Bullish outlook by Micron on stronger demand

SAN FRANCISCO: Micron Technology Inc, the largest US maker of memory chips, gave a strong forecast, highlighting broad and sustained demand for its products. The shares rose about 3% in extended trading.

The Boise, Idaho-based company said sales in its fiscal fourth quarter would range from US$8bil to US$8.4bil. Analysts were looking for US$8bil, according to data compiled by Bloomberg.

The company predicted profit, minus certain items, of US$3.30 a share, plus or minus 7 cents.

Gross margin, or the percentage of sales remaining after deducting the cost of production, would be 59% to 62%, chief financial officer David Zinsner said on a conference call.

Micron and rivals Samsung Electronics Co and SK Hynix Inc have reported surging sales and profit in recent quarters, fuelled by demand for chips that store data in mobile devices and components that help process a growing mountain of information in data centres.

The industry has suffered crushing busts after previous booms, so investors are wary. Still, Micron and others have argued the good times will continue thanks to new demand from customers such as carmakers that are increasingly automating vehicles.

The chip makers also say they’re less likely to churn out too many products – a problem in previous cycles that left a glut and depressed prices. These days, it’s much harder to improve manufacturing processes, so there’ll be no sudden surge in output, they argue.

In addition to Samsung and SK Hynix, Micron competes with Toshiba Corp in the market for flash memory chips, which store data in computers and phones.

The US company and its two South Korean rivals also own the market for, DRAM, or dynamic random access memory, a type of chip used to hold information temporarily while its being processed.

Micron is dwarfed by Samsung and Toshiba, but has carved out profitable niches and obtained higher prices by selling directly to some customers, like makers of computer-storage drives.

Micron posted a net loss as recently as 2016, highlighting the volatile nature of this part of the semiconductor industry. Most analysts who cover the company think the industry has changed – 79% of them rate the stock “buy”.

Micron reported fiscal third-quarter profit of US$3.15 a share, excluding certain items. That compared with US$1.62 a year earlier.

Revenue was US$7.79bil, a jump of 40%, the company said in a statement. Analysts had predicted profit of US$3.14 a share on sales of US$7.76bil.