Micron to shift some chip supply to data centers as cloud powers earnings beat

Micron Technology on Monday forecast current-quarter revenue above Wall Street estimates as home-bound employees and students spur demand for its chips that power notebooks and data centers, sending its shares up 6% in after-market trading.

The work-from-home boom has also driven demand for data center chips, with Micron, one of the biggest DRAM chip suppliers, working to sell more profitable solid-state storage drives rather than the raw NAND memory chips that go into the drives. The company said sales of the drives hit a record in its fiscal third-quarter and that three-quarters of its NAND chips were sold as part of higher-value products rather than raw chips.

Micron said it expects consumer demand for smartphones and other consumer electronics to fall below its initial expectations in the second half of 2020, but data center demand is strong enough that supply shortages are emerging. The company said it plans to shift its supplies from the smartphone market to the data center market, for both DRAM and flash memory chips.

The company also said its factories were operating normally again after some interruptions when lockdown orders hit and that it has taken some chip assembly functions in-house that previously were performed by contractors.

“Proximity to existing sites just makes it easier to de-bug issues that may come up as we bring up some of these products to high-volume manufacturing,” Sumit Sadana, Micron’s chief business officer, told Reuters in an interview.

Micron reported revenue for its third quarter ended May 28 rose 13.6% to $5.44 billion, beating estimates of $5.31 billion, according to IBES data from Refinitiv.

Excluding items, the company earned 82 cents per share, above estimates of 77 cents per share.

The chipmaker expects revenue in the current fourth quarter to be between $5.75 billion and $6.25 billion, the mid-point of which was above analysts’ estimates of $5.48 billion.

Net income attributable to the company in the third quarter fell to $803 million, or 71 cents per share, in the reported quarter, from $840 million, or 74 cents per share, a year earlier.