CompaniesMicron

Micron

Table of contents

Thesis

  • Unit economics:
    • Violent memory cycle driven by product fungibility and fixed cost. Depreciation is the dominant (fixed) cost.
    • Multi-year take-or-pay agreements with binding volume commitments. Most are fixed-price or carry floor and ceiling bands.
  • Barriers:
    • capital, lithography, and qualification.
    • HBM bring custom SKUs and require years of co-design and qualification.
  • Earnings drivers:
    • DRAM and NAND price per bit,
    • mix shift to data center,
    • bit supply growth from node transition,
    • HBM accelerates capacity tightening. HBM consuming roughly three times the wafer area per bit of standard DDR5.
  • Risks:
    • Supply response on a 2027-28 lag, compounded by a state-funded entrant that adds capacity irrespective of returns.

Micron vs. Sandisk

  • Micron wins on both growth and power.
  • Micron has larger scale and is more capital intensive (greenfield capacity versus nodal transition at Sandisk).
  • Micron owns HBM4, the only memory product that escapes commodity price and tightens the base market.
  • Segment: Micron has larger data center exposure.
  • Micron has the harder paper and the bigger backstop. Micron's contracts carry no walk-away clause.
  • Supply resilience: Sandisk gets 100% of its wafers from a joint venture it owns 49.9% of, cannot direct, cannot leave, must half-fund whether or not it takes the output, and which expires on 31 December 2034.
  • Geography: Micron has much larger U.S. shares of supply origin and demand. Sandisk has much larger China demand exposure and Japan supply exposure.
  • Downside risk: Sandisk breaks first, Micron breaks worse.
  • What to watch:
    • Micron's 2027-2028 capex lands in surplus.
    • High Bandwidth Flash converts, and NAND starts substituting for DRAM at the margin.
    • Change of control at Kioxia.

Micron vs. SK Hynix

  • Moat: SK hynix's moat is in manufacturing (medium durability) and scale; Micron's is contractual (better customer terms) and geopolitical.
  • Growth: Micron has the broader growth path and SK hynix the more valuable single cell (HBM).
  • Margin: SK Hynix has higher growth margin through a cycle due to mix (more HBM) and scale (R&D spend and depreciation spread over a larger revenue base).
  • Demand: Micron is exposed to a price downturn, SK Hynix to HBM (Samsung's expansion) or China shock.
  • Supply: SK hynix absorbs price shocks better (e.g. in 2023); Micron carries less political license risk but concentrates its DRAM output in Taiwan.

Reports

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