Technology expects long-term revenue percentage growth in the high single digits, and above the overall semiconductor industry, the memory chip company said Thursday.
Micron (ticker: MU) told investors and analysts at a San Francisco meeting that it sees strong growth for both DRAM and NAND memory chips in the years ahead. Growth will be driven in particular by rising demand from the automotive, data center, and industrial end markets, reducing Micron’s reliance on the PC and smartphone markets.
Micron CEO Sanjay Mehrotra said in a presentation that the company expects bit growth in the mid-to-high teens for DRAM, and in the high 20s for NAND on an annual basis through 2025. The overall memory industry should reach $330 billion by 2030, from $161 billion 2021, he said. The CEO added that memory chips are now 30% of the chip industry, up from 10% at the turn of the century.
Micron also announced a 15% dividend increase to 11.5 cents a share quarterly. That’s Micron’s first-ever dividend hike—the company established a dividend policy for the first time in August 2021. Micron noted it continues to aggressively repurchase shares, including $700 million for the current quarter, which goes through May. The company has about $5 billion remaining on its current stock repurchase authorization, and expects to continue to buy back stock at current levels.
The company’s newly unveiled long-term financial model calls for operating margins in the 30% range; Ebitda (earnings before interest, taxes, depreciation, and amortization) margins in the low 50s range; capital expenditures in the mid- 30s as a percentage of sales; and free cash flow margin above 10%. Those target ranges are across business cycles, with some variation over time. Micron noted that this is the first time in its more than 40-year history that it has provided investors with a model for how the company can grow across business cycles.
Micron also said it intends to return 100% of free cash flow to investors in the form of dividends and stock buybacks. That’s a change from its previous policy, which targeted a return of 50% of free cash flow to holders.
“Our ambition is to seize the growth in front of this company, in a way that balances with return on capital and cash returns,” said Mark Murphy, who joined the company as chief financial officer just a few weeks ago.
In the meeting, Micron made the case that it has a technology leadership position in both NAND and DRAM—while noting that demand is robust and diversifying.
Micron is a clear winner in the broader technology sector’s adoption of cloud computing. Micron said the data center market for memory was $50 billion in calendar year 2021. The company sees 28% annualized bit growth for DRAM used in data center applications through 2025, with 33% growth in NAND demand.
The automotive market was smaller last year, at $4 billion, but the company projects 40% growth in automotive DRAM bit demand through 2025, with 49% growth in NAND demand. The company notes that memory demand increases dramatically as cars add more autonomy—fully autonomous cars are expected to require 30 times the DRAM content and 100 times the NAND content as a driver-only vehicle. Micron expects sharp growth in the NAND and DRAM used in connection with each data center server as well.
Micron’s chief business officer, Sumit Sadana, said at the meeting that the company’s reduced reliance on the PC and mobile phone markets should result in higher growth and more stable financial performance. He expects the PC and mobile sector to account for 38% of overall revenue in fiscal year 2025, down from 55% in fiscal year 2021. Meanwhile the reliance on data center jumps to 42% from 30%, and the automotive, industrial, and networking markets together will hit 20% of revenue, up from 15%.
Micron also is experimenting with signing forward pricing agreements with customers—Sadana sees benefits for both Micron and for customers: “Customers get guaranteed supply and preferential allocation when supply is tight, and guaranteed price reductions following the cost curve down.” Micron said it has signed its first forward pricing agreement with a top-10 customer, with a more than three-year agreement worth more than $500 million a year.
Amid continued widespread pressure on technology stocks, Micron shares on Thursday rose 1.1% to $67.71. The stock is down 27% year to date.
Write to Eric J. Savitz at [email protected]