Author Topic: MU - Micron Technology Inc.  (Read 33818 times)

DTEJD1997

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Re: MU - Micron Technology Inc.
« Reply #70 on: December 01, 2019, 10:55:46 AM »
Hey all:

The price of RAM has gone down a LOT in the past 6 months or so.  A bit over 50% perhaps?

The price of RAM is now back to where it was before the price spiked up.

So unless MU has gained new efficiency and/or sales volumes have TREMENDOUSLY spiked, earnings will probably be under pressure.

Prices also seem to be going down and solidly so.  Memory produced by MU is frequently the lowest price that I encounter.  Perhaps MU is trying to take market share?


Spekulatius

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Re: MU - Micron Technology Inc.
« Reply #71 on: December 01, 2019, 11:56:12 AM »
Hey all:

The price of RAM has gone down a LOT in the past 6 months or so.  A bit over 50% perhaps?

The price of RAM is now back to where it was before the price spiked up.

So unless MU has gained new efficiency and/or sales volumes have TREMENDOUSLY spiked, earnings will probably be under pressure.

Prices also seem to be going down and solidly so.  Memory produced by MU is frequently the lowest price that I encounter.  Perhaps MU is trying to take market share?

Or they are behind in technology ( RAM feature size , power consumption etc) as they used to be. Is it still true that MU manufactures using trailing edge process tech, while Samsung has jumped to leading edge technology a coupe of years ago.
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ValuePadawan

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Re: MU - Micron Technology Inc.
« Reply #72 on: December 01, 2019, 12:17:09 PM »
The price has dropped a lot because the big three expanded production capacity when prices were rising. Supply grew faster than demand and prices have fallen but since they started dropping all three companies have slowed capacity growth allowing demand the ability to catch back up.

It would be foolish for any of the big three to slash prices in order to gain market share it would be disadvantageous to all producers.

skanjete- Something to be wary of is that the Chinese government very much wants a Chinese DRAM producer so their tech sector isn't so reliant on Korea and the US to make things like mobile phones, servers basically anything that needs RAM.

There are two ways they can do this. R&D or as some Chinese companies call it RD&T (theft). The last time they tried stealing IP on how to make DRAM the U.S b**** slapped that company so hard they had to close down.

https://www.anandtech.com/show/13537/us-doc-sides-with-micron-bans-exports-to-chinese-dram-maker

If they instead have to develop the capability with hard work and research and development they not only have to catch up to where DRAM producers are now, but where DRAM producers are going as chips become ever more efficient and harder to produce, needless to say its an uphill endeavour. This is not flooding the world with blast furnace steel or cheap plastic toys, these are the most state of the art fabrication facilities with very complex production methods that I think will take time to develop organically.

If China ever does produce a Chinese DRAM manufacturer I'd hope that Micron and Hynix see sense and merge to keep the number of players at 3 but this is looking out a decade and very speculative.

Does anyone have knowledge about DRAM production and how Samsung and Hynix stack up against Micron? Quality, specs, who's the most advanced research-wise?

eatliftinvestgolf

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Re: MU - Micron Technology Inc.
« Reply #73 on: August 05, 2020, 06:48:33 AM »
I am building a personal position in MU via out of the money LEAPs since it is currently an opportunity rich environment.  I would plan to exercise and hold the stock longer-term if thesis is correct.  I think the fair value on this company is more than $100 BN enterprise value today and growing.

Elements of my thesis below... some of which already has been mentioned in the thread.

- very healthy long-term returns on tangible capital
- long-term consolidation helps to enhance investment and supply dynamics in memory to protect margins
- geopolitically, ability to manufacture critical technology components only growing in importance; Micron is last major co. standing in memory with a North American nexus (even if they produce much outside the U.S.)
- management is for real. very impressed with the recent strategy presentations and the business trajectory over last five year
- huge scale requirements in a cyclical industry leading to protection against new entrants
- good capital allocation: they do acquisitions in the down cycle to further consolidate the industry, have been investing sufficiently internally in R&D to grow future value, and have been smartly retaining earnings in the up-cycles to de-lever
- ability to add value on top of what was previously an extremely tough commodity business
- overlooked by the market because it is hardware, not software. software is all the rage.  Venture capitalists don't want to fund a hardware competitor because it's boring.
- long-term, absolutely fundamental to several very long-term secular trends that look to accelerate due to COVID-19 (gaming, cloud, etc.)
- likelihood of being mispriced: screens poorly on simple metrics due to recent cyclical lows in memory pricing (P/E, etc.)
- no net debt, lower risk during period of economic uncertainty

shamelesscloner

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Re: MU - Micron Technology Inc.
« Reply #74 on: August 05, 2020, 04:34:46 PM »
I am building a personal position in MU via out of the money LEAPs since it is currently an opportunity rich environment.  I would plan to exercise and hold the stock longer-term if thesis is correct.  I think the fair value on this company is more than $100 BN enterprise value today and growing.

Elements of my thesis below... some of which already has been mentioned in the thread.

- very healthy long-term returns on tangible capital
- long-term consolidation helps to enhance investment and supply dynamics in memory to protect margins
- geopolitically, ability to manufacture critical technology components only growing in importance; Micron is last major co. standing in memory with a North American nexus (even if they produce much outside the U.S.)
- management is for real. very impressed with the recent strategy presentations and the business trajectory over last five year
- huge scale requirements in a cyclical industry leading to protection against new entrants
- good capital allocation: they do acquisitions in the down cycle to further consolidate the industry, have been investing sufficiently internally in R&D to grow future value, and have been smartly retaining earnings in the up-cycles to de-lever
- ability to add value on top of what was previously an extremely tough commodity business
- overlooked by the market because it is hardware, not software. software is all the rage.  Venture capitalists don't want to fund a hardware competitor because it's boring.
- long-term, absolutely fundamental to several very long-term secular trends that look to accelerate due to COVID-19 (gaming, cloud, etc.)
- likelihood of being mispriced: screens poorly on simple metrics due to recent cyclical lows in memory pricing (P/E, etc.)
- no net debt, lower risk during period of economic uncertainty

You are investing in good company... Mohnish Pabrai, David Tepper, Guy Spier, Li Lu, Prem Watsa

samwise

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Re: MU - Micron Technology Inc.
« Reply #75 on: August 05, 2020, 06:47:00 PM »
I am building a personal position in MU via out of the money LEAPs since it is currently an opportunity rich environment.  I would plan to exercise and hold the stock longer-term if thesis is correct.  I think the fair value on this company is more than $100 BN enterprise value today and growing.

Elements of my thesis below... some of which already has been mentioned in the thread.

- very healthy long-term returns on tangible capital
- long-term consolidation helps to enhance investment and supply dynamics in memory to protect margins
- geopolitically, ability to manufacture critical technology components only growing in importance; Micron is last major co. standing in memory with a North American nexus (even if they produce much outside the U.S.)
- management is for real. very impressed with the recent strategy presentations and the business trajectory over last five year
- huge scale requirements in a cyclical industry leading to protection against new entrants
- good capital allocation: they do acquisitions in the down cycle to further consolidate the industry, have been investing sufficiently internally in R&D to grow future value, and have been smartly retaining earnings in the up-cycles to de-lever
- ability to add value on top of what was previously an extremely tough commodity business
- overlooked by the market because it is hardware, not software. software is all the rage.  Venture capitalists don't want to fund a hardware competitor because it's boring.
- long-term, absolutely fundamental to several very long-term secular trends that look to accelerate due to COVID-19 (gaming, cloud, etc.)
- likelihood of being mispriced: screens poorly on simple metrics due to recent cyclical lows in memory pricing (P/E, etc.)
- no net debt, lower risk during period of economic uncertainty

+ one more reason: They claim to be on the leading process node 1z now. In a commodity market, they have now caught up with the low cost producer. (This also answers Spek’s question on their tech above).

Some questions on your thesis:
What strike do you buy? By a rough estimate they produced an average of $6 earnings in the last 3 years. So for a cyclical company do you apply a 10x multiple or 16x?

And while there will be bit growth, do you expect much revenue growth through cycles?

Any views on what happens with the rumoured end of Moore’s law?

HJ

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Re: MU - Micron Technology Inc.
« Reply #76 on: August 06, 2020, 05:59:10 AM »
And while there will be bit growth, do you expect much revenue growth through cycles?

Any views on what happens with the rumoured end of Moore’s law?

Those seems to be the most pertinent question and are related.  I've seen numbers that show DRAM industry having virtually no growth in revenue terms from the mid 90's until 2013-2014.  Basically all the technological advances benefitted the users rather than the producers. 

Until recently it's been a miserable industry to be in, and now there is the threat of potential government backed uneconomic entrants.  How do we know the world is wiling to pay more for memories consistently year in and year out?
« Last Edit: August 06, 2020, 06:23:31 AM by HJ »

Spekulatius

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Re: MU - Micron Technology Inc.
« Reply #77 on: August 06, 2020, 11:43:20 AM »
RAM is a commodity. That’s all one needs to know.
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ValuePadawan

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Re: MU - Micron Technology Inc.
« Reply #78 on: August 06, 2020, 07:50:05 PM »
RAM is a commodity. That’s all one needs to know.

I'm not sure it is a commodity in the same way cotton, copper and cattle are. I think it will deliver greater returns than a lumber company or soybean farmer for the simple reason that only 3 companies can make DRAM chips. It takes large amounts of capital for the fab in addition to lots of patents, IP and talented individuals to manufacture the chips. If you think my logic is flawed I'd be thrilled if you could explain where I've made a mistake. The moat in my eyes is the IP and technical skill to make more and more advanced chips with more storage capability and use less and less energy per bit. As long as demand keeps outpacing supply every few years these companies will hit the lottery every 4 or 5 years by being able to increase ASP's dramatically. Not only that but in the nadir of this current cycle the DRAM companies have managed to stay FCF positive this last cycle showing the improvement in profitability in the business. All disagreements are welcome.