Micron Technology, Inc.

Good afternoon. My name is Lateef, and I will be your conference facilitator today. At this time, I would like to welcome everyone to Micron's fourth quarter 2021 financial release conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, please press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. In order to allow as many analysts to ask a question as possible, please limit yourself to one question. Thank you. It is now my pleasure to turn the floor over to your host, Farhan Ahmad, Vice President of Investor Relations. You may begin your conference.

Thank you, and welcome to Micron Technologies Fiscal Fourth Quarter 2021 Financial Conference Call. On the call 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 earnings press release and the prepared remarks filed a short while ago. 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 a reminder, 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 be attending. You can follow us on Twitter at MicronTech. As a reminder, the matters we will be discussing today include forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from the statements made today. We refer you to the documents we filed with the SEC, specifically our most recent form 10-K and 10-Q, for a discussion of the 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, level of activity, performance, or achievements. We are under no duty to update any of the forward-looking statements after today's date to conform these statements to actual results. I will now turn the call over to Sanjay.

Thank you, Farhan. Good afternoon, everyone. We delivered outstanding results in fiscal Q4, achieving robust profitability and the second highest quarterly revenue in Micron's history. Strong execution drove healthy results across segments, including record quarterly revenue in NAND, as well as in our embedded business. Fiscal 2021 was a year of many records for Micron. We achieved our highest ever mobile revenue, driven by all-time high managed NAND revenue and MCP mix. Our embedded business had a tremendous record-breaking year, with auto and industrial businesses both at substantial new highs. And our crucial branded consumer business and overall QLC mix in NAND all hit records in fiscal 2021. Through the year, we successfully navigated multiple obstacles brought on by the pandemic and reached several key milestones. For the first time in Micron's history, we established technology leadership concurrently in both DRAM and NAND. Micron's 1-alpha DRAM and 176-layer NAND are the industry's most advanced nodes in high-volume production. And we further strengthened our product leadership by becoming first to introduce LP5X DRAM and UMCP5 Managed NAND in mobile, and the industry's first functional safety-capable LP5 for automotive applications. The secular demand for memory and storage, combined with Micron's focused execution and our rock-solid balance sheet, position us well to deliver strong financial performance and create significant shareholder value in fiscal 2022 and beyond. Demonstrating our confidence in our business trajectory, we initiated a quarterly dividend that we aim to grow over time. Memory is at the leading edge of semiconductor manufacturing, and Micron has leadership in both DRAM and NAND technology. This quarter, We reached mature yields in our ramp of 1 alpha DRAM and 176 layer NAND, 20% to 30% faster than prior nodes, and delivered performance and feature improvements that will help unleash customer innovation. We believe we are several quarters ahead of the industry in deployment of these process technologies. Additionally, through deeper customer collaboration, We have further accelerated the time to market for value-added solutions built using these nodes. 1-alpha and 1Z DRAM nodes combined now represent the majority of our DRAM bit production given by strong growth of 1-alpha production. And by the end of the calendar year, 176-layer NAND will make up the majority of our NAND bit production. Looking beyond one alpha DRAM and 176 layer NAND, we are investing to sustain scaling in both technologies for the next decade. Adding momentum to our years of R&D in EUV, we recently took delivery of the industry's latest EUV system, NXE3600, at our Boise headquarters, where we operate one of the world's most advanced centers for semiconductor research and development. The delivery of this tool is an important milestone toward our previously disclosed plan of implementing EUV in high-volume manufacturing in the 2024 timeframe. We expect that the integration of EUV with our existing multi-patterning immersion lithography expertise will help us maintain D-LAN technology leadership for many years to come. In addition to being a technology leader and an innovation partner, we are uniquely positioned as a strategic supplier to our customers. Micron is the only U.S.-based memory company, and our strong global manufacturing network provides us with a diversified source of supply, which has become increasingly critical to ensure that we continue to deliver product reliably to our customers. The advantages of this unique position have been proven throughout the past 18 months as we have successfully navigated the challenges of COVID-19 across our global manufacturing network while maintaining continuity of supply to our customers. Now let us review our end markets. The demand for memory and storage has evolved dramatically from the PC-centric era. Today, demand for memory and storage is driven from diversified end markets that extend from data center to the intelligent edge and to a growing diversity of user devices. As a result of growing memory and storage content per device, DRAM and NAND now account for an ever-increasing portion of the bill of materials for our customers. DRAM and NAND-TAM share of semiconductor industry has steadily grown over the last two decades from around 10% to approximately 30% today. The AI and 5G revolution is only in its infancy, and as these secular growth drivers gain further traction, we expect new data-intensive applications to continue to fuel significant increases in DRAM and NAND TAMs. In the fiscal fourth quarter, data center revenue grew sequentially and year over year, fueled by secular drivers in cloud demand and the resurgence of enterprise IT investment linked to improving economic growth. Data center has become the largest market for memory and storage, driven by the rapid growth in cloud. With our broadening portfolio of differentiated products across memory and storage, We are in a strong position to drive strong growth and profitability in this important segment. We have been engaged on DDR5 from initial specification development and are well-placed to support customer transitions to DDR5-enabled platforms starting later this calendar year. We are also enhancing our NVMe SSD portfolio and will soon introduce PCIe Gen4 data center SSDs with micron-designed controllers and leveraging the full benefit of vertical integration. These SSDs will strengthen our market position over the course of the coming quarters and years in the fast-growing data center NVMe storage market. Work and learn from anywhere trends are driving a second consecutive year of double-digit PC unit sales growth in calendar 2021. In the fiscal fourth quarter, PC DRAM revenue was up significantly year over year. We are making strong progress transitioning our PC DRAM to our one alpha node, which represented a meaningful portion of our FQ4 PC bit shipments. Client QLC SSD bitmix hit a new record and made up the majority of our client SSD bit shipments in FQ4. Our QLC leadership enhances our bid supply capability and product profitability. We also have continued momentum ramping 176-layer NAND products for the PC market, and we qualified our 176-layer NAND-based Gen 4 NVMe client SSDs with several PC OEMs during the quarter. In graphics, revenue increased sequentially and year-over-year, driven by a continuation of last quarter's strong next-generation game console and graphics card shipments. Micron holds an excellent position in the fast-growing graphics market with a broad product portfolio featuring our proprietary GDDR6X product line and deep partnerships with leading GPU suppliers. FQ4 mobile revenue increased more than 25% year-over-year, driven by continued unit sales and content growth. We expect overall smartphone unit sales to grow this year, with sales of over 500 million 5G mobile phones forecasted. These content-rich 5G phones feature more than 50% higher DRAM and double the NAND content than 4G phones. We expect 5G and AI to drive new innovation in applications, such as AI-optimized video capture and editing, that will fuel DRAM and NAND content growth for years to come. Our 1-alpha LP4 16-gigabit design is now fully qualified and ramping at multiple OEMs, while our 176-layer NAND achieved its first UFS 3.1 qualifications at two OEMs. These wins demonstrate Micron's leadership in the mobile market and our continued strength in managed NAND products, where MCP sales surpassed $1 billion for the third straight quarter. We are continuing to see strong demand in our edge markets, which includes automotive and industrial IoT. We expect the automotive and industrial markets to be the fastest-growing memory and storage markets over the next decade. As the number one player in these markets, Micron is exceptionally well positioned to benefit from these secular growth trends. Our automotive business delivered a fourth consecutive record quarter, driven by continued recovery in auto manufacturing and the growth of memory and storage content, driven by in-vehicle infotainment and driver assistance applications. Industrial IoT revenues also set records in the fiscal fourth quarter, benefiting from the continued growth of applications such as point-of-sales devices, factory automation, and surveillance. We expect industrial demand trends to accelerate further as 5G speeds the adoption of data-intensive applications powered by intelligent edge infrastructure. We are also seeing an acceleration in our consumer IoT business driven by rapid growth in devices such as VR headsets, smart exercise equipment, and smart speakers. Turning to market outlook, calendar 2021 is shaping up to be a strong year. We expect calendar 2021 industry DRAM BIT demand growth to be in the low 20% range and industry NAND BIT demand growth to be in the high 30% range. Overall, our preliminary view is that calendar 2022 industry bid demand growth will be consistent with long-term industry bid demand growth CAGRs in the mid to high teens for DNAM and approximately 30% for NAND. We anticipate underlying demand in calendar 2022 to be led by increasing data center server deployments, 5G mobile shipments, and continued strength in automotive and industrial markets. Additionally, non-memory supply shortages that are constraining customer bills across various end market segments and that are pushing out some demand should ease throughout 2022, supporting demand growth during the year. Given prudent industry capex and very lean supplier inventories, we expect healthy industry supply-demand balance and robust profitability for both DRAM and NAND in the year. In the near term, our FQ1 bit shipments will decline modestly in both DRAM and NAND from very strong levels in FQ4. Some PC customers are adjusting their memory and storage purchases due to shortages of non-memory components that are needed to complete PC builds. We expect this adjustment in our PC customers to be largely resolved in the coming months. We are also seeing constraints within our supply chain for certain IC components, which will somewhat limit our bid shipments in the near term. Bid shipment growth will resume in the second half of the fiscal year, and we are planning to deliver record revenue with solid profitability in fiscal 2022. Our calendar year 2022 bid shipment growth for DRAM and NAND will be in line with the industry. However, due to the strong shipments in fiscal year 21 and our below-normal current inventory level, for fiscal year 22, our bid shipment growth for DRAM and NAND will somewhat lag the long-term CAGR. In fiscal year 22, the continued ramp of 1-alpha and 176-layer NAND should provide us with good front-end cost reductions. Our efforts to increase supply chain resilience and provide business continuity to our customers will cause headwinds to our assembly and packaging costs, consistent with the trend in the overall industry. Overall, we expect annual cost per bit reductions to be competitive with the industry in fiscal year 22 and over the long term. Turning to capital expenditures. We expect fiscal year 22 CAPEX in the range of $11 billion to $12 billion. The year-on-year increase in CAPEX is driven by our continued 176-layer NAND transition, pilot line enablement for next-generation NAND and DRAM, and continued infrastructure and prepayments to support the introduction of EUV. Fiscal year 22 DRAM equipment CAPEX for manufacturing will decline from fiscal year 21 as we benefit from the capital efficiency of our mature 1-alpha node. For fiscal year 2022, our bid supply growth will be achieved through node transitions alone, as we are a few years away from needing wafer start additions to keep up with the industry demand. We also expect to increase fiscal year 2022 R&D investment by approximately 15%, from fiscal year 21 to deliver bold product and technology innovations designed to fuel the data economy, as well as to expand our portfolio to capitalize on opportunities such as high bandwidth memory and CXL solutions. Our leadership portfolio, product quality, supply chain agility, and deep customer relationships make us a preferred partner in many of our markets, and we are confident in our ability to continue to create long-term, sustained profitability and returns built on that leadership. I will now turn it over to Dave.