- Micron Technology is the 4th largest semiconductor company in the world and a leader in DRAM.
- Mohnish Pabarai has been adding to this stock in recent quarters, and it now makes up 78.4% of his U.S. holdings!
- A global semiconductor shortage hit the supply chain, could this company be poised to benefit?
Micron makes 71% of its revenue from DRAM and 26% from NAND, which is used in solid state hard drives (SSDs). These have many applications, including computers, mobile, automotive and even Cloud.
The market for 5G cell phones is an especially interesting tailwind for the company, as 5G-enabled phones have 50% higher DRAM and double the NAND content versus 4G phones. Revenue from 5G smartphones is expected to reach $337 billion for the industry by 2025, up from $108 billion in 2021, according to Juniper Research.
Micron has 13 Manufacturing sites, 14 customer labs and 40,000 team members. They have multiple sites internationally in the U.S., Europe, India, Malaysia, Taiwan, Singapore, Japan and China.
As a technology company, Micron must continually innovate to stay ahead. Thus, they are investing heavily into R&D, dedicating 10% of revenues, or approximately $2 billion per year. According to their investor relations presentation, the company’s strategy going forward includes reducing manufacturing costs and increasing density per wafer.
Micron produced strong earnings results in 2021, with revenue jumping 29% to $27 billion. Gross margins also increased to 37% of the revenue, while net income increased by an amazing 118% to $5.9 billion. The firm’s cash position also increased to $8.6 billion. In addition, Micron’s investments are paying off well as the firm’s return on capital is 14.6%.
