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While short term outlook for global economy stays bleak, Micron Technologies are in a unique position to weather through it unscathed.

With more than 30,000 employees spread around the global, Micron Technology (NASDAQ: MU) is best known for the tiny memory card it manufactures. The fifth largest microchip manufacturer in world plays significant role in the design and manufacturing of memory components and devices used in hundreds of millions of devices. 

The company covers a wide range of market segments, from gaming consoles to data centers. With ongoing Covid pandemic threatening global economy and posing daily challenges to the manufacturing operations, how will the company navigate these challenging times and what solutions it may have to battle these challenges?

2020 hasn’t been easy for Micron Technologies so far. The company had to take all the necessary precautions to protect its manufacturing capacity from potential disruption Covid-19 could cause. So far, the company has been successful at protecting its staff and even managed to expand the existing capacity in certain locations.

Despite challenging trading environment and subdued global economic outlook, the company managed to increase sales in the financial quarter ending May 28,2020: $5,438 million vs $4,788 million for the same quarter in 2019. Nine months period ending May 28,2020 shows less optimistic results, as the company’s revenue drops from $18,536 million to $15,379 million for the period in 2019.

One of the biggest growth areas is Mobile, where Micron saw quarter on quarter change of 21%: 2nd financial quarter- $1,258 million to $1,525 in 3rd financial quarter.

NAND memory, one of the company’s core products, accounted for 31% of revenue in FQ3, compared to 23% in 2019. The revenue has also increased from $1,104 million in FQ3 2019 to $1,665 in FQ3 2020.

With both Sony PlayStation and Microsoft Xbox being released later this year, the company will continue to have a steady flow of orders for its memory units. Another key factor that may not be too obvious first, is the arrival or cloud gaming services, such as Google Stadia and Amazon Luna. Both companies have unparallel resources and reach to their customers, which could push the demand for Micron Technology’s products even higher. 

However, despite the positive outlook for the company’s products, it has challenges too. Its clients aren’t paying as fast as they used to global and very likely increasing payment periods even further. This had a strong impact on the company’s cash flows. For May 28,2020, the company reported $1,720 million, compared to $5,772 million in May 30, 2019.

While short term outlook for global economy stays bleak, Micron Technologies are in a unique position to weather through it unscathed. We may see some growth in company’s order book for Q4, as the festive season will boost its sales to clients working in consumer sectors.

Large data center operators, device manufacturers, and retailers now have a much better understanding of how the ongoing pandemic may affect their operations, therefore higher-level restocking is highly likely. No market player wants to undergo similar scenarios to those seen earlier this year when shortage of memory chips skyrocketed its prices.

Disclaimer: I have no positions in any of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. All information should be independently verified and should not be relied upon for purposes of transacting securities or other investments. See terms for more info.

Published On
2020-09-28 13:53

About the Author
Valdas S. London based head of technology during the day, writer at night. Valdas writes about finance, economy, and technology.