iPhone’s Component Ecosystem: Micron

In this post, we will be analyzing Micron as part of the series analyzing the major players in the iPhone’s component ecosystem. The 2-megapixel camera mounted on the back of the iPhone is powered by an imaging chip from Micron.

Micron Technology Inc. (NYSE: MU) with revenues of $5.3 billion in 2006 is one of the world’s leading manufacturers of semiconductor devices. Apart from CMOS image sensors, its core products include DRAM and NAND Flash memory. To reduce its exposure to the volatile DRAM market, it is expanding into specialty memory products, NAND Flash memory products, and CMOS image sensors.

In January 2006, the company formed a manufacturing joint venture, IM Flash Technologies, LLC in partnership with Intel (NASDAQ: INTC). In February 2007, they formed another joint venture, IM Flash Singapore LLP. Micron owns 51% of IM Flash and would be contributing $2 billion in cash to it over the next three years. Its acquisition of Lexar Media, Inc. in June, 2006 further established its presence in the NAND Flash market. Lexar Media is a leading provider of NAND Flash memory products for the digital photography and consumer electronics markets.

The company diversified into the image sensor business in 2003. Since the DRAM production process is similar to that of image sensors, it has been able to use its older DRAM plants for image sensor production. In December 2006, it acquired Avago Technologies’ image sensor business and strengthened its position in the field. Today, it is one of the leading providers of CMOS image sensors.

For its third quarter of fiscal 2007, Micron reported a net loss of $225 million ($0.29 per diluted share) on net sales of $1.3 billion primarily due to severe price declines of memory products. This was its second consecutive quarterly loss. The extent of the effect of price decline on Micron’s financials can be gauged by the following facts:

• Quarter on quarter, the sales of NAND Flash memory increased by 75% in gigabyte products in the third quarter
• The company achieved per megabit cost decreases of 30% for NAND Flash and 15% for DRAM products in the third quarter.

  Micron is now looking at pursuing more intensive cost cutting measures. These include reduction in workforce and developing production facilities closer to Micron’s global customers in Asia.

  The iPhone design win has corroborated Micron’s status in the image sensor industry and will directly help Micron’s CMOS image sensor business. Although they entered this business rather late, they have shown great capacity for technical innovation. More demand for NAND Flash memory in the wake of me-too product launches in response to the iPhone will be a welcome bonus sure to help Micron.

Micron’s stock is on an upswing since mid-April when it had slid to a 52-week low of $10.88. The stock has been continuously upgraded in the past couple of months and is currently trading at $13.66.

This segment is a part in the series : iPhone’s Component Ecosystem