy year-over-year costdeclines in both DRAM and NAND. In DRAM, our 1Y nanometer is yielding well, and we expect to increase
conversion to 1Y nanometer in the second half of fiscal 2019. We are also making excellent progress on
1Z nanometer and have started sampling products utilizing this technology. As we have said in the past,
future DRAM node transitions require additional process steps and more fab cleanroom space.
Consequently, in addition to the previously announced expansion of our Hiroshima facility, we are startingsite preparation for the cleanroom expansion at our Taichung facility to enable the transition of existing
DRAM wafer capacity to future nodes. We are still finalizing the timing but expect production output
sometime in calendar 2021.
In NAND, we achieved meaningful production on 96-layer 3D NAND in fiscal Q2 with the fastest yieldramp of any NAND product in our history. We are also making good progress on development of our
fourth-generation 3D NAND, which uses our replacement gate technology. Given the high initial capitalrequirements of floating gate to replacement gate conversion, we expect that our first replacement gate
node will provide limited cost reduction, and hence we are planning to deploy this node across select
NAND products, with the rest of the portfolio converting later to the second node of replacement gate.
This approach will optimize the ROI of our NAND capital investments as we convert our capacity. As areminder, our replacement gate architecture will allow us to deliver performance improvements andprovide us an efficient path toward scaling multiple future generations of 3D NAND. Given the limited
initial deployment at the first node of replacement gate, we expect that our NAND bit supply growth incalendar 2020 will be below industry demand levels, and we plan to utilize our cost-effective floating gate
inventory position to meet customer requirements.

1

Based on internal estimates derived from publicly available information.

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Micron Technology, Inc.
Fiscal Q2 2019 Earnings Call Prepared Remarks

Turning to high-value solutions, more than two-thirds of NAND revenues in the first half of fiscal 2019were from high-value solutions, up from 55 percent in the first half of 2018. This increased mix of highvalue solutions, combined with our competitive cost structure, enabled us to deliver fiscal Q2 NAND grossmargin in the high 30s despite steep price declines in the industry.
In SSDs, we are making progress on transitioning to NVMe while continuing to improve our cost profile in
SATA. In fiscal Q2, we began revenue shipments to a large PC OEM for our first NVMe client SSD, whichfeatures our internally designed controller, and are in active qualifications with other customers. We
intend to introduce cloud and enterprise NVMe SSDs later this calendar year. In SATA, we introduced
consumer and client SSDs based on 96-layer 3D NAND in fiscal Q2. In the cloud market, our custom
persistent memory solution, which combines DRAM and NAND, is now fully ramped and contributed
meaningfully to our cloud revenues.
3D XPoint™ development remains on track with customer samples planned before calendar year-end. We
believe 3D XPoint technology will be a key enabler for numerous new applications, particularly artificial
intelligence and data analytics. As announced previously, in January of this year we exercised our option
to acquire Intel’s interest in the IMFT facility in Lehi, Utah. This acquisition provides us with the
manufacturing capability and highly skilled talent to drive 3D XPoint development and innovation.
Now turning to end markets:
I’ll start with Mobile. During fiscal Q2 we grew revenues and expanded gross margins year-over-year
despite adverse memory and storage pricing and weakness in high-end smartphone unit sales. Our
performance in mobile was propelled by growth in our managed NAND portfolio, where NAND bit
shipments grew more than 5X year-over-year. We are also seeing strong demand for our 1Y-nanometer
LPDRAM due to its industry-leading capacity and best-in-class power consumption.
Memory and storage content growth in smartphones continues, driven by features such as multiple
cameras, machine learning, computational photography and 4K video. Last month, Samsung announced
its premium Galaxy S10 Plus smartphone, featuring 12 gigabytes of DRAM and 1 terabyte of NAND. At
Mobile World Congress, several companies announced exciting new phones featuring 5G connectivity andfoldable screens. These next-generation premium smartphones will typically feature 8 to 12 gigabytes of
DRAM and 256 to 512 gigabytes of NAND versus 4 to 6 gigabytes of DRAM and 64 to 128 gigabytes of
NAND in current-generation premium smartphones. These trends will likely cascade to lower-tier phones
as well. We believe that 5G, foldable phones and upcoming innovations in augmented and virtual reality
will drive sustained content growth for years to come and should reignite smartphone unit sales
beginning in calendar 2020.
We are also excited by the opportunity that 5G is likely to create beyond mobile, as it will enable truemachine-to-machine communication and accelerate data creation and analysis, which are fundamental
drivers for our business. We expect 5G adoption to create increased demand for memory and storage in© 2019 Micron Technology, Inc

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Micron Technology, Inc.
Fiscal Q2 2019 Earnings Call Prepared Remarks

IoT devices, wireless infrastructure and data centers. Our embedded and networking businesses are
already starting to see benefit from early 5G infrastructure investments.
In the data center market, the demand for memory has moderated this year following exceptional growthin the last two years. The slowdown in demand is a result of ongoing customer inventory adjustments, aswell as software optimizations at some cloud customers. We expect growth to resume in the second halfof calendar 2019 as we see improvement in our customers’ inventory position. New server processors that
support higher memory densities are expected to be introduced in a few months, which should drive
additional demand growth in the second half of calendar 2019. In fiscal Q2, we shipped high-density 1Ynanometer DDR4 server module samples to customers ahead of plan, which will position us well tobenefit from this new CPU platform ramp.
In graphics, we grew sales of our high-performance GDDR6 DRAM and expanded our customer base,which positions us for stronger growth in the second half of calendar 2019. We are seeing steep customer
inventory adjustments in GDDR5 and expect them to be largely completed by the middle of this calendar
year.
We had another strong quarter in automotive with year-over-year revenue growth driven by increasing
demand for ADAS and advanced in-vehicle infotainment systems. In fiscal Q2, we announced several new
automotive products, including a collaboration with Qualcomm for next-gen in-vehicle infotainment and
5G communications modules. We also announced a new strategic collaboration with a leading supplier of
ADAS platforms using our full portfolio of memory and storage products. Lackluster automobile unit sales
are a short-term challenge, however, we see the auto market generating robust growth for Micron overthe next decade, as memory and storage content continues to increase in autos, driven by advanced
infotainment systems and the adoption of autonomous vehicles.
In the industrial and consumer markets, we saw a decline in sales due to seasonal, macroeconomic andpricing weaknesses, as well as inventory adjustments. We had important design wins in video surveillance,
point of sales and factory automation applications. At Mobile World Congress, we announced theindustry’s first 1TB microSD card using QLC NAND.
In the PC market, sales declined more than 25 percent sequentially driven by weaker pricing and theinventory drawdown seen in other segments, as well as client CPU shortages. We remain focused on our
cost competitiveness in this market, and over two-thirds of our PC DRAM bit shipments are now comingfrom our advanced 1X- and 1Y-nanometer technology nodes.
Now turning to our DRAM industry outlook:
Since our last earnings call, DRAM pricing weakened more than expected. Our demand outlook forcalendar 2019 has moderated, led by somewhat greater levels of customer inventory, weakening server
demand at several enterprise OEM customers and worse-than-expected CPU shortages. We believe
macroeconomic uncertainty is also contributing to hesitation in buying behavior at some customers.

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Micron Technology, Inc.
Fiscal Q2 2019 Earnings Call Prepared Remarks

However, as we discussed on our last earnings call, we still expect DRAM bit shipments to begin
increasing in our fiscal Q3, with demand growth strengthening in the second half of calendar 2019 as
most customer inventories are likely to normalize by mid-year.
Based on our current view, we now estimate calendar 2019 DRAM bit demand growth from our customers
to be in the low-to-mid teens, with their end demand a few points above that. Further, we estimate
industry supply bit growth is tracking to mid-to-high teens.
Given the lower DRAM demand outlook from our customers, we have decided to idle approximately 5
percent of our DRAM wafer starts. This action will bring our production levels close to our view of DRAM
industry bit demand growth for calendar 2019. We will continue to monitor the market and takeappropriate actions to ensure that our bit supply growth in calendar 2019 remains closely aligned withdemand.
Looking beyond our fiscal 2019, we expect bit demand growth to accelerate as mobile and server demand
improves. In particular, we expect robust DRAM bit demand growth in fiscal 2020, bouncing back from aweak fiscal 2019.
NAND markets remain oversupplied from the acceleration in bit growth driven by the industry transition
to 64-layer 3D NAND. Although fiscal Q2 pricing came in below our expectations, we are optimistic thatdemand elasticity and seasonal trends will support improving demand growth in the second half of thecalendar year. We expect that calendar 2019 NAND bit demand growth is likely to be in the mid-30s
percent range, with industry supply growing in the high-30s, and we are targeting our bit shipments togrow close to the growth rate of industry bit demand. We have been managing our NAND bit supply
growth prudently, including adjusting our capital planning and wafer volumes. We are reducing our total
NAND wafer starts by approximately 5 percent, mostly through reductions on our legacy nodes.
Given these changes in DRAM and NAND industry conditions, we have reduced our capex for fiscal 2019
and are evaluating our capex for fiscal 2020. We are taking prudent actions to address the current market
conditions, while executing well on our long-term strategic objectives.

Dave Zinsner, Senior Vice President and Chief Financial Officer
Micron’s fiscal Q2 results were within our guidance as we executed well in a period of somewhat weakerthan-expected market conditions. In the quarter, we returned capital to shareholders, continued to
improve our cost structure and strengthened our balance sheet through our first issuance of investmentgrade debt. Most of the proceeds from this offering were used to redeem a large portion of ouroutstanding convertible notes, reducing our fully diluted share count.
Total fiscal Q2 revenue was $5.8 billion, down 21 percent from the prior year and down 26 percent fromthe fiscal first quarter. Revenue reflected worse-than-expected pricing trends in DRAM and NAND.

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Micron Technology, Inc.
Fiscal Q2 2019 Earnings Call Prepared Remarks

DRAM revenue was down 28 percent year-over-year and 30 percent sequentially from the fiscal firstquarter and represented 64 percent of total company revenue in the fiscal Q2. DRAM ASPs declined in thelow 20 percent range compared to the prior quarter, while shipment quantities were down in the low
double-digits. Year-over-year, DRAM bit shipments were down mid-single digits.
NAND revenue declined 2 percent year-over-year and 18 percent from the prior quarter. NAND revenue
represented 30 percent of total company revenue in the fiscal Q2. Our overall NAND ASP declined in the
mid-20 percent range, while shipment quantities increased in the upper single-digit percent range
compared to the prior quarter. NAND bit shipments came in stronger than our expectation due to timingof demand from a large customer.
Now turning to our revenue trends by Business Unit.
Revenue for the Compute and Networking Business Unit was $2.4 billion, down 35 percent year-over-yearand 34 percent from the prior quarter. The sequential decline was driven by pricing across major market
segments, as well as volume reductions, particularly in graphics, cloud and PCs.
Revenue for the Mobile Business Unit or MBU was $1.6 billion, up 3 percent year-over-year and down 27
percent from the record fiscal first quarter. Lower volume due to weak seasonality and pricing contributed
to the quarter-over-quarter revenue decline. Despite the current market conditions, MBU revenue grew
year-over-year due to strong growth in our managed NAND products.
The Embedded Business Unit revenue of $800 million was down 4 percent compared to the prior year anddown 14 percent from the record fiscal first quarter. The automotive business was only down slightly fromrecord fiscal first quarter, despite weakness in automobile sales. Other embedded revenue declined
quarter-over-quarter due to weaker pricing and lower DRAM volumes.
Finally, the Storage Business Unit fiscal Q2 revenue was $1.0 billion, down 19 percent year-over-year anddown 11 percent quarter-over-quarter. The sequential decline was driven by lower SSD revenue, partially
offset by increased component revenue.
The consolidated gross margin for the fiscal Q2 was 50 percent compared to 58 percent in the prior year
and 59 percent in the fiscal first quarter. Fiscal Q2 results included ongoing impact from 3D XPoint
underutilization costs, which approximated 160 basis points. Pricing came in weaker than expected inboth DRAM and NAND, but strong execution on cost reductions resulted in gross margins within our
guidance range.
Fiscal Q2 operating expenses of $818 million came in at the high end of our guided range. OpEx included$37 million in one-time tool impairment costs that were not anticipated in our guidance. Excluding this
impairment, OpEx would have come in at the low end of our guidance. We remain focused on controlling
our expenses, while investing in future products and technologies.

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Micron Technology, Inc.
Fiscal Q2 2019 Earnings Call Prepared Remarks

We delivered solid profitability in the fiscal Q2 with operating income of $2.1 billion, representing 36
percent of revenue. This margin is down 13 percentage points year-over-year and also down 13
percentage points from the fiscal first quarter.
The tax rate for the fiscal Q2 was approximately 8.3 percent. We now expect our fiscal 2019 tax rate to beapproximately 10.5 percent.
Non-GAAP earnings per share in the fiscal Q2 were $1.71, down from $2.82 in the year-ago quarter anddown from $2.97 in the prior quarter.
Turning to cash flows and capital spending, in the fiscal Q2 we generated $3.4 billion in cash fromoperations, representing 59 percent of revenue.
Capital spending, net of third-party contributions, was approximately $2.4 billion, relatively flat comparedwith the prior quarter. We have lowered our CapEx target for fiscal 2019 to approximately $9 billion fromour prior guidance range of $9 to $9.5 billion, as we manage through the current environment while
maintaining investment in our strategic priorities. As we mentioned before, a significant portion of our
CapEx this year is going towards cleanroom construction and assembly and test operations, which do notcontribute to our bit supply growth. Fab equipment spend in fiscal 2019 is down from last year and ismostly targeted towards migrating 20-nanometer DRAM and 32-layer 3D NAND to more advanced
nodes, with no new wafer capacity additions. The investment in these technology transitions provides
compelling cost reduction and a very attractive ROI. As we have demonstrated over the past two quarters,
we remain nimble on CapEx based on business conditions.
In the fiscal Q2, our adjusted free cash flow, defined as Cash Flow from Operations less Net CAPEX wasapproximately $1 billion, compared to $2.2 billion in the year-ago quarter and $2.3 billion in the fiscal firstquarter. We deployed approximately 70 percent of the quarter’s free cash flow towards our share
repurchase program. We bought back approximately $700 million of stock in fiscal Q2, representing 21
million shares.
Through the first half of fiscal 2019, we repurchased 63 million shares for $2.5 billion, utilizing 76 percent
of our free cash flow in fiscal first half. We continue to view share repurchases as an attractive use ofcapital and remain committed to deploying at least 50 percent of our free cash flow on an annual basis
towards repurchases under our current $10 billion authorization. In addition to the buybacks, we also
eliminated our 2043 converts subsequent to the quarter close, which at current share prices effectively
lowered our fully diluted share count by approximately 9 million shares. Note that the underlying sharecount for these converts was 35 million shares, which could have resulted in greater dilution withincreases in our share price.
Inventory ended the quarter at $4.4 billion, increasing from $3.9 billion at the end of the fiscal firstquarter. Our fiscal Q2 days of inventory were 134 days compared to 107 days in the fiscal first quarter. The
actions we have announced today regarding supply reduction, combined with improving customer
demand, will begin to address our higher inventory levels.

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Micron Technology, Inc.
Fiscal Q2 2019 Earnings Call Prepared Remarks

We ended the fiscal Q2 in a strong liquidity position with net cash of $3.0 billion and total liquidity ofnearly $12 billion. Total cash increased to $9.2 billion largely as a result of our $1.8 billion debt issuance.
Our debt position increased by $2.1 billion to $6.2 billion in the quarter primarily due to the debt offeringand recognition of premium associated with the Series G convertible note redemption. Subsequent toquarter end, we used $1.4 billion of cash to complete the convertible note redemption, which reduced ouroutstanding GAAP debt balance by approximately $1.1 billion.
On January 14th, we exercised our call option to acquire IMFT, our joint venture with Intel. We expect toclose the transaction in either late fiscal 2019 or in the first half of fiscal 2020. This near $1.5 billion
transaction will also retire the $1 billion of joint-venture-related debt on Micron’s balance sheet. Since wealready consolidate IMFT’s results in our financial statements, we do not expect a material impact to ournear-term results.
Now turning to our market outlook. DRAM and NAND markets are working through supply and demand
imbalances. Our visibility remains low and the near-term environment remains challenging. While there
have been CapEx reductions across the industry they haven’t yet impacted output growth due to leadtimes. We expect our DRAM bit shipments to grow sequentially during the fiscal third quarter and atmuch higher rates in the fiscal fourth quarter. In NAND, we expect a modest sequential decline in our bit
shipments in the fiscal third quarter due to timing of shipments and expect growth to resume in the fiscal
fourth quarter. The output reductions that we announced today for DRAM and NAND, and the $1.5 billionof CapEx reductions that we have announced year to date, should also help reduce our supply of DRAM
and NAND in the second half of this calendar year.
With that in mind, our non-GAAP guidance for the fiscal third quarter is as follows. We expect revenue tobe in the range of $4.80 billion plus or minus $200 million, gross margin to be in the range of 37 to 40
percent and operating expenses at approximately $785 million, plus or minus $25 million. Based on ashare count of approximately 1.14 billion fully diluted shares, we expect EPS to be $0.85 cents, plus orminus 10 cents.
In closing, Micron continues to execute on our key initiatives: increasing our mix of high-value solutions,improving our cost profile and investing in new and innovative products. Our solid financial footing,strong liquidity and substantially reduced leverage means that we are well positioned to invest in our
future despite near-term market conditions.

Sanjay Mehrotra, President and Chief Executive Officer
In response to near-term industry conditions, we are taking decisive action to reduce our supply growth
to be consistent with industry demand. At the same time, we continue to invest and execute against our
strategic priorities to reduce costs and increase the mix of high-value solutions in our portfolio. The longterm demand trends for Micron remain very healthy, with tremendous growth opportunities acrossmultiple markets. We continue to believe that the memory industry is structurally stronger with more

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Fiscal Q2 2019 Earnings Call Prepared Remarks

diversified demand drivers and moderating supply growth capability. With our strong balance sheet andimproved product portfolio and operating model, Micron is better positioned than ever before to win anddeliver long-term value for shareholders.

© 2019 Micron Technology, Inc

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