Ukraine War Putting Additional ‘Pressure’ on Chips Supply Chain: Micron CEO
The global semiconductor supply chain is “experiencing pressure” above and beyond the existing shortages and logistical bottlenecks, due to the impact of Russia's invasion of Ukraine, said Micron Technology CEO Sanjay Mehrotra on an earnings call Tuesday for its fiscal Q2 ended March 3. “The region is an important source for the global supply of noble gases and other critical minerals that are used in semiconductor manufacturing,” he said.
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Micron “strategically diversified” its supply chain over the past several years and “maintained appropriate inventories of materials and noble gases,” said Mehrotra. “We currently do not expect any negative impact to our near-term production volumes because of the Russia-Ukraine war, but we do expect an increase in our costs as we secure supply of certain raw materials that could be at risk.”
Amid the ongoing semiconductor supply chain challenges in fiscal Q2, a government-mandated COVID-19 lockdown in late December affected production output at Micron’s “back-end” facility in Xian, China, said Mehrotra. The Micron team was able to quickly return the Xian site “back to normal output levels post-lockdown,” he said. “Additional COVID-19-related lockdowns in the region present a risk to the global electronic supply chain, and we continue to monitor the situation closely.”
The industry is experiencing a “healthy supply-demand balance across both DRAM and NAND,” amid strong “demand trends,” plus “supply discipline across the memory industry,” said Mehrotra. But there remain “long semiconductor manufacturing equipment lead times and reduced NAND supply from some of our competitors that experienced a contamination issue in their fab,” he said.
Western Digital’s flash memory production at two Japanese fabs it runs in a joint venture with Kioxia returned to normal in late February after the contamination of materials used in its manufacturing processes halted operations earlier in the month (see 2203030006). It’s estimated the snafu will cost Western Digital about 7 exabytes of flash availability in its fiscal second half ending in early July. Mehrotra said the disruption “certainly brought down the year-over-year supply growth for the industry” by a few percentage points.
Nonmemory component shortages are improving, “and we expect that further improvements should support memory and storage demand growth for the rest of this year,” said Mehrotra. There remain “some pockets” where semiconductor shortages “have not improved as fast as we had expected, and these shortages are likely to continue into calendar year 2023,” he said. “We are mindful of increased macroeconomic uncertainty and remain vigilant of any changes in market conditions.”
Micron's fiscal Q2 mobile revenue grew 4% year over year to $1.9 billion as the 5G transition continues in smartphones, said Mehrotra. “We see some weakness in the China market as the local economy slows, smartphone market share shifts and some customers take a more prudent approach to inventory management,” he said. Demand for Micron’s mobile memory and storage solutions “continues to be supported by content-hungry applications and the ongoing transition from 4G to 5G, which is driving 50% higher DRAM content and the doubling of NAND content,” he said. Micron expects 700 million 5G smartphones will be shipped in calendar 2022, which would be a 40% increase from 2021, he said.
In the PC segment, Chromebooks and consumer PCs “have had some weakness, as is well known, but enterprise and desktops are strong,” said Mehrotra. “That's a favorable mix for us because enterprise and desktops take higher content of both DRAM and NAND. So while we look at PC unit growth on a year-over-year basis to be flattish, the enterprise and desktop mix is favorable in terms of DRAM and flash content requirements there.”