Micron Technology, Inc.
Fiscal Q3 2020 Earnings Call Prepared Remarks

FQ3 2020 FINANCIAL RESULTS
Farhan Ahmad, Senior Director, Investor Relations
Thank you, and welcome to Micron Technology's fiscal third quarter 2020 financial conference call. On thecall with me today are Sanjay Mehrotra, President and CEO, and Dave Zinsner, Chief Financial Officer.
Today’s call will be approximately 60 minutes in length. This call, including the audio and slides is also being
webcast from our Investor Relations website at investors.micron.com. In addition, our website contains theearnings press release, and the prepared remarks filed a short while ago.
SAFE HARBOR STATEMENT
Today’s discussion of financial results will be presented on a non-GAAP financial basis unless otherwise
specified. A reconciliation of GAAP to non-GAAP financial measures may be found on our website. As areminder, a webcast replay will be available on our website later today.
We encourage you to monitor our website at micron.com throughout the quarter for the most current
information on the company, including information on the various financial conferences that we will beattending. You can follow us on Twitter at MicronTech.
As a reminder, the matters we will be discussing today include forward-looking statements. These forwardlooking statements are subject to risks and uncertainties that may cause actual results to differ materiallyfrom statements made today. We refer you to the documents we file with the SEC, specifically our mostrecent Form 10-K and 10-Q, for a discussion of risks that may affect our future results. Although we believethat the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance, or achievements. We are under no duty to update any of theforward-looking statements after today’s date 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.
I hope that you, your family and your colleagues are safe and healthy. Along with Dave and Farhan, I am
doing this call from Micron’s offices.

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Fiscal Q3 2020 Earnings Call Prepared Remarks

FQ3 HIGHLIGHTS
Micron’s strong execution in the fiscal third quarter drove solid sequential revenue and EPS growth. We
are ramping the industry’s most advanced DRAM node and increasing our mix of high-value NAND. Ourstrong competitive position and diversified product portfolio put Micron in an outstanding position for the
many exciting growth opportunities in the memory and storage markets.
OPERATIONS UPDATE
I’ll start with an update on our operations:Due to the excellent work of Micron's operations team, most of our fab and assembly sites operated at fullproduction throughout the quarter, with our Singapore and Taiwan assembly and test facilities achieving
record production. COVID-19's impact to our production early in our third quarter was limited to our backend assembly and test sites in Muar and Penang, Malaysia, and we quickly offset this impact with production
adjustments at our other facilities. All our production facilities are operating normally at this time.
We continue to prioritize the health and safety of all team members and contractors and have strong
COVID-19 safety measures in place at all our sites worldwide. We are taking a conservative, phased andsite-specific approach to returning our team members on-site, prioritizing our manufacturing workforce
and engineering teams.
MARKET ENVIRONMENT
Now turning to the market environment:
The pandemic has impacted the cyclical recovery in DRAM and NAND, causing stronger demand in somesegments and weaker demand in others.
Market segments driven primarily by consumer demand have seen a negative impact. Calendar 2020 analyst
estimates for end-unit sales of autos, smartphones and PCs are meaningfully lower than pre-COVID-19
levels, even though estimates for enterprise laptops and Chromebooks have increased. The reduced levelof global economic activity has also curtailed near-term demand.
The pandemic is driving rapid change in consumer and corporate practices around the world. Consumers
are significantly increasing online activity, including e-commerce, gaming and video streaming, all of which
drive additional data center capacity requirements. Trends like working-from-home and online learning are
likely to drive long-term changes in how we think about workforce flexibility and education. Several
governments around the world are considering ways to ensure a level playing field by consideringsignificant programs that provide Chromebooks or tablets to students who cannot afford them, as online© 2020 Micron Technology, Inc.

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learning becomes a necessity in these times. Additional government fiscal stimulus programs are also
supportive of economic activity and will accelerate trends like electric vehicle production. Emerging
technologies such as drone-based deliveries and the increased use of robotics across many applications are
now being pursued with urgency. Technology solutions are rapidly helping society adapt and manage thetemporary and permanent changes stemming from this pandemic. Clearly, certain trends that would havetaken 2 to 4 years to develop have been accelerated into months. It is easy to see how these changes will
drive higher consumption of memory and storage in the long term. The faster pace of digital transformationin the economy is here to stay.
Looking ahead to the second half of calendar 2020, let me discuss certain key market trends. First, we expect
the data center outlook to remain healthy. Second, we expect smartphone and consumer end-unit sales tocontinue to improve, accelerating inventory consumption across the supply chain. And third, new gaming
consoles will drive stronger DRAM and NAND demand.
Despite these trends, our short-term visibility across end markets remains limited due to COVID-19, macroand trade uncertainties, as well as customer inventory changes. The recent restrictions on Huawei are also
impacting our opportunity in the near term. As these risks recede, we expect a resumption of industry
growth, with a long-term bit growth CAGR of mid to high teens for DRAM and approximately 30% for
NAND. This growth will be supported by powerful secular technology trends ranging from AI and machinelearning to cloud computing, 5G and the growth in edge computing, and the industrial IoT economy.
Turning to industry supply, second-half 2020 supply growth may be somewhat muted compared to preCOVID-19 expectations. Some suppliers have commented about delays in equipment deliveries, which can
result in slower node transitions and lower bit growth.
Specific to Micron, we are proactively aligning our bit supply to market demand. Our FY20 front-end
equipment CapEx is down more than 40% from FY19 and is at its lowest level in the last 5 years. While we
expect to increase FY21 CapEx to support high ROIC node transitions, this capex will be meaningfully lower
than our pre-COVID-19 plan. We have also made changes to our DRAM utilization to align with the current
lower demand in the automotive market. As end-market conditions evolve, we will remain flexible to makeany needed adjustments to our supply.
STRONG TECHNOLOGY AND ROADMAP EXECUTION
Since 2016, Micron has made tremendous progress narrowing the competitive gap on leading-edge
technology nodes.
In DRAM, we are ramping 1z technology, which is the industry’s most advanced node, and achieving yield
improvements that reduce our cost. We have several customer qualifications underway for this technology.

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Our 1y and 1z nodes together now make up more than 50% of our bit production. We continue to makeprogress on our 1-alpha node, which we expect to introduce in FY2021. We have begun sampling our firsthigh-bandwidth DRAM memory product, which is competitive with the industry’s most advanced products,
and will expand our AI data center opportunity. We are excited about entering this new high-value segmentof the DRAM market and look forward to ramping this product after it is qualified with our customers.
In NAND, our 128-layer first-generation RG NAND technology entered volume production in FQ3, and weare pleased to announce that we have recently initiated customer shipments. We are also making good
progress on our second-generation RG node, which will be deployed broadly across our product portfolio.
We remain on track for RG production to make up a meaningful portion of our NAND output by the end of
calendar 2020.
Micron also continues to make progress with QLC. QLC bits now represent more than 10% of Micron’s
overall NAND production, contributing to our NAND cost improvements. Fiscal 2020 has been a year of
extraordinary gains in the mix of our high-value solutions in NAND, which now make up over 75% of ourquarterly NAND bits. We remain on target to increase this to 80% for FY2021.
The new Micron is undergoing a dramatic transformation to combine product leadership with technology,
manufacturing and supply chain excellence. Across our entire portfolio of DRAM and NAND products, wewill continue to focus on product differentiation and portfolio expansion to grow our share of industry
profits while maintaining stable bit share.
Turning to end markets:
END MARKET HIGHLIGHTS
SSD
We had record quarterly revenue in solid state drives, as cloud SSD revenue more than doubled quarterover-quarter. We continue to introduce new NVMe products in our SSD portfolio, while maintaining ourleadership in the enterprise SATA market. Customer qualifications are progressing well for our nextgeneration products for both NVMe and SATA markets. Our client NVMe SSDs have also contributed to our
SSD growth. In May, we announced a TLC client SSD and our first QLC client SSD, both using next-generation
96-layer NAND technology.
DATA CENTER & NETWORKING
As the only company with a portfolio of DRAM, NAND and 3D XPoint technologies, Micron is uniquely
positioned to benefit from the secular data growth that is driving the cloud, enterprise and networking
markets. Our cloud DRAM sales grew significantly quarter over quarter, with strong demand due to the© 2020 Micron Technology, Inc.

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work-from-home and e-learning economy and significant increases in e-commerce activity around theworld. This quarter, we started early sampling of 1z DDR5 for enterprise applications. Additionally, we also
started sampling our higher-frequency DDR4 modules for Intel’s Ice Lake server platform, which we expect
to drive server DRAM content growth.
In networking, our DRAM bit shipments expanded significantly on a sequential basis, driven by rapid workfrom-home infrastructure deployment, as well as increased 5G deployments, particularly in Asia.
MOBILE
Despite demand headwinds in the smartphone market due to COVID, our mobile business delivered healthy
sequential and year-over-year growth due to continuing momentum of our DRAM and NAND solutions.
The outlook for calendar 2021 is promising, with 5G expected to drive a resumption in smartphone unit
sales growth, with the multiplier effect of higher memory and storage content. 5G phones will have greatercontent than 4G phones, and we can see this already in the phones being introduced in calendar 2020. We
see the strongest memory and storage content growth in the low-to-midrange part of the smartphonemarket, which is also the largest segment in terms of units. In this part of the market, 5G phones have 6GBof DRAM and 64 and 128GB of NAND versus 4G phones with 2 to 4GB of DRAM and 32 to 64GB of NAND.
We are encouraged to see sub-$250 5G phones, which make 5G accessible to a broader market. This lower
price point has been enabled by BOM cost reductions in semiconductor content outside of memory andstorage. Micron is well-positioned to help our customers win in the 5G era, with an industry-leading productportfolio, including low-power DRAM and multichip packages (MCP). We continue to achieve design-ins
for LP4 and LP5 5G platforms, and our most advanced managed NAND products based on UFS 3.1 are now
sampling at several major Android OEMs.
PC
In PC, our bit shipments declined modestly as we strategically moved supply of compute DRAM to address
demand in the data center market. Demand was strong for certain PC subsegments that are supporting
increased work-from-home and remote learning activities, and our PC DRAM revenue was up sequentiallyas ASPs increased. While certain parts of the PC market have strengthened, overall PC unit shipments are
expected to decline this year due to weakness in desktop PCs.
GRAPHICS
In graphics, we have started shipping GDDR6 DRAM for next-generation gaming consoles, and we expect
strong demand in the second half of calendar 2020.

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AUTO
In auto, revenue declined significantly from the previous quarter due to broad auto supply chain disruptions.
Despite auto unit weakness, secular content growth from ADAS and autonomous driving platforms resulted
in record LP4 DRAM revenue for our auto business in FQ3. As automotive production rates improve aroundthe world, our auto business should return to a growth trajectory.
I’ll now turn it over to Dave to provide our financial results and guidance.

DAVE ZINSNER, SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Thanks Sanjay.
Despite COVID-19, we achieved strong results, thanks to resilient execution from our team members acrossthe globe.
REVENUE
Total FQ3 revenue was approximately $5.4 billion, up 13% sequentially and 14% percent year-over-year.
Sequential revenue growth was led by the data center and mobile markets.
PERFORMANCE BY TECHNOLOGY
FQ3 DRAM revenue was $3.6 billion, representing 66% of total revenue. DRAM revenue increased 16%
sequentially and 6% year-over-year. Bit shipments were up by approximately 10% sequentially. ASPs wereup sequentially in the mid-single-digit percentage range.
FQ3 NAND revenue was approximately $1.7 billion, representing 31% of total revenue. NAND revenue
increased 10% sequentially and was up over 50% year-over-year. Bit shipments increased in the lowersingle-digit percentage range sequentially. ASPs increased sequentially in the upper-single-digit
percentage range.
BUSINESS UNIT RESULTS
Now turning to our revenue trends by business unit.
Revenue for the Compute & Networking Business Unit was $2.2 billion, up 13% sequentially and up 7%
year-over-year. CNBU sequential growth was driven by double-digit, quarter-over-quarter pricing
improvements and stronger demand for data center products. We were supply-constrained for certain
compute DRAM products, which limited our ability to meet some demand upside from customers.
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Revenue for the Mobile Business Unit was $1.5 billion, up 21% sequentially and up 30% year-over-year. The
sequential growth was primarily driven by strong growth in our LPDRAM bit shipments. MCP revenue
remained strong and was up significantly year-over-year.
Revenue for the Storage Business Unit in FQ3 was $1 billion, up 17% from FQ2 and up 25% year-over-year.
SBU operating margins increased dramatically to 17%, up from a break-even level last quarter. Thissignificant sequential improvement in operating margins was driven by improved pricing, stronger data
center SSD mix and overall record SSD revenue.
Finally, revenue for the Embedded Business Unit was $675 million, down 3% sequentially and down 4%
year-over-year, primarily from a reduction in automotive demand.
FQ3-20 NON-GAAP OPERATING RESULTSGROSS MARGIN
The consolidated gross margin for FQ3 was 33.2%. Sequential gross margin improvement was driven bypricing improvements in both DRAM and NAND, as well as our ongoing improvements in product mix that
continue to underpin our financial performance. The impact of underutilization at our Lehi fab wasapproximately $155 million or 285 basis points in FQ3. We expect underutilization to be approximately$135 million in FQ4 and expect gradual declines in underutilization through FY2021.
OPEX
Operating expenses were $823 million in FQ3. As we said on last quarter’s call, we’ve taken several actions
to control our operating expenses, given the increased uncertainty surrounding COVID-19. As a result, we
continue to expect favorable underlying OpEx trends to continue into FQ4.
OPERATING INCOME
FQ3 operating income was $981 million, resulting in an operating margin of 18%, compared to 11% in theprior quarter and 23% in the prior year.
NET INTEREST EXPENSE
Net interest expense increased to $24 million, compared to $6 million of net interest expense in the priorquarter. This increased expense was primarily driven by the drawdown of our revolver and subsequent $1.25
billion investment-grade note issuance in the quarter. We expect net interest expense will be approximately$30 million in FQ4, due to the decline in interest income because of lower interest rates.

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TAXES
Our FQ3 effective tax rate was 3%, which benefited from approximately $19 million of one-time items. We
expect our tax rate in the fourth quarter to be approximately 6%.
Going forward into FY2021, we expect our tax rate to be in the high single-digit to low double-digit range.
EARNINGS PER SHARE
Non-GAAP earnings per share in FQ3 were $0.82, up from $0.45 in FQ2 and down from $1.05 in the yearago quarter. FQ3 non-GAAP EPS was approximately $0.02 higher due to the tax benefits reported in thequarter.
OPERATING CASH FLOW
Turning to cash flows and capital spending, we generated $2 billion in cash from operations in FQ3,
representing 37% of revenue.
CAPITAL ALLOCATIONCAPEX
During the quarter, net capital spending was approximately $1.9 billion, approximately flat quarter-overquarter.
As we enter the final quarter of FY2020, we are projecting FY2020 CapEx to be approximately $8 billion. Our
FY2020 front-end equipment CapEx will still be down more than 40% from last year. However, back-end
CapEx and building CapEx, neither of which add to bit supply growth, are up from last year.
FREE CASH FLOW
Free cash flow in the quarter was $101 million, compared to $63 million in the prior quarter. This represents
the 14th consecutive quarter of positive free cash flow, reflecting the structurally improved profitability andworking capital improvements of the new Micron.
SHARE REPURCHASE
We repurchased approximately 929,000 shares for $40 million in FQ3, at an average price of $43.54. In thenine months of FY2020, we’ve returned $134 million of capital through repurchases and paid $266 million
to settle conversion of convertible notes. Combining the convert premiums and share repurchases, we haveused $338 million or 135% of FY2020 FCF toward reducing the share count.

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INVENTORY
Ending FQ3 inventory was $5.4 billion or 131 days versus 134 days last quarter. Our overall days of inventory
are above our approximately 110-day target level, partly due to elevated NAND inventory as we transition
to replacement gate. We are also carrying higher raw material levels as a precaution, given the increased
supply chain uncertainty due to the pandemic.
TOTAL CASH/DEBT
We ended the quarter with total cash of $9.3 billion and total debt of $6.7 billion. Total liquidity wasapproximately $11.8 billion, up from $10.6 billion at the end of the second quarter.
In the quarter, we issued $1.25 billion of investment-grade notes, and those proceeds, together with $1.25
billion of cash on hand, was used to repay the $2.5 billion revolving credit facility we drew at the beginningof FQ3.
OUTLOOK
Prior to providing our outlook and guidance, we’d like to remind everyone that our FQ4 is a 14-weekquarter.
Now turning to our outlook. As Sanjay mentioned, while visibility remains limited overall, data center trends
are strong, and new gaming consoles will be a tailwind to demand in the second half of the calendar year.
While end-unit sales of consumer devices such as smartphones have started to recover, we are seeing an
impact from the recent restrictions imposed on Huawei. It is also important to remember that we are alagging indicator relative to the end demand. In addition, the risk of a second wave of COVID-19 infections
is continuing to drive greater uncertainty for the economic recovery and our business. Lastly, inventory
strategies of our customers are difficult to predict. We continue to closely monitor market conditions andrespond to changes in the market environment in a timely and disciplined manner.
GUIDANCE
With all these factors in mind, our non-GAAP guidance for FQ4 is as follows. We expect revenue to be $6
billion, plus or minus $250 million; gross margin to be in the range of 35.5% plus or minus 150 basis points;
and operating expenses to be approximately $850 million, plus or minus $25 million. Finally, based on ashare count of approximately 1.14 billion fully diluted shares, we expect EPS to be $1.05, plus or minus$0.10.

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Fiscal Q3 2020 Earnings Call Prepared Remarks

CLOSING
In closing, we are extremely proud of Micron’s performance in this unprecedented period of market
uncertainty and operational challenges. The tenacity, creativity and dedication of our team members aroundthe world drove strong results that surpassed our initial expectations. Micron remains on very solid footingwith an investment-grade balance sheet, ever-strengthening product portfolio and secular industry trends
that will continue to drive long-term demand.
I’ll now turn the call over to Sanjay for closing remarks.
Sanjay Mehrotra, President and Chief Executive Officer
Thank you, Dave.
The pandemic has impacted our financial performance trajectory, which was shaping up for a robust
outcome this calendar year. Nevertheless, we have moved with agility to leverage the new opportunities in
the marketplace and have further strengthened our product portfolio. Micron’s portfolio is now dramatically
better positioned from a competitive perspective, and we have driven a tremendous transformation here
over the last three years. In the coming quarters and years, we will continue to strengthen our businessfoundation. And as the industry environment improves, Micron is exceptionally well-positioned to takeadvantage of long-term trends and drive superior returns for our shareholders.
Of course, preparing Micron for a bright future has to be about more than just quarterly businessperformance. We also have to be leaders in creating positive outcomes for all of our stakeholders. In that
context, there are two topics that I would like to touch upon before we move to Q&A.
First, earlier this month, we issued our fifth annual sustainability report. This year, we set challenging new
goals for energy use, emissions, water use and waste generation that aim to dramatically improve theenvironmental sustainability of our operations worldwide over the years ahead. We also established an
aspirational future vision that will drive us to achieve even more. Reaching our goals will require investment,
and we plan to devote approximately 2% of annual capital expenditures to environmental sustainability
initiatives, amounting to about $1 billion over the next five to seven years. These initiatives underpin ourcommitment to achieve significantly higher standards and help create a better planet.
Second, I’d like to address the social unrest and racial division that have gripped our country. The
senseless and tragic deaths of people in our Black community in the U.S. must be addressed with real andlasting reforms. Hate, racial discrimination, violence and social injustice have no place in our society.
Micron is committed to creating a welcoming and safe work environment for everyone, and we are taking
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populations. We are also actively engaging and investing in community programs that aim to create amore just and fair society for everyone. There is much work to do, and we look forward to being part ofthe solution.
We will now open for questions.

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