With HBM pie too tempting, could Micron sacrifice production capacity for other memory chips?

Mavis Tsai, Taipei; Willis Ke, DIGITIMES Asia 0


Micron Technology has seen its orders for High Bandwidth Memory (HBM) wait to be fulfilled throughout 2025.

This has sparked concerns about potential production capacity constraints and supply squeezes for other memory chips. CEO Sanjay Mehrotra noted an improvement in memory market conditions, attributed to factors such as robust demand for AI servers, stable end-user demand, and overall reductions in industry-wide supply capacity.

He further explained that robust AI server demand is driving rapid growth in HBM, DDR5, and data center SSD markets, resulting in tight supply capacity for high-end DRAM and NAND products. This is expected to bring a positive chain reaction to the prices of diverse memory and storage products. In the next few quarters of 2024, prices for DRAM and NAND flash chips will continue to rise, generating brighter revenue and profit performance for Micron in fiscal 2024-2025.

In Micron's latest financial report, revenue for the second quarter of financial year 2024 (ending February) surged by 58% year-on-year to US$5.8 billion, allowing the company to return to profit one quarter earlier than expected. Specifically, Micron's DRAM revenue surged 21% sequentially and 53% annually, reaching US$4.2 billion.

Compared to the first quarter of financial year 2024, its DRAM bit shipments only increased by a low single-digit percentage, ranging from 1-3%. However, the Average Selling Price (ASP) experienced double-digit growth, underscoring pricing as the primary driver of revenue growth.

NAND revenue grew by 27% sequentially and 77% annually to reach US$1.6 billion in the second quarter of financial year 2024. The revenue growth was also driven by a significant increase of over 30% in NAND ASP compared to 1QFY24, despite a sequential decrease in bit shipments.

DRAM bit shipments down, NAND's up

Micron expects its DRAM bit shipments to decline slightly in the third quarter of financial year 2024, compared to the second quarter of financial year 2024, while NAND bit shipments are anticipated to rise slightly due to recovering market demand.

In the DRAM market, HBM stands out as the most anticipated segment for growth. Micron announced the mass production of 24GB 8H HBM3E at the end of February, beating out competitors SK Hynix and Samsung Electronics. Among its customers is Nvidia, scheduled to ship its Hopper architecture H200 GPUs in the second quarter of 2024.

Regarding the more advanced 36GB 12H HBM3E, sampling has commenced, with production set to gradually increase in 2025. Mehrotra also estimated that for NVIDIA's latest generation Blackwell architecture GPU, the "content" of HBM3E memory will rise by 33%, presenting greater opportunities for Micron.

Apart from Nvidia, Micron has recently signed new customers for its HBM products but has not disclosed their identity yet. Market analysts project the company, now ranking third in HBM supply, to continue growing its market share in the segment in 2024.

Mehrotra highlighted the critical role of memory and storage technologies in AI workloads, allowing Micron to capture opportunities across data center and edge applications. However, rising memory prices present a double-edged sword, benefiting suppliers like Micron while potentially burdening customers facing increased interest rates.

Furthermore, with Micron's HBM for 2025 mostly sold out already, there are concerns about potential constraints on AI GPU supply in the future. Additionally, the increase in HBM production capacity will likely squeeze the growth potential of other product supplies.

According to Mehrotra's estimation, the wafer supply consumed by HBM3E is three times that of DDR5 using the same fabrication process.