The Zhitong Finance App learned that Micron Technology (MU.US), the largest memory chip manufacturer in the US, has given strong current revenue expectations, indicating that, driven by the AI boom, strong demand for memory chips in data centers is helping to make up for the slow pace of recovery in the personal computer and smartphone markets. The company said in a statement on Wednesday that it expects the total revenue range for the second fiscal quarter ending February next year to reach 5.1 billion to 5.5 billion US dollars, compared to analysts' average expectations of about 4.99 billion US dollars. Excluding certain items, under non-GAAP standards, Micron expects a loss range of 21 cents to 35 cents per share for the same period. In comparison, analysts expect an average loss of 62 cents.

In the first fiscal quarter of fiscal year 2024 ending November 30, Micron's total revenue increased 16% year over year to US$4.73 billion. Excluding certain items, the Boise, Idaho, US-based company lost 95 cents per share under non-GAAP guidelines. In contrast, analysts' average expectations were: total revenue of about 4.54 billion US dollars, loss per share of about 1 US dollar, and Micron's Q1 core performance indicators both exceeded analysts' expectations.

After the latest performance data was released, Micron's stock price once rose by more than 5% in after-hours trading. When previewing results later this month, Micron issued a less optimistic signal, warning that its operating costs had risen compared to the same period last year. The report disappointed investors and caused the company's stock price to fall, but since then, after AMD (AMD.US), a giant in the CPU and GPU dual industry and one of Nvidia (NVDA.US)'s rivals, announced a strong AI chip market size forecast, the stock price quickly recovered from losses due to optimistic demand expectations for memory chips and HBM driven by the AI boom.

The company's stock price has risen by about 57% since this year due to investors' optimism that the excess memory chip inventory is easing, and that the global enterprise layout of generative artificial intelligence (generative AI) is driving a surge in demand for memory chips, especially HBM, the company's stock price has risen by about 57% this year, which is basically in line with the overall increase in the “global chip stock trend” of the Philadelphia Semiconductor Index.

The “darkest hour” of the chip industry has passed, and the upward cycle has quietly begun

Micron's latest performance and performance outlook data show that Micron has survived the worst period of the entire chip industry cycle and is moving back to a profit model. In particular, the surge in artificial intelligence (AI) boom in spending has helped. Micron CEO Sanjay Mehrotra pointed out that the demand for high-end memory chips used in data centers to help develop artificial intelligence software/applications is extremely strong.

Mehrotra also reiterated his optimistic forecast that 2024 will be a “big year of bottoming out” for the chip industry and expects a return to record levels of demand in 2025. “We expect the fundamentals of all of the company's businesses to improve significantly throughout 2024,” Mehrotra said in a statement. “We are in a very good position to take advantage of the huge opportunities presented by artificial intelligence in the terminal market.”

Another storage giant, SK Hynix, expects that the memory chip market situation has improved markedly since the third quarter and will improve drastically next year, in line with Samsung Electronics' optimistic expectations. From the price trend of DDR4-3000, which is suitable for most general computing tasks, it is also possible to see the pioneering recovery trend of the memory chip market compared to the entire chip industry.

Since memory chips are used in a very wide range of consumer terminals such as PCs and smart phones, the level of demand for memory chips can basically reflect the specific boom and decline cycle of the entire chip industry.

Micron is currently trying to completely recover from the slump where smartphone and personal computer manufacturers have drastically cut orders. Most Micron customers established oversupplied inventories from early 2022 to the first half of this year, causing memory chip prices to fall below production costs. During this period, the three major memory chip giants, Micron, Samsung Electronics, and SK Hynix made concerted efforts to cut production, which greatly alleviated the oversupply situation and drove inventories and memory chip prices into a recovery channel.

Micron executives currently expect that after two years of declining demand, overall PC sales will achieve “year-on-year growth in single-digit percentages from low to medium levels” in 2024. The company said smartphone demand is also showing signs of recovery and will “maintain a moderate pace of growth” in 2024.

According to a recent report released by TechInsights, 2024 will be a year with record overall revenue for the industry. The overall semiconductor market size will surpass its peak in 2022. Over the next ten years, the market will double in size, generating more than $1 trillion in revenue.

According to the 2024 semiconductor industry outlook data released by the World Semiconductor Trade Statistics Organization (WSTS), the global semiconductor market is expected to decline by 9.4% in 2023. However, WSTS expects a strong recovery thereafter, with 13.1% growth expected in 2024. For 2024, WSTS predicts a market size of 588.364 billion US dollars, an increase of 13.1% over the previous year. This is also an upward revision to the forecast growth of 11.8% in the spring of 2023.

WSTS said that looking ahead to 2024, the global semiconductor market is expected to reach 588.3 billion US dollars, higher than the 576 billion US dollars forecast this spring. This expansion is expected to be mainly driven by the storage sector covering applications such as PCs, servers, and smartphones. It is expected to recover to 120 billion US dollars by 2024, an increase of more than 40% compared to the previous year; almost all key categories, including discrete devices, sensors, analog chips, logic chips, and MCUs, are expected to show single-digit growth.

Demand for HBM is strong, and Micron, which accounts for only 10% of HBM, wants to be a “latecomer”

Micron became the largest memory chip manufacturer in the US by acquiring some strong competitors and surviving several harsh chip industry recession cycles in the industry. The company competes with Samsung Electronics Co. (Samsung Electronics Co.) and SK Hynix Inc. (SK Hynix Inc.) from South Korea in terms of chip sales. DRAM and NAND memory chips are the core hardware of application terminals such as computers and mobile phones. Micron has also launched HBM storage products, mainly used in fields such as high-performance graphics cards, AI accelerators, high-performance computing, and data center servers.

Memory chip manufacturers, including Micron, have been striving to enter new markets, such as AI data centers, electric vehicle intelligent driving, and increasingly popular electronic products such as smart watches, thereby reducing excessive dependence on the mobile phone and personal computer markets.

HBM can be described as the “new favorite” under the global AI boom. As global companies step up their efforts to deploy the AI field, demand for AI servers has ushered in strong growth, and its strong shipping momentum has driven demand for HBM (HBM technology uses 3D stacking technology to stack multiple DRAM chips to form a high-density, high-bandwidth storage module).

Micron CEO Mehrotra said the company has completely sold out all the HBM it expects to be able to produce at 2024 capacity. “This is the type of super-fast access chip needed for computers to create artificial intelligence software. The high-revenue and high-profit opportunities that AI has brought us have only just begun.” Mehrotra display.

According to forecast data from the well-known research agency Mordor Intelligence, the market size of HBM storage products is expected to grow from US$2 billion in 2023 to US$6.32 billion in 2028, with a compound annual growth rate of 25.86% during the forecast period (2023-2028). Mordor Intelligence said that the main factors driving HBM market expansion include growing demand for high bandwidth, low power consumption and highly expandable memory, increasing adoption of artificial intelligence technology, and rising trends in miniaturization of electronic devices.

HBM is a high-bandwidth, low-energy storage technology specifically designed for high-performance computing and graphics processing. There are some differences between stacking HBM's high-end DRAM and traditional DDR DRAM. The most notable difference is that HBM achieves high bandwidth by vertically stacking multiple DRAM chips, while DDR is arranged in a flat plane; multiple DRAM chips stacked by HBM are connected together and data transmission is carried out through fine Through-Silicon Vias (TSVs), thus achieving high-speed, high-bandwidth data transmission. HBM is mainly used in fields such as high-performance graphics cards, AI accelerators, high-performance computing, and data center servers. Its high bandwidth characteristics enable processors to access storage space faster and improve computing performance and efficiency.

As of 2022, the market share of the three original HBM manufacturers was SK Hynix 50%, Samsung Electronics about 40%, and Micron about 10%, respectively. Since SK Hynix was the first to gain strength in the HBM field, it entered this field as early as 2016, so it occupied the vast majority of the market share. Some industry insiders said that the share distribution in 2023 will be roughly the same as in 2022. Micron developed relatively late in the HBM field, but recent news from the HBM industry shows that Micron, which accounts for only 10% of HBM, wants to be a “latecomer.

Micron plans to begin mass shipping of the new HBM3E storage product in early 2024, and also revealed that Nvidia is one of the main customers of its new HBM storage products. Additionally, the company emphasized that its new HBM products have received a great deal of interest from across the industry, which suggests that Nvidia may not be the only major customer to end up using Micron HBM3E. Micron clearly has high expectations for the HBM3E, as this may enable it to continue to gain market share from SK Hynix and Samsung Electronics to increase the company's overall revenue and profits.

According to reports, Micron's HBM3E module is based on eight stacked 24Gbit memory chips and is manufactured using the company's 1beta (1-beta) manufacturing process. The modules have a data rate of up to 9.2 GT/s, bringing the peak bandwidth of each stack to 1.2 Tb/s, a 44% increase over the current fastest HBM3 module. Meanwhile, the company won't stop its 8-Hi 24 Gbit-based HBM3E components. Following the start of mass production of the 8-Hi 24GB stack, the company announced that it plans to launch an ultra-high capacity 36GB 12-Hi HBM3E stack in 2024. Micron's CEO said, “We expect to begin mass production of HBM3E in early 2024 and expect to achieve significant revenue in fiscal year 2024.

Citi said it is optimistic about the overall recovery trend of the chip industry and lists Micron as the preferred stock in the chip industry. Citi raised the agency's target share price for Micron from $85 to $88, maintaining its “buy” rating. According to data compiled by Seeking Alpha, Wall Street analysts gave Micron a consensus rating of “buy,” with an average target price of $85.94, which means that the potential upside in the next 12 months is 9%.