Micron CEO says 2004 outlook strong

SINGAPORE: Micron Technology Inc, the world’s second-largest maker of computer memory chips, said on Friday it was upbeat on its 2004 prospects, thanks to firming memory chip prices and a broad recovery in the industry.

Idaho-based Micron, which has been largely in the red for the last three years and supplies about 20 percent of the world’s dynamic random access memory (DRAM) chips, ranks behind South Korea’s Samsung Electronics Co Ltd, which has 31 percent.

“We think that the outlook for 2004 is pretty strong,” Micron Chief Executive Steve Appleton told Reuters in an interview.

“We believe from this point, moving forward, the company will be profitable under current market conditions. Of course, we can’t predict what those will be late in the year or 2005, but we believe it will remain fairly stable and strong for us, given the dynamics of what is happening — the shortage of silicon (chips) around the world.”

Having slashed spending, the global semiconductor industry is bouncing back from its worst downturn. Computer memory chip prices, which have been firming since late February, hit levels this week that were nearly double last year’s prices.

Mainstream 256-megabit double data-rate (DDR) memory chips averaged about $6.42 on Friday, according to DRAMexchange, an online clearing house. This compares with about $3.33 a year ago, said analysts. Surging demand from PC makers and a shift in production capacity to other types of semiconductors, such as flash memory chips that are used widely in photo-snapping mobile phones and digital cameras, are behind the high prices, analysts said.

“The computing market is also strong,” said Appleton, a 22-year veteran of the semiconductor industry. “We’re seeing the corporate world coming back to buy as their last upgrade cycle was in 1999 for Y2K.” Appleton, 44, has said he would forgo his $800,000 salary until Micron returned to profit. His pay, which stopped in October 2001, resumed last month.

Robust outlook: The stronger chip market prompted Oppenheimer & Co analyst Quinn Bolton to raise his revenue and earnings estimates for Micron.

“We believe Micron will benefit from a tight DRAM market — the result of strong demand and constrained supply — that will lead to a robust pricing environment over the next few quarters. This should drive revenue higher,” he said in a client note.

The company posted a narrower-than-expected net loss for the second quarter ended March 4 of $28 million versus a net loss of $619 million a year earlier. Sales rose 26 percent to $991 million. It had returned to the black in the first quarter ended December 4 with net income of $1 million.

JP Morgan analyst Christopher Danely said that Micron needed to lower unit costs and diversify its revenue base, of which 80-85 percent comes from personal computer demand.

Appleton said Micron was reducing its unit cost for production of DRAM chips by 25-30 percent annually, and had exceeded that target in the last fiscal year ended August 2003.

The company also expects non-DRAM products, such as complementary metal oxide semiconductors (CMOS) or electronic film chips, to account for 20-25 percent of production capacity by the end of the year, up from 10-15 percent currently. —Reuters