Micron Technology (NASDAQ:MU) is a semiconductor manufacturer specializing in making memory devices, mainly DRAM, NAND flash and NOR flash memory as well as other innovative memory technologies. It is the fourth largest DRAM manufacturer globally behind Samsung Electronics, Hynix and Elpida. It is also the third largest manufacturer of NAND flash behind Samsung Electronics and Toshiba/SanDisk (NASDAQ:SNDK). In NOR flash, it is the second largest player behind Spansion (NYSE:CODE).
We recently launched coverage on Micron Technology with a price estimate of $5.75 for the company’s stock. Our estimate is around 15% ahead of the market price.
See our full analysis for Micron Technology
Micron’s Sources of Value:
We have broken down our analysis of Micron into three main business segments:
- NAND flash division (49% of total value)
- Core DRAM division (38% of total value)
- NOR flash & Imaging division (14% of total value)
In an industry characterized by declining prices, Micron has remained competitive through continuous innovation and partnerships. A few key aspects of Micron distinguish it from its competitors:
1. Highly integrated DRAM manufacturing process
Micron has integrated DRAM manufacturing process and owns the wafer manufacturing facilities which helps it lower its cost base. In addition it has wafer supply agreements with Inotera which has enabled higher yields and hence lower costs and improved margins.
2. Better product-mix results in selling prices higher than industry average
Micron continues to have one of the most diversified product portfolios among DRAM and NAND manufacturers. Consequently, Micron has achieved significantly higher average selling prices compared to industry averages. Its DRAM products sold at a premium of 25-30% over industry average selling prices.
3. Sharing of R&D costs with Intel, Inotera reduces costs & improves margins
Micron has R&D cost sharing agreements with Intel for its IMFS facility (NAND flash) and Inotera (DRAM). Such agreements provide Micron a unique advantage as it can improve its operating margins and hence be more competitive in and industry which is marked by heavy price declines.
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