Micron Technology, Inc. (MU)

Analyst Meeting 2013

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Aug 9, 2013

Alright. Thanks. Thanks. Thanks everybody for coming today. We really appreciate you coming out, packed house, which is great. So I'm just kicking it off real quick and give you the format for the day. We obviously are pretty short on time. We've got 2 hours, so we're gonna try to really focus on the keys that that we think investors are most interested right now. And, actually, we're doing in in basically a fireside chat q and a sort of format based on questions that we received from, you know, everyone here in the audience. We solicited feedback for questions of what is really important to you as investors, as analysts, and that's the basis for the presentation today. So We hope you enjoy it. We're gonna have Mark Durkin First, then Mark Adams and Ron Foster. And then we'll also add a couple of our business units with Mike Rayfield and Brian Shirley. And then Scott D'Bore, VP of R And D as well. So that's the flow for the day. And, Mark, come up. Alright. Thanks, Ivan, and thank you everyone for coming today. It's kind of an exciting morning for us ringing the bell and looking at our pictures. But now we're getting down to work, and, we I think we've got a great presentation for you. I wanna, kick it off here. Let's skip through that. Just talk a little bit about, you know, the the value proposition to Micron of this Al Qaeda transaction we just we just closed. First of all, I'm not going to steal Ron's thunder But I'll tell you right now that the the economics are very compelling. And, in my mind, that was always going to be true. But obviously as things have changed over the last year and we've ground through the process of bringing this thing to a close, the situation has changed. And I think you'll really You really get to see some numbers today that drive home what a significant, and beneficial acquisition this was to my farm from a pure asset purchase perspective. Now that's not the primary reason we did the deal, though. There there are a number of different factors to play in here. The product portfolio itself is is very complimentary and synergistic, gives us a huge leg up in the mobile market, with their mobile DRAM portfolio, but also a lot of strength in graphics. Those happen to be two places where Micron historically is not focused. And you put that together with with the things that we've been working on in enterprise networking, computing DRAM, automotive, industrial, etcetera. And it's really very, very complimentary. The R and D resources, the technology resources, that, that come with LPDA are not to be underestimated. They they have, really a world class team in terms of technology development. And our plan is to to leverage that for continued DRAM development and take more of our resources and deploy that to some of the, the other things we wanna work on. Now You know, we've got a lot of great DRAM technology. We've been working on a joint development basis with them, for over 9 months now on the 25 nanometer node. And for the last three or months on 20 nanometer, and it's amazing what we're learning from each other. So, we're already seeing the benefits of that, and we've got that technology path moving forward quickly. There's going to be significant synergies as we bring these companies together, not only from the product portfolio, 1+1, leading to more than 2, but also, from the activities that we're doing when we start thinking about, you know, all the infrastructure that goes into running the company we can take advantage of a combined supply chain, a combined procurement activity, eliminate some of the overlap in in common designs, for the more commoditized products where we're doing multiple designs that are actually the same thing. And we're gonna recognize significant synergies. When we've talked about in the past, you know, back end technology, not to be underestimated, the importance of that and getting that optimized for the products we want to build in the future, also going to be significant for Micron. And finally, we now have, the scale that our customers have wanted us to have for a long time. So the customers out there a rooting for Micron for the world's only global memory company, with with smart folks interacting with customers around the world, really understanding their applications. And one of the impediments we've had to date has been we just don't have the we haven't had the scale for the customers to really bet on us to be able to deliver not only a a a niche product, that are differentiated, but to really work with them on their high volume applications and add value at the system level with those advanced product We have that now and it is no longer an issue for us. So you put the whole package together, and it's really going to be very, very compelling for Micron. If you think about how we're going to execute on this thing, we've had a lot of history, in in growth through acquisition. The the timeline on the bottom there, you can see how we, you know, move through time adding assets around the world. From from PI back in 1998, to, more recently Toshiba followed by mnemonic and most recently, obviously the LPDA transaction that is closed. As we did that, we've added scale efficiently without adding capacity to the marketplace And this is just the last step in that transition. What you see for Micron now in terms of capacity is really significant growth over the last year without impacting, market capacity and really distributed globally in a fashion that that we think makes the the most sense and is very advantageous for us on a go forward basis. So, Ivan said, we were gonna try and answer some of the questions that were submitted. I'm not gonna I'm not read the questions. You can read them up front here and those of you on the web can see them. But I think the theme of the first question here is you know, is this industry changing and how is behavior going to change as a result of that? And And what I would what I would say to you is this industry has already changed, and it has changed for good. And there are a lot of reasons for that. But I would not first of all, I would say, there's been a lot of growth in the memory industry. There's been a lot of fantastic innovation from a from a technology perspective that's driven, significant productivity increases in terms of transistors and bits per square into silicon over the last couple of decades. But that trend is playing itself out, and it's I'll show you the data here in a little bit in terms of the addition of bits from technology migration that's been going on in both NAND and DRAM over recent years. And you can see the slowing of that that has a fundamental, implication on the nature of the memory industry going forward. Which is that we will not have unrestrained growth of supply as competitors in the marketplace, struggle to adapt to adopt the leading edge technology in order to remain cost competitive. Yes. We'll still have technology migration. We'll have introduction of new technologies, and we'll have innovation that moves the ball forward, but it's not an all out economic decision anymore that one must move aggressively to the new technology node in order to stay competitive. It'll play differently in the broad base of applications that we service, and that's the second fundamental change. We no longer ship all our bits into the compute segment. And even the mobile segment is while growing rapidly, is not a majority of where the bits go, and we'll show you that data here in a little bit. Very broad swath of end applications, now being served which tends to dampen the volatility and increase our ability to differentiate our product portfolio, which begins the process of decommoditizing the industry, and really I think will lead to a totally different market dynamic. The industry is consolidated and it's been painful. And as we look back through history, we've we've seen a lot of government industrial policy that where where governments have been active in the market, disrupting what would be a normal market environment through through the, the support of excess capacity into the marketplace. That trend is played out We're not going to see that anymore. And for the first time really in the industry now, we have rational competitors looking at what is the best way to deal, with their capacity in order to optimize the value that they're delivering to the customers. And so our focus really for the first time is how do we tune our technology development to deliver value added systems to the end customer, memory systems. And what that means is more of our capital more of our R and D investment is to not to advancing process technology nodes, but to, building the infrastructure that supports those advanced memory systems that are much more tuned to the end application they're going into. And that's a much less capital intensive business. It's a and it drives a much, a different capital spend for the industry on a go forward basis. So how do we think about optimizing our returns for the future? It's no longer about market share. It's no longer about, driving the most advanced technology, to full volume production as quickly as possible. It's about delivering volume value added systems to the end customer. And that's a very different state. Historically, of course, return on invested capital in the in the memory industry has been bad. Even as compared to the rest of the semiconductor industry here, you can see a pretty good dislocation in terms of what's the average return through the cycle. And you can see it's been pretty volatile. Big swings from the top of the cycle to the bottom of the cycle. For all those reasons I just talked about, that's not the case going forward. This industry has fundamentally changed. And how are we gonna run our business? We're gonna run our business by making sure that when we make investments, they're predicated on on a decision process, that evaluates what is the long term return on that investment through the through the through the cycle of the capital invested Are we really getting the full return? And if and and we're not investing for the peak of the cycle. We're not investing in order to stay in the game, so to speak, we're gonna be investing to make sure we have the capacity in place, for all those applications we're delivering. And that may mean that as we migrate technology, it's a smaller slice at the total capacity that we move in order to support a particular application. So there's another trend that's going on, and there's been a lot of, discussion. And and one of the questions or themes of questions that that came to us is, well, the equipment folks are telling us you guys are gonna spend a lot more money on capital. And and the reason you're gonna do that is because the capital is just a lot less productive. And I'd ask I'd ask you, does that really make sense if something becomes less productive in terms of what it can deliver to you is your natural reaction, well, I'll just go buy more of that. That's certainly not how we're thinking about our business. It is true but as we move through time, we are going to have a harder and harder time scaling, and the equipment supplier is gonna have a harder, harder time delivering equipment to us that will facilitate those transitions, which means, one or 2 things. That we behavior rationally and pour more and more money into a hole, or that we change our behavior. And so we're changing our behavior. And I think that's what that's what rational folks will do. And I think what you'll see, as we move through time, is that you won't see as many new capacity additions because it's inefficient, and you'll see us slowing in the rate of new technology adoption, not only because the applications will demand a slower, a fuse in order to adopt new technologies but also, because that's what makes economic sense. So how's that going to impact a future supply? Well, I'll get to that in a second. But first, I wanna show you that it's it's the the change has already occurred. If you look at what's going on relative to the capital spending in the DRAM industry for 4 years in a row now, is a significant lack, or really almost a complete lack of capital spending, for new capacity. It's all going into technology migration, and I'll show you in a second, But that spending was going into technology migration. It's actually producing a slower and slower growth rate in terms of bits supplied into the marketplace. Now, you know, you might say, well, that's gonna be a problem. In my mind, it's a fantastic boon because we're in an environment now where the where the demand for memory across all the various applications, is really exploding. And we've got all the business unit guys here to tell you about the exciting products that we're working on. On the NAND side, you can see a similar similar trend. We've actually, on the NAND graph here, we've actually taken a little bit of capacity of capital that may get spent in 2014 for new capacity and moved it into 2015 because what's going on in the NAND business today as people are building a greenfield, cleanroom for space not large scale new capacity, but the spend's going on, going to go on in 2014 in order to facilitate a three d NAND transition that'll slowly in the years beyond that. And Scott will talk to you more about how that all plays out. But the capital spend you see going on here in 2014 for NAND capacity. A piece of that obviously is Micron as we transition a fab from DRAM to NAND. But a lot of it is cleanroom space and early pilot line for 3 d NAND. So here's the supply situation. Even NAND, which I would argue is the the most rapidly growing and the and the most elastic piece of the memory market You've seen a a a a long term trend now to reduction in in, in capacity addition. And a long term trend in the reduction of bits supplied to the marketplace as a result of those capital spends. And, I would argue this doesn't This doesn't reverse. There's not some miracle that's going to happen that's all of a sudden going to change this dynamic. This dynamic is actually continuing, with the same driving forces behind it, as you've seen over over the recent years. And a supply picture that is relatively muted relative to the growth of demand. And again, We'll have some folks come up here later and show you what the demand picture looks like. On the DRAM side, Again, capacity actually coming offline, over the last 4 years. Part of that's, micron fab again But, generally speaking, you've you've seen a a long term trend in terms of supply, to the market from technology migration, continuing to scale down as the process just becomes more difficult. And where we sit now, you know, 2014, it's going to be in the in the low 20s, and the long term trends probably under 20. So we have to wait and and see how that plays out, but you know, generally speaking, these dynamics are in place and they're here to stay for a while. So given all of that, you know, many of you are taking a look at Micron and saying that this is a this is a different company. And If we're really gonna have, a situation where it's not quite as capital intensive, what are you gonna do with all that capital? And and we sort of what's your what's your approach to how you spend it? Well, I wanna I wanna let Ron come up and sort of frame up the situation with LPDA and give you guys a better sense of where we're going. And it may be a good question to ask a little later in the presentation too if you want additional detail, But I think you should think about our thought process on a go forward basis relative to allocation of capital is we've got some debt we need to pay down. It's it's very manageable, but we wanna get that back into a more normal a range. We've got some investments that we want to make prudently in building our system level businesses. Which are very muted in terms of their capital demand compared to what we experienced historically relative to new equipment And then beyond that, you know, we've got we've got money available to return to the shareholders. And and what we've done historically has been, you know, first to go the converts. I think that's something that that, you know, is a strategy that makes good sense for us. But beyond that, you know, there are other ways we can think about about using that capital. And and hopefully it'll be, at least as long as I'm CEO, it will be focused on our shareholders. So I wanna stop there And, obviously, I'll be around, on stage here for quite a while, actually, and available for Q and A as we get some more information out in front of So can I invite, are we gonna bring some chairs up Ivan? Yep. Let's let's see if we can have Mark Adams and Ron Foster come up and join us. And we're gonna go to, I think we're gonna go to Ron Foster next because many of you wanna see what he's got to say about LPDA. Ron, can I give you the clicker? Sure. What do you want me to? Why don't you go, yeah, why don't you go here? I don't I'll sit between you. Okay. We're all set. Good morning. I'm gonna I'm gonna start with a question that, judging from the request we got in the conversations last night, There may not be a whole lot of interest in, but I thought I'd be covered anyway. Let me let me give you a little it's a little hard to see. Let me give you a level perspective on, hang on a second. Let me reorganize things. Let me just have the presenter. So let me give you a little perspective on LP to financials. As you know, we closed the, the transaction, July 31st. Look at the balance sheet. And, there's a couple steps we have to go through. One is we have about complete the, pro form a financials and historical financials for Alpita. That's about a mid October time frame. We're beginning our work on that to get those financials ready to go. We also are started on our purchase accounting activities as of close to figure out what the purchase accounting effects are, for LPDA. But what I do wanna do is give you some perspective as I can on current run rates, I can address, most straightforwardly, those items which are not materially affected by the gap adjustments or the purchase accounting. But I'll also try to give you some perspective on that in a bit. So these are, per quarter run rates first on the the P and L. And so these are examples of their current performance, if you will, not represented necessarily of any particular time frame, but roughly what they're running right now. That's the way to think about it. We still have to do all of our work to get get their financials into our gap statements, but, this gives you a view of it. So on the revenue side, they're running about 1 to $1,100,000,000 per quarter. The cash gross margin, and I'm giving you that one because it's important to our business and, too, because depreciation is harder to calculate, but I'll comment on that in a in a bit. 47 to 53% kind of range in current performance. OpEx is running 11 to 13% on the LP to financials. Currently. And one important thing to keep in mind is that our our total yen based cost structure with the LPDA acquisition with a 1% change, which is approximately a 1 yen change today, we'll move our costs 5 to $7,000,000 a quarter. So that gives you some frame as you're looking at what's happened to the exchange rates going forward to our total cost structure. Obviously, that affects both COGS and OpEx. And the operating cash flow and their current run rates are the range of $500,000,000 to $550,000,000. So, very good performance on the on behalf of Alpida. And you'll you'll hear more about that with some of the following speakers balance sheet, a couple of pieces I can give you, with some degree of accuracy. One, the cash was probably the most accurate estimate I can provide. It's about $1,000,000,000 that we are picking up on the closing balance sheet. The debt is about $1,300,000,000. This is the this is the gap number estimated GAAP number after, our initial $600,000,000 purchase payment, which pays down some of the debt. So, about 1,300,000,000. In terms of purchase accounting, Let me address the elements of that that I can tell you about. As I mentioned, we are just starting our work now, but I'm gonna try to give you some ranging views of that make sure we all understand what it's gonna look like when we report our financials at the end of this fiscal quarter, which ends at the end of August, the end of this fiscal year, for that matter, which ends the end of August. So looking at some key items that are affected by purchase accounting on the left, I'll just walk through them I've got the estimated impact, with each one ranging and then additional comments. So on the inventory side, let me be clear about purchase accounting. So we're all on the same page. We are required to value everything on the balance sheet at fair value, assets, and liabilities. So that's the fundamental requirement is a fair value measurement of everything that that goes on those financial statements. If you look at inventory, it will be booked to fair value for everything that was on the books on the balance sheet as of the date of close. So that means that any value that was in the inventory at that time will flow through our financial statements effectively as 0 gross margin. They have about a 3 to 4 month flow of inventory, so it's going to take 3 to 4 months for that to flow through the books. There's 1 month we'll be reporting the month of August for LPTA. So you can expect the CELP to in the single digit gross margin in terms of what what's reported on their GAAP of effects with purchase accounting. And we expect the flow through of this written up inventory to normalize after Q1, after our fiscal Q1. On the depreciation side, depreciation per quarter It's the most difficult thing to, estimate right now prior to having all of our purchase accounting done. So I've provided a fairly wide range here. It could be between the range of 15,000,000 a quarter of depreciation expense for the acquired LPDA assets, or up to 75,000,000 a quarter. It's affected by the the valuation, the fair value exercise on the PPNE and, obviously, the PPNE relates, to that number And we also have to estimate the depreciation the depreciable life of all the assets, which we estimate will be somewhere between an average 4 6 years. That work is also going on. But to give you a ranging estimate, it's it's somewhere in that range. Taxes. So we also have a significant effect on our taxes, as a result of of NOLs that, net operating loss carry forwards that LPTA has, and, those have to be valued also at fair value. So we will likely have a deferred tax asset, that we will put up on our books for LPTA's NOLs. And because of that, Our GAAP taxes will be running close to their statutory rate of Understood. Close to 30%. But the way to think about taxes is cash taxes, Elpitas will be running with significantly lower low single digit tax rates for some time, because of the the, NOLs. And to give you another benchmark there in the comment section, Micron's total cash taxes we estimate for fiscal year 14 to be in the range of $20,000,000 to $40,000,000 for the year. So we have a very efficient tax structure and LP that comes in with a nice, NOL structure, but the GAAP number will be higher because of the DTA we will put up in purchase accounting. In terms of acquisition intangibles and goodwill, any impacts here will be minimal, not material to to the discussion as near as we can tell. And just to summarize the debt situation, the face value of debt that's on the closing balance sheet for LPDA it includes the initial payment of $600,000,000 that we will pay down with our initial purchase price in October. So it will be in our or year end close numbers. Future installment payments of $1,400,000,000. These are the scheduled payments, for the, for the LPED acquisition and other acquired debt from LPED and Rexchip of about $300,000,000. So it's about $2,300,000,000 600,000,000 of it will be paid with our closing acquisition purchase. And, of that 2,300,000,000 the the book value or GAAP value, but it's gonna be about 1.9. And that the reason for that is the future installment payments of $1,400,000,000 the book value will be about a 1,000,000,000. And the reason is that they're at 0 interest. So we impute interest at our at our weighted weighted debt, cost of debt capital rate. And that flows through in GAAP interest expense, which shows on here we're estimating it'll be about 15 to 25,000,000 per quarter but less than 5,000,000 of that has really cash taxes. It'll be imputed interest from our purchase accounting, just so you understand that. For total Micron, we already report about $28,000,000 of of, of noncash interest related to our converts. So when you look at our interest expense line, you're gonna have the vast majority of our interest expense is actually noncash. In terms of gain on acquisition, we have to go through all our purchase accounting work to figure this out. But a number of circumstances have changed since our, our, last published pro form a financials on LPDA back in February. When we did our financing. Obviously, the business is performing better. FX rates have moved significantly favorably for us and LPDA has significantly more cash on their balance sheet, as you saw, a $1,000,000,000. When you add all that up, we have to go back and reassess if there's a gain on the purchase If if there is a gain, it will be a one time one nonoperating gain in our fiscal fourth quarter that we're currently in. More to come on that on earnings release, which will be in early October. We'll obviously break all this out for you and give you the proper pro form a so you can understand the flow of the business. So in in terms acquisition, what's our, long term capital structure and financing strategy, and and do we need to raise capital? Let me first address capital requirements as a important variable, obviously, when you're thinking about capital structure. This graph shows, CapEx dollars per wafer out per year on the dark blue line. And the dotted line is just the trend line of the, dark blue line. So that's the CapEx dollars per wafer out. The bar behind there is our average wafer capacity per calendar year. And, obviously, we've been increasing our wafer capacity. As you can see over time, but you can also see also see on the blue line that our our dollars per wafer out of CapEx has been declining over the last decade. And the peaks that show here in our history were when we were building out new greenfield capacity in in NAND flash at, IIM Flash Technologies in Utah, and I'm Flash Singapore. So if you take that out, the CapEx run rates are are fundamentally lower. And as Mark already commented, we don't have any plans for capacity expansion, and you can see the trend line going significantly lower in calendar year 13, As you may recall in our last earnings, conference call, I commented that we were deferring out some capital out of fiscal year 13, in anticipation of the integration with LPDA. So we're actually projecting to come in just below the bottom end of our guidance at about 1,500,000,000 of cap and fiscal 13. Some of that slipping into fiscal 14. And you can see, on the line on the curve here that we expect the capital intensity to be in the same general range of as we've been running in in recent years. So we're guiding our 2014 CapEx to be about 2.6 to three $200,000,000 in fiscal year 14. Now let me turn to capital structure. Now that you see the view of sort of what our capital requirements are, comment on three areas. First liquidity, and, then debt management and debt to capital ratio. Our fiscal third quarter, closed for Micron, we report about $29,900,000,000 in cash. For your information, this excludes about $400,000,000 and undrawn revolvers that are available to us if we need the liquidity. But that's our starting point pre close. We are targeting to keep a a a near term cash balance, comfortably exceeding $2,000,000,000 as we go through our integration, of LPTA over the next year and a half or so. So that's a the range we we have planned to stay in. And on debt management, we are, always focusing on a staggering debt maturities and, avoiding any, large maturities as we go through there. And on debt to capital, we're targeting a 20 to 25% capital range, we were 31% in the, in the third quarter, and we are gonna be in the mid to high thirties as we bring in the debt I just showed you from LPDA. But commenting on each one of these, on the liquidity side, there's been no adverse impact on our liquidity of the LP LPDA acquisition. We received about a $1,000,000,000 on the balance sheet of cash and the purchase price of LPDA plus WEXGIP was about a $1,000,000,000. So net neutral on that. In terms of debt management, there's been no there's no adverse impact on our debt structure over time because we've staggered the payments, the 0 interest payments over the next 6 years. So we, we're a $1,000,000,000 per year amortization or less in in less than most years as you look at our debt maturities. And on debt to capital, there will be a short term increase at the mid to high thirties as we bring that debt on But we are expecting given our, current performance and our debt amortization schedule that we will be back to our target range within 2 years. So to answer the the the last question, any plans to raise capital it is it is clear from our perspective given the current status of our integrated balance sheet. The business performance that we're, in good shape and there's no need to raise any significant amounts of new capital. And we have no plans to do so. We will continue as we always do to, engage in asset backed financing as we amortize off our existing back financing and roll into new ones. So that will continue. And, as Mark commented in his early comments, just to summarize, as we go forward in terms of our, capital structure planning and and use of cash, our our first priority will be, deleveraging the balance sheet, debt repayment, the second priority will be managing our dilution, most notably with our convertible bonds. So with that, I'll turn it over to Mark. The first question I wanted to address this morning was around the integration how do we navigate that and more specifically around technology transitions? I'm not gonna get into a lot of detail on the technology roadmaps. I'm gonna leave that to Scott, but You know, when you think about technology and the LPDA business case, for us way back at the beginning of the process, You know, Micron portfolio at the time, a a rough run rate, about $88,500,000,000 was very similar to our largest competitor at the time, was probably the range of twice as big as this, with twice an R and D budget. You know, with the Alpida acquisition, on the DRAM side, we've now got an integrated team that Scott will discuss, able to advance us further and and at a faster pace than the 25 nanometer volume manufacturing. As well as accelerate our development of 20 nanometer technology. So on the technology side, integration is pretty strong. One thing we don't talk a lot about in terms of, you know, beyond the the economics beyond the technologies, you know, over an 18 month process, on the integration side, we've got to know these people fairly well. And it's a group good group. It's a solid organization of people. And talent, and we're excited to have this team on our onboard at Micron. When you look at R&D specifically, you've got a court group, that is right inside of their Hiroshima facility on the DRAM side, as well as pockets of engineering around the globe. Around Wrexchip. And so from a R and D perspective, a very solid integrated approach for us in DRAM, and we're pretty pleased there. From a manufacturing perspective, it actually aligns pretty well with our overall manufacturing network. If you think of some of our announcements in the last year, you've got now Singapore position as a nonvolatile geographic location for us in manufacturing. You've got Taiwan, in terms of high volume compute and some mobile in Taiwan. You've got high volume mobile in Hiroshima. So our network is pretty trued up integrated pretty well into Micron as well. On the BU structure, if you think about Micron's current structure on BU, you've got a DRAM business, a NAND business. You've got a wireless business, and you've got an embedded business. Well, the best way to think about how that will fold into Micron is to think about a mobile business, integrating and merged in with Micron's mobile business, and and Mike Raefa will be up shortly to talk about the scale and and the opportunity there, but you've got a pretty sizable business for us, of of LP that's folding their business unit into Micron's mobile business for the new mobile Wsg Group at Micron. And the compute business, at, LPIDA will fold nicely under the BU structure that Brian Shirley runs under DSG. From a back end perspective, LPTA, Akita, with a a pretty strong packaging group that's supporting the mobile mobile portfolio, and that will continue to do so under the supply chain and operations and packaging group that we have in Micron that works under Brian Shields. So I think the message here is that their organization fits pretty well into Micron. And the timing that we've had, yeah, it was a longer process. But the timing of integration allowed us to get a much further head start on on what it will take day 1 to bring these 2 companies together. We're pretty we're pretty optimistic there. And lastly, I'll just comment on the customer side. LP business was primarily mobile and computing. On top of that, what we know is it was a pretty cost relative to Micron business, a pretty concentrated set of business, We do all we do business with all their customers. And the overwhelming support there from the customer base has been very positive. From an account standpoint, We're just going through the process of identifying where the relationships are stronger and how we'll serve the customer. But, again, we've been, gotten a lot support from our customers on this and feel pretty good. So the net of the integration discussion is we're pretty excited about it and pretty comfortable that the preparation in the last 18 months has positioned us well for smooth integration. Next question was around, Current supply and demand environment, both DRAM and NAND. I'll start off with NAND. You can see the numbers over over over the cycle here over the last about 5 years or so. And you can see what the industry is, forecasting somewhere in the, you know, mid to low forties. Mike Ron is going to grow slightly more with more slightly above the industry growth projections for, 14 And a lot of that has to do with what we announced in our last earnings call with the, conversion in Singapore. And quite frankly, you know, we see a pretty robust demand picture to support this. Primary categories of growth demand, obviously, are SFDs both in the client side and the enterprise side as well as mobile DRAM. We're also seeing strong growth in in smaller categories, but but higher value categories, things like automotive, good business for us, a very strong business in terms of market share, and starting to use both DRAM and NAND. In this case, the growth for the end market is pretty good. Tablets is strong. So, we remain very bullish on NAND, and we think the supply balance on NAND and DRAM are pretty sorry, NAND supply and demand are pretty, pretty well aligned, as best we can see. On the DRAM side, again, lower bit growth, and you can see the trend, and we're looking at a kind of low 20% range on the bit growth. And we're going to be slightly below that, obviously, with conversion in Singapore. But interestingly enough, we think we think the balance still remains pretty strong here. You can see some, diversification of the application market. If you go back to 2006, you see how significant the growth rates were in terms of PC and what have you. Now you've got areas like server and even mobile DRAM that are driving, not only growth, but as Mark talked about in his opening, differentiation for us and and how we go to market with package solutions that get us away from the commodity business and more of a unique customer engagement model where we're delivering products that are proprietary to their own platforms. And that's kind of where we want to take this business over the last 3 to 5 years. There's been a couple different ways we've talked about. Cash intensity in the business. And I just wanted to talk about it relative to sales and kind of history, in the business. And If you look back over time, Ron alluded to it back in the 7, as far as the, flash manufacturing and and our engines into flash and what that did to this ratio, of CapEx versus sales. And for all the reasons Mark talked about in terms of lithography and maturing the business and evolving to more of a systems play with less capital intensive investments, as well as, let's not forget, over the last 18 months, we've increased our total capacity roughly 90 percent of all existing capacity that was in the industry at phenomenal economic value. And when you look at that, that takes our, our ratio here. It makes it in a world class relative to our competitors in any greenfield analysis you want to do we came out very strong in terms of our capacity profile. So we continue to look for opportunities to do that in the past. But as Mark mentioned, going forward, It's more about enabling this technology, into a more of a solutions orientation and differentiating our products within the segments we serve. So with that, I was gonna hand it back, to Mark, to Brookfield, one broader question on yep. So you know, I I think I think the question is, okay. So what would change all of that? When when would Micron step back and say, Hey, you know what? This market looks pretty good and there's robust demand. And, let's go ahead and make some significant investments in order to grow our overall profitability. And I think you should think of us as as reasonable rational business people. Hopefully, we've we've demonstrated that, over the last number of years. And and our approach is is really, pretty simple. We need to have good visibility over the life cycle. I'm not gonna give you a gross margin number because that's that's not the answer. The answer is we need to have good visibility that if we invest, in capital. You know, that that is then, water on the bridge, so to speak. And we need to make sure that that we're gonna get the return over the useful life of that equipment, which is growing. And I have to have good visibility that I'm gonna get, a return on that invested capital that significantly in in excess of my whack, my weighted average cost, a capital, because There's there's there's uncertainty, first of all. And secondly, just putting that additional capacity is gonna impact all my existing assets. So when I go and put, when I look at a new investment, I gotta have certainty of the return to to some level. And I've gotta have a a a return on invested capital analysis that says Not only is is this incremental investment, positive, to me from an economic profit perspective, but also it's significantly well above that threshold that that I have confidence I'm not disrupting the rest of the assets I have working for me and for our shareholders in the marketplace. And so it's a very high hurdle, that that, that we have to get over. You know, what are the things come into you know, our decision making process. And in particular, would we ever, you know, look at the business more carefully in terms of the supply and demand balance and actually, take capacity offline if the market warranted it, or, or, run our, run our manufacturing plants a little bit, leaner. Optimized in a different way. Well, of course, you know, our job here, on a go forward basis, we have the manufacturing scale, we need our job on a go forward basis is to, you know, deliver value added solutions to our customers. We don't wanna be the the biggest memory company. We've got the scale we need. We wanna be the best memory company. And that means thinking about our assets and our, and our, whatever kind of asset that might be in a, in a fundamentally different way. And that's how we intend to approach the business on a go forward basis. So I think at at this point, we want to stop and, and, take some questions because we've covered a lot of ground. And I'm sure, in particular, you've got questions for for Mark and Ron, but I'm happy to answer any as well. And we'll get a couple of shots at this as we go through the day. But, Ivan will pass the mic and and you can address them to any of us or throw it out there, and I'll try and direct the question. Thanks. David Wong Wells Fargo. Two questions. I get the primarily wrong question. The first one is you're coming in with a great asset purchase, but then you have to put in CapEx to upgrade capacity and so on. Does your cost per bit actually rise over the next few years because you're coming from a lower base and then you're having to invest. And the second question, I think, Mark, you talked about extending life of equipment. So does your depreciation cycle stretch out because you're you expect to stay on nerves for long time. So let me give you a high level answer, and then maybe Ron wants to jump in with some more specifics. But, absolutely, we are looking at what's the useful life of our of of all the various components, of our business. And and, that could stretch over time. I think that that fits with the with the discussion, I gave you earlier. In the short term, will our depreciation load on the LP to ask sets go up. Absolutely. You know, there there's a there's a a, there's a high likelihood that as we continue to upgrade that equipment. The the depreciation load will increase. We'll have to wait and see what the what the purchase price accounting sort out as, but that, noncash expense will likely go up a little bit. In terms of the overall cost per bit. Is that gonna go up? No. I I I I don't foresee that happening given the ongoing muted rate of technology expansion or or or change, as as as well as the ongoing depreciation of the existing assets. But Ron want to add anything on? I I think you covered it pretty well, but, obviously, we're getting, we have to complete our purchase accounting, but we believe we'll a a pretty low PP and E value. In fact, the numbers I showed you, the high end of that depreciation range is roughly the PP and E value that we used back in February, it's going to be at or below that kind of number in terms of PP and E. We think we have to go through the work. So the depreciation on the existing assets will be pretty low. As Mark mentioned, we gotta layer in CapEx as we migrate, but that is why I showed you that capital intensity graph, and it's not fundamentally changing as we go forward. It's more akin to our normal technology node migrations, we just have more capacity, that we acquired at a very low base cost in terms of the depreciation. So the cost per bit should be declining, both for the reason I showed you of the trend over the last decade as well as the, the, well priced asset we've we brought in and our and our plans to convert, which are, as Markman, They're pretty well architected already because we've been working on this for a while. We've been working with them for quite a few months. We have a a fairly good view of that road map and what it takes to do the conversions, both on the technology side as well as the equipment side and the fabs. The team's done a a great job. So we see a pretty consistent trend, and that's why we're communicating that message in terms of, cost of CapEx per wafer trend lines continuing on the on the trend that we've done been doing historically and in the recent past and a low cost bid acquisition, as base depreciation and then adding in capital on top of that. So that should do nothing but help our cost per bit. Hi, Mark and Ron. Just a quick question. This region is turn AG. When you look at, the whole CapEx for next year, How's your how do you specifically Nandan, DRAM? Mark, do you wanna do you wanna take that one? On the CapEx, man, DRAM CapEx? You know, we were we're locking in our plans for, our fiscal year 14 as we speak here. My suspicion is it's probably in the 2 thirds of 2 thirds of that spend will be on, DRAM conversion and I think closer to 1 third will be in the NAND conversions as best we see right now. Right. And and just the just the housekeeping in the 1.1.1.1 1,000,000,000 that you gave for L. Peter, is that the May quarter or the July quarter? You mean the 1,100,000,000 I mentioned? Yeah. PPD. That was the that was the the base PPD e value that we've produced in February when we rolled out the first set of financial statements for LPDA. Got it, but thank you. It will, yeah, it will actually grow the revenue. Yeah. That and what I'm saying is that that it will be at that number or or likely lower, given the depreciation scale I showed you of 15 to 75,000,000 a quarter. 75 would be more towards that end. 15, obviously, a lot lower. Revenue? Yes, ma'am. Revenue. Oh, I'm sorry. Well, the rev the revenue you showed on the current run rate. Oh, I'm sorry. I thought you were talking about the the comment I made about, PP and E. I apologize. So that is that is roughly the current range they're running. We haven't done their historical pro formas, and we also aren't giving you a forecast. But I'm just saying if you look at recent months, that's about what they're running. Got it. Okay. And if you go back to the NAND and DRAM forecast that you gave, any any thoughts on how you see mobile DRAM within that? How do you see that? Growing next vehicle industry or for a for a period? I'm not letting Mike answer that because it's, it's just playing out as we speak for kind of fourteen numbers? The the spending, let me start again. The CapEx projection you provided, does that include some of the, catch up CapEx associated with LP Direct chip that were highlighted in the February filing, or is that a separate, spending item? The, the range that Ron gave you is an all in number. That's what we expect to spend in in fiscal 2013 2014. That's, sorry, in fiscal 2014 for Micron and LPDA. So that includes some deferrals out of 13. As I mentioned, we actually came in below our guidance for 13, and and everything we're planning to do on on 14 to get the conversions done in the in the in that year. Thanks for taking the question. Jim Schneider from Goldman Sachs. Just one question. First of all, on the capacity transition you talked about from at the tech from DRAM to NAND. Can you tell us, over roughly what time that's going to be completed. In other words, if we look out into into Q1, Q2 of next year, do you expect that to transition to be complete? And then I guess the the second question is, as you look at the rest of the factory network, are there other places like the NASA or or elsewhere where you could contemplate some future transitions, either way. Yeah. So, first of all, relative to the tech transition, that's that's obviously something that we're gonna continue to monitor and dial with market conditions. We could complete that as quickly as late this calendar year if we so chose to. But we're gonna we're gonna reserve the right to change and modify that as we move through time. But still heading in that in that general direction of a of a complete conversion or almost complete conversion at some point in the future. That's how we get the the best capital asset utilization Relative, so would we go and do that, one way or the other, at some point in the future? I think absolutely that is a a possibility for us. I'll say also that, you know, even relative to compute DRAM and mobile DRAM, there are some slight differences in in how we align our capacity. And we're we're, we are planning to to have flexibility in our network to dial that to optimize, for market conditions as well. Because as you know, when you've got you know, the the growth that we've seen in low power DRAM relative to what's going on in in in the PC segment. We make sure we get that balance appropriate. But, you know, for the longer term stuff, yes, I can see, depending on how the markets play out, the that we might wanna move capacity, one way or the other. And, my my my guess would be that's more likely that we would move more to NAND versus DRAM over the long haul, but we don't have any plans to do that today. We think, we're getting an in about the right spot with the move we've got in in play, and we'll take a look at it and see how it plays out. Thanks for taking my question. You maybe talk about what are the DRAM pricing trends you're seeing in the market and if you could address both like PC DRAM side of the market and mobile DRAM side of the market? Sorry. I didn't hear the second half of the both in the PC DRAM side and the mobile DRAM side? Sure. So, there's been a little softening in in the DRAM market, but we think that's pretty contained to just excess capacity from some of the Tier 2 players in the business who are looking at this to generate some cash and you know, get through a technology process or liquidation process of their inventory. We don't see that. And by the way, our exposure in the spot market, which I'm referring to is pretty light. Our OEM contract pricing has remained pretty strong and stable. We haven't seen any pressure on that. So we feel pretty strong about our own performance in that. And then we think there's just a little noise in the system. We don't think there's a lot of volume driving this. Of course, If there's small volume out there, that's the current price of the day. So so we're not, at this point, we're not overly concerned this is a trend. We think this is more of some inventory movement through the flow in the summertime here. As far as PC and mobile, mobile, of course, was pretty strong for most of our fiscal year, and had a pretty sizable gap between where the PC business and mobile was. Mobile then has been relatively stable during the second half of our fiscal year, and yet PC has improved dramatically. And I think part of that is because a lot of folks looked at the opportunity and directed some capacity towards mobile, and there's been some pretty good evening out of the capacity. And of course, the PC business, which on the demand side has been, you know, flat to less than flat. The alignment of supply and demand has been pretty good, and then the pricing improves. It's Natalie in Leeds for Glen Young City. Can you sort of describe in more detail, what's your end market exposure before and after Alpida? And then the follow-up is, also on price seeing. What is your sense of the overall pricing volatility, after that industry change? Something that have a slide a little bit later in the presentation to address your first question as far as market exposure. When you think about PETA, as I mentioned in my earlier comments, primarily think of Alpida as a mobile business and roughly around 2 thirds mobile And if you think about, the rest of that was it was kind of, commodity, PC computing business. And that's the opportunity for us, which is pretty exciting. We have the opportunity to take some of that capacity and drive it into Micron's profile, which I will show here shortly on the different segmentation. So when you when you ask about exposure, we're inheriting a business that was mobile and computing, and we're gonna have the opportunity to take some of that capacity and put it into some of these segments that we are market leaders in, you know, the the the server, the networking, automotive, and those types. So We're pretty positive there's good value there for us long term in our transition there. The second question was It goes around pricing trends, wasn't it? Overall pricing trends? You know, you know, as I mentioned in the last question here, you know, there's been a little softness on on NAND DRAM. And, we think that's just kind of, again, a low volume stuff that's out in the spot market, which we're not very exposed to at the company. And on the on the NAND side, It's actually interesting. On the higher density NAND side, it's pretty tight. And that's going into the, client SSDs and the enterprise SSDs We've seen some softening on the lower density products that go into cars and USB stuff and, even some of the feature phone business. But again, as an overall in NAND, very pleased with where it is today, and we continue to be pretty tight for us given that a lot of our capacities in the better segments, higher density segments. Unfortunately, we're we're we're gonna go ahead and stop the Q and A there. There will be more Q and A, though, later on. Hold on to your question. Now there's still some more. And, we're gonna bring up the the other presenters now. Hang up. Did you come back? Oh, no. Yeah. Okay. Yep. Okay. Alright. So so maybe before we kick off, I introduce, Brian Shirley here from our DRAM Solutions group Scott De Boire runs our technology development and, Mike Rayfield from the wireless products group. Okay. So I'm gonna start off and and Mark Mark has, has covered a lot of this, very well already on the the synergy. And the first question is around the benefits of LPDA from, an RDA technology development overall point of view. Certainly, the the big message is around around scale. The the the two pieces that I would add to some of the things that have already been said today are really around our, combination of Micron's previous expertise in mobile technology and low power tech sorry, Alpeda's previous expertise in mobile technology and low power technology. And the combination with, you know, the the inherent, high quality products we have right now on the on the server side And when when we put those two things together, the the combination really makes us into a a very strong technology company on on the DRAM side. And a piece of of the DRAM strategy that's fit together very well for us, over over this period of time is Micron's previous strategy, and I've I've talked to that, at previous meetings, really was to go straight to the 20 nanometer node. And and we've had our R and D resources focused very strongly on the 20 nanometer node over the last two and a half years, preparing for a, you know, a a strong position on that node. During that same period of time, LP had all of their technology resources primarily focused on a 25 nanometer node, which which is now positioned, and starting to ramp. So the synergy of of how the development was done even pre close has has been really good, and it's it's fed into something that's gonna put us in a strong position from a DRAM point of view. Mark, Mark and Mark talked about, technology slowing. The the scale and the resources we're bringing in through this acquisition really position us to to deal with a a, a difficult technology scaling path on DRAM and a and a highly complex road map going forward to support the whole product base. Okay. The the the second question here is around what what we think our Our road map position is, across all of our products. And and some of this has been alluded to, the the 25 nanometer technology, which is is, now yielding well and ramping, in Hiroshima and Rex Chip is the current, leading edge production on DRAM for us In the second half of of 2014, we'll be we'll be introducing the the 20 nanometer node, which will be a a joint product where we where we align our technology roadmaps, between previous LPDA and Micron. So we we come together with one technology. I'm gonna talk quite a bit of detail about NAND. I have a couple of flies on this. I know there's a lot of interest in where we're at on NAND technology. I'll just say right now, our leading technology that that we announced about a week ago, is on 16 nanometer. We view this as, the most cost effective, NAND technology in the world right now. And and we're very pleased with where that positions us both from a cost per bit point of view and also from a performance point of view over the next year. Our 3 d NAND, this is this is a big topic right now. Our technology on 3 d NAND, this is a a a 256 gig density that we're gonna be sampling in the first quarter of 2014. This technology and the mixture of how it comes in relative to our 16 nanometer technology is is part of the story that that that I'll be explaining to you today. But because of the strength in our planar NAND, we, we really can be very critical of where we introduce 3 d NAND and make sure it comes in at a cost and a performance point of view, that that continues our industry leading finance technology position. And across our other technology, right now we have we have a solid position in NOR and in PCM with with a 45 nanometer product. And then we're in development on a on a 20 nanometer node for PCM that'll that'll roll out, probably in 2015 time time frame. Okay. So now I'll go into some details really on the on our view of what what what 3 d NAND means, to the industry. And then explain the strategy that we have for NAND technology that that I think puts us in a position to to be the leader in technology and performance through this decision that was unique in the industry to to change the NAND cell and to position it for a high performance, process technology that would scale rapidly and with and with good cost structure, to the 16 nanometer node. And part of our strategy that's playing out right now is that this 16 nanometer node is going to be the most cost effective technology in the market, in volume ramping up right now and in volume through 2014. One of the big pieces about our differentiated planar technology is really the CapEx per wafer for this conversion, the structure. This is, I believe, unique in the industry from from, things that have been put out. We really positioned our 16 nanometer node to be exceptionally low in CapEx for this transition, relative to all of our previous nodes. So this this, this technology that enables it and this cost structure are something that we're very proud of and things put us in a very strong position over the next year. The other thing to look at on this graph, which tells part of the 3 d NAND story sorry. I know you can't see past me. That tells part of the 3 d NAND story is the CapEx relative to transition a planar node to a a 3 d NAND node. And it and it tells you part of the story around how you make the decision on 3 d NAND relative to cost structure, number of wafers you get out of the fab and and biff for wafer. And I'll I'll talk about that in more detail in the next slide. So this is this is our nonvolatile strategy. As we as we focus on 15 nanometer, as I've discussed, maturing right now. We have 3 d NAND technology. We've made a business decision that the right time to come in is that is that a cost per bit point of view where it makes financial sense. When you weigh the capital cost transition, the the number of of wafers you get out of a given fab on three d versus, plainer nand in the performance, which we we believe we have the highest performance 3 in NAND solution available right now. We understand that the right strategy is to run Planner NAND through, big part of 2014 and introduce this and then ramp it up over a a probably a a significant period of time, as Mark mentioned earlier, rather than a rapid switch to 3 d NAND overall. Beyond that, we have a scaling path already well down the down the road on scaling to a higher density of vertical NAND. We believe this technology is is the position for, for for bulk storage. It won't be touched by any other technology in our view. For that SSD application. And I'll talk a little bit about that on the next slide. We have a lot of focus on emerging memory for higher performance applications, at a cost point, not quite to the to the NAND space, but significantly better than the DRAM space. We have major partnerships with with, strong partners, and we're putting a lot of focus on this next memory technology. But we we believe these 2 things co exist going forward in the future. Okay. So then the the last topic here is around our emerging memory strategy. So when we when we look at across the, you know, we've shown the stoplight chart in the past of of all the memory technologies that that exist in this space. And we've spent a lot of time understanding with our partners, with our global infrastructure, what the best technologies are that actually fit into good memory applications in the future. And and we've really we've really narrowed it down to a few key partnerships and a key few key technology. What this graph shows really is the the performance and the density, between the different types of these memories that we're focused on on this page. If you look at at the far left and the far right, it it shows our belief that that the DRAM space really can't be touched, from a pure speed point of view into the future, relative to these other memory technologies. And then and the far right of this is that NAND goes on, and we believe in our scaling path for NAND technology to maintain a position that really can't be touched by any other technology for that piece of the application. The middle part, which sits in between the two in performance and density, is where we're putting a lot of focus on on new memory technology, on 3 d memory technology. And we believe that a a space for the future of of that really enable some new kinds of memory system technology and new kinds of of applications. One thing to highlight here, because we've talked about PCM, Micron has a lot in the past. And we you know, PCM is the only emerging memory that actually emerged. You know, we've it it works. We have we have products on it, but it isn't our primary focus going forward. As as as it is something working on, but we believe TCM is a platform that we've gone through to enable system products to really understand the technology requirements of a new memory. And we think that just having the platform of PCM has has moved us into a pretty strong position as we look at all these other kinds of memory technology and evaluate which ones are gonna Okay. So that's the technology section. I don't know if we're doing questions on this right now or if we're going through all three of us. K. Scott, just be clear on you you said your 16 nanometer, process technology. You think it'll be the lowest cost. Is that for the segment you're targeting? You mean high high performance? Now we're even for compared to 3 bit per cell. We well, the 16 the 16 nanometer inherently can be MLC, SLC, or 3 bit per cell. So it's a technology platform. We we believe that that technology node of 16 nanometer, given the the the cost structure and the the bits per wafer will be the leading at at each of those segments. Quick question. How far, how much development do you think you need for going to, you know, somewhere in the low teens beyond 16 nanometer in terms of development or capital thing that you might say, maybe it's easier for me to switch to 3 d, or do you think that you know, Planer has still some more legs to go, you know, before you start to see, you know, 3 d starting to happen? Right now, the last products that we're developing on a planar roadmap are at 16. And from a pure technology assessment point of view, there's a a capability cost and performance, overall performance trade off. We really think 16 nanometer is is the last node that that makes fundamental sense before the transition to to three d, but it's physically possible to build something smaller than than 16. Scott, hi. It's John Pitzer with Credit Suisse. A lot of us is focused on 3 d from a manufacturing yield ability standpoint. I'm kinda curious if you can give us some insights on the ecosystem around 3 d NAND specifically on the controller side because clearly, as we think about how quickly, 3 d NAND can ramp into the supply environment. Controllers are gonna be pretty critical around that. And I've gotten mixed views when I've talked to people. So Is there stable controller technology out there? Is that going to gate or or slow down the adoption? Sure. NAND and 3 d NAND in the marketplace would be helpful. You know, Jason, if you can yeah. Thanks. Brian Shirley here. I'm gonna go ahead and field that one, you know, both in, in NAND DRAM, we do see an increasing use of controllers coming both for the interfaces as well as what we would call the media management. And and as we bring 3 d into, into production, both in SSDs and mobile, as well as as we bring new DRAM technologies into production, I think you're gonna see areas where really understanding the physics and getting some layer of logic management of that memory, taken care of really is critical. And, frankly, to do that well, you have to be the memory company that understands the physics as well as the fabrication behind it. But, yes, that will be a, a, a, a piece of the game going forward. Srini Sundarajan from Summit Research. The question that I have is on on 39. What will you be doing to make it more, ROI friendly in the next 2 years for 39. So from from the the point of view of what the the cost structure is of 3 d NAND. We're we're targeting a position and, and, you know, our our belief is that it has to be above 30 tiers for it to be cost effective relative to, especially to our Planner NAND solution. But when you when you look at the overall cost structure of 3 d man, you get You you you get to a scaling point where you get a lot of bit density in increase per wafer. And you the the financials of it are you you offset the extra cost of capital and the, you know, what we call wafer trade ratio, which which is the special as you scale, can be anywhere from 1.5to2.0on number of planar wafers you could get out of the same space as you get out of a out of a 3 d NAND process flow. But Certainly, the bit density increase trade off there gets you to where the ROI on it is is very positive. Yes. Do you have any packaging synergies between what you do in mobile DRAM, speeder, and what you have in house with NAND flash either different types of packages or things relating to EMMC for smartphones and tablets? One of the one of the big strengths of LPDIS technology, especially in the mobile area, is is their packaging technology. And it's it's definitely a a a synergy that that we're really happy with. I think that like all the parts of of R And D right now, there's a definitely a a blend of technology expertise. It's gonna make it stronger both on the NAND side and the DRAM side. And, just a, I think, a really good situation for us in the technology side, through the combination. Let me let me re add a little something there. The, you know, clearly, for the types of products we wanna deliver to our customers going forward, you know, state of the art packaging technology is key enabler. We're very happy to, as, as Scott said, to have some of the expertise and capability that came with LPDA, imported into our into our bag of tricks, so to speak, But but you will see that, as we move forward and as we probably spend less money on on advanced capital for a bit square into silicon, you'll also see investment that goes to facilitate both system level solutions and advanced packaging let's demand it all in the applications which are linked for the future. Thank you. And one follow-up question. Scott, did you say that you're going to sample 3 d NAND q1014. Calendar. Calendar Q1. Calendar. Okay. And then on DRAM, if you're gonna be migrating to 20 nanometer next year, then what would it happen to technology roadmap beyond 2020 to follow-up on that? Would you need EUV to migrate below to 20 and how does the cost benefit change? Sure. On there is a note below 20 that we're working on right now. It doesn't absolutely require EUV. It it it and some of our other technologies benefit from EUV above a certain cost point on on the EV infrastructure. So when the when the when the wafer per hour of of an EV tool gets to a a certain point It's not necessarily for us a technology enabler, but it's absolutely from a cost point of view, the the right thing to do. But if you EUV is not available with double or patterning have an adverse impact on the cost structure? No. If well, if you if by by default, if EUV comes out and can run a 150 wafers an hour. It will be a benefit to our cost structure. Our our plans right now don't assume that EV is gonna be available for 20 nanometer or the whatever the 1 x nanometer node is on DRAM. So the other piece of that is our fab our the infrastructure in our fabs is is facilitated for double and triple patterning already. So Those things are built into our DRAM and our NAND fab now, and and they're already part of our our cost structure. There would be other types of cost savings to offset the increased capital intensity of double triple piloting? So in in in my view, at least, the the cost of for us with the technology we use of double and triple patterning is is, is sometimes over emphasized in in the in the press. I I think we have a very cost effective methodology for doing double patterning, and, it's, you know, it's been a mass production for us in especially on the NAND side for for ever since the 50 nanometer direction. So we're very experienced with it. The tool sets are very mature, and it's it's Now he he's the thing with the hurdle to get over to be cost effective, not not necessarily double pattern. The the different Nanman factors are all taking different strategies for the timing of 3 d relative to plane of that migration, which is the more important driver for each of the competitors? Is it their planar technology running out of gas, or is it their 3 d technology being superior? I think a big piece of it is is really the quality of the planar technology. And and in in the end, that, you know, the timing for real volume manufacturing on three d for for the competitors may may look very similar. The the front end of this may look different because of the timing of or the the quality of the planar NAND technology. But, certainly, if you if you have a strong position in planar NAND technology and your performance is, meeting a the spectrum of needs for your highest performance product, then the cost structure of Planer NAND is is superior through the next year. Let let me add a little on this on this 3 d NAND topic. You know, well, we've said we're gonna sample early in in 2014. And and others are talking about sampling at different points as as Scott has already pointed out potentially for different applications. We don't believe that there's any significant impact on the NAND marketplace from 3 d NAND in 2014 owl. We think it's a much slower boil in terms of of when this becomes a volume manufacturing technology. But but but There there are there is socket enablement and work to be done with the customers to smooth the way, and that's why, that's why you see the sampling earlier in the Okay. Talk a little bit about, the mobile business. So, the way I wanna talk about it is, you know, it was 5 years ago or so we started talking about our, our phones becoming computers, and there were doubters. They just assumed that they were sort of high end calling devices. They had become computers. There's really no argument both from our processing capability and, and and what we try to go off and do with them. You know, the the diagram here a couple of years ago would have shown servers and workstations and maybe some laptops tied to the cloud to do processing. If you just take a look at some of the things we do with these mobile devices now. A couple of years ago, somebody came up with the idea of we'll upload a bunch of photos to the web it'll go off and get crunched on a big machine, and you'll come back with a panorama, panoramic picture. Right now, we do that on our smartphones. We just go across like this. We get, you know, beautiful panoramic pictures, a huge amount of processing necessary, a huge amount of memory necessary. Got a bunch of frame buffers in there. A whole bunch of, crunching going on. And, ultimately, that that's what is opened up this whole, category we call mobile computer. And as we talked about this last night at dinner, a bunch of you said, yeah, yeah, but that's only the high end devices. And the high end devices are slowing. Well, so, earlier this week, a bunch of you probably follow Xiaomi in, in China, the, little, smartphone startup that did $2,000,000,000 in the first half of this year. They just introduced a $130 phone. It's called the red rice. It's a quad core 720 p phone, 4 point inch display, 4.7 inch display, 1 gigabyte of memory, and 4 gigabytes of, of NAND, that's the new definition of low end phone. So all these models that talked about low end phones and smartphones having a quarter or a half a gigabyte at $130. That's squarely in the middle of the low end phone smartphone category And it belongs right here with these devices in terms of its processing capability and where it goes. When we talk about what part of the market's growing, The market in terms of its capabilities is crunching together pretty significantly. And I think, the other thing that we've seen is this architecture that is called smartphones is really the 1st instantiation of mobile computing. It goes everywhere. If you look into what's in your car entertainment system, what's in the back of your television, what's in your tablets, what's moving into ultrathin, it's architecturally all the same. And what that means is that this little, smartphone opportunity of a billion units is really just the tip of the spear on what mobile computing And we'll see it grow into an amazing amount of applications, some of which we'll talk about here, and some of which we probably can't even imagine. So it really does tie our lifestyle together. I watch all of you folks operating these things all the time, and, it is where we share data. It's where we have amazing amount of applications running in the background and where we go off and actually edit data, which is something people didn't think we'd go off and do. So there's a whole bunch of forces driving this computer and what it's capable of doing as well as the amount of memory you need. So the first piece is we talked about All of these mobile devices are architecturally about the same. And if you've got a tablet and a smartphone and you do one application on that tablet, you wanna make sure that that same application runs in your smartphone. Right? If you've, you know, I've got a fifteen year old daughter when the smartphone runs out of either memory or processing it's ugly. Right? So you need to go off and make sure you've got enough to be able to do the same kinds of things you do on your tablet and your smartphone, and the same things happen in the back of your automobile. The next piece is all these soft services. Right? We we share, we share and edit photos. We share and edit all kinds of content. All of these things run-in the background. And if you understand computer architecture, in order to run all these things in the background, they all have a carve out of memory. And it just keeps adding up. And we've got a BSP. I've got all the applications, and nobody wants to shut one down to bring another one up. And it just keeps inching up. So we've already talked about the low end smartphone being a gigabyte now. You saw the Moto X came out at 2 gigabytes. Samsung's new phones are 2 gigabytes. There's 3 gigabytes and larger phones in development, and it's all about the the user experience. People wanna make sure they can go off and do those same things. Then the carriers have gotten in the mix. They want you to run a lot of applications. It forces a lot of data. You've seen T Mobile, very recently, no contract. They want you to upgrade phones more rapidly. AT and T has come out with a plan every year you can upgrade, and you start to put the the forces of very affordable high performance devices with very rapid upgrades, you end up with a market that grows pretty dramatically in very high performance devices. And then finally, all these, the personal electronics, whether it's gonna be a watch or glasses or a heart monitor or medical monitor, While those all have a relatively small amount of memory, all of those use the phone as the hub. And now I've just put a whole bunch of relatively critical applications that you're interested in running in the background on your mobile device. So this thing is now, as opposed to the cloud being the center of the universe, What it is, it's the center of your universe. And the cool part about it is as you put more memory on that, it also forces more memory in the cloud. Which was where Micron's got a huge opportunity. And people wanna back up to the cloud, but they don't wanna be connected all the time. Right? Connectivity isn't ubiquitous yet. And this allows us to go off. And every time there's another device being sold, there's a huge amount of instruction that goes in place as well. In terms of just sort of a couple more, pieces of data that that shows where this is going, you know, the amount of NAND in the smartphone in 2 years is doubling, right, it goes to over 20 gigabytes. The amount of, the amount of tablet goes closer to rippling. And again, to our earlier conversation, if you can do something in your tablet, you store your information on your tablet, you wanna be able to do that same thing in your Right? I have all my books on all the phones and all the tablets, and I get a little upset if I can't fit them on. And people go off and wanna make sure that's a great experience. Cameras are another great example. When you start doing processing of images, you have multiple copies of the frame buffer, and you need to go off and and and, crunch on those and keep them in main memory. As camera resolutions go above 20 megapixels, you saw Nokia is what, the highest one's not 41. You put a couple 41 megapixel images in memory and start processing it, it's gonna take a lot of memory. If you just look at connectivity, and video. So LTE drives more memory. Combination initially was because it's a higher performance device. In the end, it's because it allows you again to do a lot more processing on images and and video. And then, and then finally, you know, 3 or 4 years ago, I used to walk around and tell people about 7 20 p and 1080 p videos on phones. And they said, you're crazy. There's no way everybody's gonna wanna do that. I don't know if any of you are are fans of these GoPro devices. So the latest GoPro device, when you take it out of the box, The default video setting is fifteen frames a second 4 k. You choose through 64 gigabytes a day in a very short period of time. And that's the same things that's coming in all these mobile devices. So, the memory is gonna continue to grow grow pretty dramatically. And then finally, sort of, what does that mean to us? Right? Obviously, we're a memory supplier, but as we put, Micron and LP to together, And as you've heard earlier, the rate of of, progression in technology is slowing. It's all about having all the right pieces. NAND, nor DRAM controllers, firmware packaging, every in in with the combined companies, we've got all those pieces to go off and create interesting solutions. Energy efficient, high performance solutions for all of these mobile devices. And I think that that as, as Brian had talked about earlier, the real innovation is going to be how do we put all these pieces together? How do we wrap firmware around it? How do we do the right controllers? How do we control memory like we can better than anybody else and deliver something to customers to let them go off and make these mobile computers all that much more mobile and all that much more powerful? That's it. Okay. I'm gonna go ahead finish up on the business unit side here. We're gonna talk a bit about what we call the the DRAM solutions group. Again, this is our computing DRAM portfolio that goes into servers, networking, ultrathin gaming applications. And we wanna talk a little bit about what how we see Alpida adding to these segments and some of the key trends happening in each of them. You've heard talk about it before. Server storage and networking. These have been, some some hallmark, segments for Micron over the years. Lot of, a lot of key products that we've developed, such as RR DRAM going into core networking. This is a segment that continues to grow leaps and bounds It is insatiable demand out there, notably on the server side, really, for a lot of the trends that Mike talked about, you've all seen the the figures about the number of cell phones driving new data center, servers as well as the networking gear behind it. Folks, we can't keep up with that demand. And one of the things we're most excited about with LPDA is just simply additive scale, it's taking us away from being in a supply limited situation in servers, to increase our share of market in a segment that frankly has been very good to us and that we see quite a bit more room to increase, further, further share with scale. Moving down to ultrathend, PC, and tablet. You know, this is a this is a changing market, frankly. And as as you think about the diversity of memory and the diversity of platforms coming in there, frankly, it's it's unlike the desktop notebook market of years past. What you see these days, with a variety of different SoC platforms is different memory requirements, coming into that space. Really a de commoditization happening in a segment that frankly is is, still a fairly high volume. So in in this space, we have DDR3 coming into play. Now even, mobile technologies such as LPDDR3, And really, what we, are finding with Alpida is just a perfect match, both with 25 nanometer technology in production Hiroshima and Rexchip, as well as lpddr3 capability, for always on, always connected, all us in, memory that's getting soldered down, really bringing into play much different customer supplier relationships that we've had in years past, and, again, helping to, to decommoditize this space. Finally, over on the graphics and consumer side, this is a big win for us, with Alpida. Elpida has been a, a, a long time player in the graphics market, something called GDVR Memory, graphics DVR, and currently, they are in production with something called GDDR5. This is a this is a product line that is perfectly complimentary to our existing, buy 16 portfolio for mid range and low end graphics, GDDR5 really giving us the product portfolio for the game console refresh happening now, as well as advanced graphics, in in laptops and desktops, and and, frankly, even moving beyond to some high performance computing applications. So really an area that we're we're pretty enthused about perfect complementary product portfolio to what we had already developed and the scale to execute there. Now in the graphics market particular, again, gddr5. This is a picture of the 4 gigabit gddr5. LPDA had recently taped out. This is in production as we speak in Hiroshima. This will be used for a number of of upper end game consoles as well as advanced, advanced computer computing graphics. Again, one of the things we see here is an opportunity to leverage GDDR5 into upper end server and high performance computing application You don't hear much about that, but some of the the absolute column performance that GDDR5 offers is actually making it the texture of choice in a number of infrastructure markets. This, by the way, is in production on 25 nanometer technology today. Moving over to the to the infrastructure side, again, growing by leaps and bounds, we can't keep server modules on the shelf right now. We have recently moved the product portfolio from what we would call 8 gigabyte registered dims as really the sweet spot of the, the server space into what are now 16 gigabyte registered dims, that speaks to the kind of content per box increases happening out there. You can see the chart on the upper right here talking about the server unit, CAGR over the last, or looking forward, the really amazing thing, and we see this daily, is the content per box of any given server. And, again, that's driven by the mobile trend. That's that's driven by virtualization. More cores per CPU and more CPUs per server. And what it all needs is a lot of memory in that box. That's that, again, on the Alpida side, is really helping us out as we increase our scale moving 25 nanometer, eventually, into server applications, and helping fulfill the the needs of our key customers This, you know, a lot of this, the market for Micron over the years past, we have, we have generated good share of market in the corporate server, the high performance computing side of the business, the data center growth has really, been a huge volume adder here. The way those data center builds happen, though, is that the customers will come in, and it's a little bit of a clumpy business. It's something that we call the LVO phenomenon. Large volume orders. The customers, and you have a good sense of who they are, the large data center providers will come in and say, if you can deliver x amount of memory to me next week, you can have a 100% of this business. And then by the way, it may be dark for a couple weeks after that or a couple months until the next data center build comes along. The way you win that business is through scale, And again, it sets up as something that that turns into a very, very large percentage of the overall memory market going forward. Decomoditize specialized server memory driving significant, multi digit percentages of the overall DRAM market. From a product standpoint, We've situated ourselves beautifully here, both with standard server modules as well as optimized cloud products that really get to high density, DRAM densities. You get into RLDRAM 3, specifically as the architecture of choice today, for upper end routers and switches. And finally, moving into HMC, which is winning the battle for the generation, high performance computing and networking architectures out there. To that point, let me finalize here with just a, an update on on memory cube. What we did roughly, when we started this program, roughly 4 years ago, is we said, we want to gain the the upper end perform performance point in servers and networking with this architecture but we also want to doesn't need a silicon interposer. It doesn't need fancy assembly technology. We take care of all of that for the user and manage the memory. Frankly, this is working out better than we ever could have planned. It's gained the high ground, and it has given, a a number of server and networking companies in architecture that is ready to use in these upper end systems. I I'm happy to report that the, the production version is in silicon. We have sampled this outside of the company. And we are on track for a 2014 production launch. So we're we're very excited about that, and it continues to win more design wins in each of these, these space today. Now the interesting thing is that in between standard DDR3 DDR4 memory and HMC What we're seeing out there daily is a massive number of custom opportunities coming in across the board And this is not just true in the server and networking space. This is true in graphics. It's true, frankly, even in in upper end, standard, client machines, new ways of of taking advantage of DRAM memory, and that's really changing the business for us. 10 years ago, you know, what we worried about in product development was just standard component designs bringing in a lot of designers to cost optimize the design, fight through high volume, and really, you know, ultimate cost optimization. What I worry about these days, frankly, is bringing in more logic architects, more firmware architects, even software, crafting up, frankly, a much higher value add portfolio, something that competes on value, as opposed to just a a commoditized cost profile. So a number of areas here that frankly, we're we're pretty enthused about the memory industry going forward. Think it brings it back around to Mark's point from the beginning of what the r and d starts to transition like, with this changing, changing game of memory. So that, I'm going to turn it back over to Mark Adams. Thanks, Brent. So when you take a look at the technology, discussions we've had today and then But I wanted to do comment a little bit about our business model because it's the vision of differentiated products sounds great on PowerPoint what have you, but from a vision of how we've gone forward, If you went back 5 years ago, you're gonna see on this chart, kind of the changing diversification of our business. The left hand side, there's a technology discussion around you know, our our mix here with DRAM, NAND, and NORR, and other. And if you take a look at what we've acquired with Alpida, obviously, nearly a 100%, DRAM. The the combined last 12 months puts you in a ratio of around 61% over 60% on DRAM. And 27% on NAND. The opportunity for us is to continue to play out the differentiation, and multi segment approach. If you look at, you know, at the end of the day, you know, our job is to take this precious resource we call capacity and put it in the right homes. I mentioned earlier over the last 18 months, we got a lot of capacity. So I heard some questions last night about what would it take? And Mark addressed the question here is what would it take? That's not our mindset. Our mindset really going forward in our strategy is how do we take our capacity and put it in the right, higher value segments. Micron, if you went back again 5 years ago and looked at where we've come from, We've done a pretty good job. You know, personal computing is was down under, 20% on the on the native micron And now we take over an alopaedic capacity that will that is much higher. But again, it gives us the opportunity as Brian was just talking about to push that capacity in better segments. And so Our focus going forward from an operating perspective and from the go to market perspective is how do we continue to optimize that? And we're not thinking about additional capacity. We're thinking about existing capacity in new higher margin segments. And quite frankly, the opportunities there, our customers want us to be bigger in server. Our customers are demanding us to be bigger in networking, automotive, and all these premium segments. So it's an exciting time for us from a go to market standpoint to take that new capacity and continue to drive into these differentiated markets and really give us some leverage in terms of our P and L and operating performance. You might wanna read a couple of those more because I'm not sure they can all see. Yeah. I'm sorry. We're blocking the hair. On the bottom there, there's this personal system. The personal systems, on the Micron, native Micron was, through our last 5 years of kind of going to market and and product development. We got that down to a number sub 20%. And then you've got, a mobile here and the combined mobile and the new business will be about 25%. And then consumer server, networking storage Automotive. Broadly referred to as AIM because you had some industrial and and medical. And then SSPs at the top, you can see it become again, keep growing immateriality. So the shift here is as we balance out the equation on the left hand side from a DRAM NAND technology mix is how do we leverage that into the right markets? And we're pretty comfortable in the scale piece. We've got a a really good story there. And you'll see us continue to drive more in these higher value segments. And you can use the left hand side as a benchmark on how we've done. From a diversification. And the excitement we have around Alameda is we can take that capacity to do the same and get leverage in the business. Okay. Thanks. So I think we're gonna go to a broader group, q and a. Once you once you see that. Yes. That's in here. There we go. Yeah. John Pitzer again with Credit Suisse. Just two questions here. One for Ron and one for Mark. And I guess Ron quickly. I've heard the word scale multiple times in this presentation. And I guess just given your newfound size with LPDA, how do we think about get purchasing power either with raw materials and or capital equipment today versus what it has been. And and then for for Mark Durkin, Mark, you guys put out a lot of arguments as to why the industry is different today versus, you know, the last 15 to 20 years. One that I didn't hear was the fact that your largest competitor Samsung today for the first time in their corporate history also has a sizable market share as an OEM. And I'm wondering whether or not that's allowing them to view the component business differently because clearly stable to up pricing for them now is very profitable and makes them more competitive in their handset business. How important is that dynamic to your new world view on memory? And does it open up opportunities with, you know, competitors of Samsung, to drive economics. Thanks. Go ahead, everyone. Oh, John, you've heard comments already in terms of, relationships on the customer side that I think they're gonna be really helped with scale. I think that base was covered pretty well. To your question on the on the procurement side, obviously, having more scale in the total system is gonna be, valuable to us. And, we're we're already beginning to work, in the last few days with LPDA, we haven't had a chance to really, even see that information until, till we close the transaction. But I I think there'll be some opportunities there as we're moving ahead, especially on the capital side. And, you know, as to the as to the question on on Sam's being a a large consumer of of memory and having a, obviously, a vested interest, in, maximizing their competitive advantage through how they treat their memory business. You know, I think that that's definitely a a factor in the market today. What Samsung's corporate strategy is over the long haul, I, you know, I I would love to pontificate on, but I probably probably ought to, because I don't actually, you know, know exactly what they're planning to do, but it it makes sense. And and, you know, I think I think you know, the way I the way I look at this business is, I think rational people are rational, and they do what makes sense for their business. And and I think, you know, what the the dynamic you're talking about, it applies to Samsung, but I think it also applies, by the way, to to SK Hynix now with with SK. And and and maybe to a slightly different degree with with, one of the other big NAND manufacturers. So that is a dynamic in the marketplace. I think it's real. And, it, it gives me more confidence that that everyone's got the right approach to this business. Maybe I can just add one more comment. From a customer perspective, you know, yes, does the emotional headache compete with us? We wanna buy from other people, and that certainly helps. But if you look at the raw availability of the output, to the non Samsung camp, the rest of the world. When Sam when Samsung takes that consumption internally, we're in pretty good shaped to be the leading supplier to everyone else but Samsung in just terms of the raw capacity. And so that manifests itself into pretty good customer relationships and these opportunities of development and higher value opportunities at all these other customers. So just the raw capacity we have versus what Samsung has available outside of their company to other com customers. It puts them in pretty good shape. Oh, oh, I'm since we're on a roll, I'll add one one final point to that, which is, you know, Samsung's actually a pretty good customer. We're happy to have them as a customer. And they're very happy to have us as a supplier because if you think about also from their perspective and rational behavior and it's playing out the way one would predict, from just a technology risk mitigation perspective, even if they think they've got a perfect roadmap internal to their own semiconductor operation. You know, they've gotta they've gotta be concerned that, there's a lot of bright guys here at Micron. They're innovating and have a lot of customer engage even all over the world and, and to not be engaged with Micron for Samsung, is is a is a risk factor that this makes no sense. And so, you know, we actually have a pretty good business relationship with with Samsung now. We're happy to engage in that. Hi, it's Sandeep Budget from Jefferies. Thanks for taking my question. Just to follow-up on the capital spending question that came up So I think you've made it pretty clear a couple of times that your capital intensity is trending down. And it's clear now with scale that you have more power in terms of bargaining with your, with your suppliers, specifically the equipment vendors. So given this, I guess, big picture, how do you think this impacts the equipment supplier industry longer term in terms of their ability to invest in technology development. I mean, clearly, this comes at a time when scaling has become increasingly challenging. So any thoughts you might share on that? Yes. Well, you know, I think it's, it's a interesting challenge for them. I think I think you know, frankly, for both the suppliers and ourselves, the future lies in much closer collaboration in terms of picking the things we work on very strategically and doing them in a more deliberate way rather than a, maybe more of a a spray shot approach. So there are, you know, the the the investments required for particular capability are probably larger and more complicated. And the the probability of if you're not working very closely with a supplier and have buy in from the beginning that this is something that's going to add value for them, you know, you have a very, diminished probability of success at the end of the day. So I think for both the suppliers and for ourselves, that close interaction in relation ship's gonna be critical to to optimizing our our outcomes. Quick question. As the NAND players, 4 NAND players embark on this 3 d NAND, how should we be thinking about what kind of differentiation that all the floor players, 1, will have against each other if at all there is a differentiation on the 3 d NAND in terms of anything in terms of density or any, you know, anything, any other metric that you might be able to throw out so that we can better understand in terms of the differentiation? Maybe I can start and stop or or Brian. Maybe you got you guys wanna jump in or or even Mike. You know, I think fundamentally, the large NAND suppliers all have a slightly different technology or technical approach. To three d NAND. And, that underlying that then underlies probably a slightly different strategy in terms of what the optimal timing and first application is. And the the primary driver behind that is what's the, you know, what's the quality level of the the data retention and endurance performance of the NAND technology you're deploying. And that then drives a a thought process around. Okay. So then what application makes sense what kind of configuration, what kind of density, etcetera. And each competitor in the marketplace, I believe today, probably has a slightly different view of what makes sense for them. The other thing is I think Scott already pointed out. Kind of depends where you are in your planar technology as well, but but less important than the than the, sort of fundamental approach each competitor is taking to the 3 d NAND technology itself. And, Brian or Scott, do you wanna add anything? I mean, just a quick question on your the way you're gonna manage fab utilization. And just the sort of historical aspect of the business has been the fabs report until you kind of get to, to cash costs last year, kind of a watershed event when Toshiba took utilization down unilaterally in a, you know, not great environment, but not a horrible environment. Do you guys think about it and what are the criteria you would use to determine when you'd run the fab less than full? Yeah. Well, you know, I think it's is completely rational behavior. From Toshiba. They had a lot of, my understanding anyway. They had a lot of triple level sell product place in that time frame, and I think they just looked at it and behaved rationally to optimize, their company independently. I think you can you could assume, that Micron and other competitors in marketplace will do the same thing. We have no interest, in pumping extra memory out into the lowest value add segment in order to simultaneously pump money off seat. That's just not a behavior that we're interested in engaging in. Hi. This is Srini from Cement Research, and this is a question for Scott. Can you show the slide where you have the 20 nanometer and the 16 nanometer side by side? Trying to get through the the police back a little bit. Sorry. We're a little crowded in here today. This one? Yeah. Yeah. So you can clearly show here how your density is going to be much better compared to 20 nanometers, 16 nanometers. So by using the Hi K. By using the Hi K, are you able to confirm the case between? Yeah. Could you better repeat the question? On that. But I'm sorry. I didn't hear your whole question. So my my comment is it's very easy to explain why your 16 nanometer is going to be superior and why 39 is not necessary just based on the Yeah. I think I think, you know, as I mentioned, we we did think out this strategy of of of how to go from 20 to 16 to 3 d, in great detail with with, you know, a lot of thought put into this node. And, We we definitely believe this is the the most cost effective direction for the for the next year and and really put this in a strong position as we transition into 3 d Let me let me add. I think I think the the primary point for the benefit of others in the audiences, and we said previously, Our 20 nanometer node here is is what we call a planar cell. The the control gate does not wrap around the floating gate, and he's just he's he's noticing from the cross section that that in order to facilitate that, you have to have, you know, an an advanced high gate gate dielectric. And and that's the the approach we adopted a 20 nanometer driving a a low cost scaling to 16 nanometer. Hey, guys. By vinyl, Peter, yeah, yeah, obviously become a a bigger DRAM company. And for those who have been around for 10 or 15 years. You know, in the past, what we're doing in the morning is wake up. And, the first thing we'd check is DRAM exchange. And look at the spot price. And by that, is it almost gauge what, you know, Mike wants doing, how well it's doing, and where the share price is going? So and, certainly, DRAM has been, you know, fixed or in operating income over the last few years, So my my question is when we look at that DRAM One? Yeah. We'll look at the DRAM spot price every day. Does that number still have a big, you know, rental and compared now than compared, say, 5 or 7 years ago, it's still, is an important gauge. I know you don't sell into the spot, but certainly the contract follows the spot. Is that still an important number that we wake up? I got it this morning. And my second question is Originally, we see the spot has gone below the contract price in DRAM. And that has, that's the first time it's happened in a few months. Do you expect contract to follow spot and go down near term? Or do you expect, spot to stabilize? I mean, it's hard to do you expect contract at least to follow spot in the near term. Thank you. So let me let me take the first part of the question, then maybe I'll ask Mark to comment on on, you know, how contract and we think that's gonna kinda play out. But, you know, I would say, for a lot of reasons, and we tried to tried to enumerate some of those for you here today, the DRAM business going forward is going to be very different than the DRAM businesses has in the past. I think it's going to be a pretty good business. And what and and when you look at anywhere the micron's products go today. Very few of them, as you pointed out, go into the spot. But the spot itself is also very thinly traded. And as representative, not of the vast majority of the memory output, today, and the quality level is required for a lot of those applications. It's really representative of the tail end of the quality distribution, of that that can perform in some of the lower value add applications. So I can't predict how you guys are gonna trade our stock. I think if you're if you're rational, you'll be less sensitive in aggregate, to what's going on in the spot market. Now relative to how's the Scott, you know, how's the spot gonna play with contract, etcetera? You know, certainly we we have to make rational decisions. And and the spot to us, given everything I just said, does not drive how we approach contract. And with that, turn over to Mark and maybe he can can speculate on, you know, where ASPs are going. Thank you. You know, from a mix standpoint, one of the things we've been working on a lot over the last five 5 plus years is the diversification in the end segments to address your question about the exposure to the quote spot price and and and the, commodity type of the business. As you can see on the the right hand side, that first bar, the micron last 12 months, you can see we've done a pretty good job on the diversification of the business. And we believe that we have an outstanding opportunity to take Alpitas business and push it more to that Micron model around DRAM. So from a diversification plan, long term, we don't think that index of DRAM exchange on a daily basis. And by the way, we look at it once in a while. We don't think it's gonna be as meaningful as it has in the past. As far as OEM contract and their behavior versus, the spot market, In the here and now, we don't think the linkage is very tight. And and what I mean by that is we don't think the volume out in the spot market is significant. We think there is just some, some flowing through of excess inventory, and we don't see that pressure on the contract. And as I mentioned earlier, we're not selling a lot there. So our OEM spot contract pricing, you know, to where we are today has been pretty stable. Hi. Thank you. Historically, your your Schroeder customers have waited until the end of the quarter. For you to make decisions regarding pricing. Can you talk about that historical behavior and reconcile it with nodes living longer and, you know, slower shrinking and, and kind of tie together what's going on on the technology side. With how you're running the business and, how you think your customers will or should behave going forward. Thank you. Sure. You know, one of the, byproducts of where we have been pre LPDA on capacity is we weren't even exposed to that behavior, although they tried, except for extreme conditions where there was oversupply. We have been able to to navigate the end of quarter end of even end of, month buying cycle, the pressure at the end. But you know, given some of what Brian's team has been up on in terms of stimulating demand around server and networking, what have you, our decision in that scenario is we normally don't try to push out revenue towards the end of the quarter just to do that. Again, the the theme part of the theme in the day is it's profit driven and it's value driven. And so if our decision is do we push out DDR3 inventory just to get hit a revenue number versus keeping that for linearity for the next quarter so we can ship servers and networking. It's a no brainer. We don't we don't look at our business that way. So so you're saying you'd be willing to hold more inventory as well as to, yeah, to be economically makes sense. And by the way, as we've talked about in our last couple of earnings calls, over the last 18 months, our inventory is down about over 20%. So we're trying to manage it well in in this and so we're not sitting on a lot of pressure towards the end of the quarter. And so if we had to, we look at that as just good economics, good value. And rather than issued to a spot market customer at on the 31st the month, it doesn't do anything for our business. We're so constrained right now in the server networking business that It's it's just it's clear what we're gonna go do. I'm Raja Gill from Needham And Company. Question now that you have both NAND and DRAM uh-uh capability and capacity, how do you look at the trend towards multi chip package solutions and and mobile handsets. Where do you see that going in terms of adoption And then how how do you think you can exploit that internal, capability over your competitor who has to partner with a a third party? So, you know, as I talked about on the last slide, right, one of the pieces one of the things to do is have all the pieces. So when you've got the NAND, you've got the DRAM, you've got the PAC technology controller and firmware, that's where the differentiation's gonna happen. As, as phones and tablets get more and more memory, higher and higher performance, that's where we think we can add a lot of value. And, and it's just the integration of all those pieces doing From a firmware standpoint, as Brian highlighted, there's a piece of firmware to manage the memory itself. We're probably better at managing our memory than anybody else. And then a piece of firmware that looks externally where we can add value to whatever that application is. So huge, huge piece of opportunity for You know, by the way, let me, let me mention on the computing side as well. We are seeing mixed DRAM and NAND architecture come into play. As a matter of fact, we've launched a product line, with a couple notable design wins, something called NVDIM. These are standard server DRAM modules, with our own NAND on the same module, a controller and firmware in place to manage, in, a checkpointing operation in the server where everything that goes that's written into the DRAM can be, placed directly into the NAND flash for backup for checkpoints for a variety of different applications. This is a pretty big piece of the server world going forward. So, in the bag right now. Thanks, Steve Fox with Cross Research. So you guys have outlined a lot of synergies that are to come from the LPDA position. Obviously, it's too early to put a dollar number on that. But could you maybe just qualify what's the most important synergies to watch for the timeline that we could start seeing them maybe drop to the bottom line. And then just one clarification, Ron, in looking at the purchase accounting for LPDA, you're saying the rest of this quarter and next quarter gonna be running LPeter through the GAAP, the non GAAP numbers at a 0% margin before we see the real, numbers from LPeter. Is that correct? So, let me take the first, and and I haven't actually tried to dollarize the impact of any of these things, but You know, I think the the the product portfolio slash uh-uh-uh customer application diversification immediate impact and and very significant to us. The, the R and D a scale capability and bandwidth to handle future challenges, a big win. The ability to tune our capacity. You know, we started on that in advance to close, and important. And you know, finally, you know, all the various things that we can do as we run the company together in terms of marrying product portfolios and in terms of, getting more efficient relative to a company infrastructure, supply chain, IT, those types of things. Yeah. I probably put that at the bottom, but but, you know, there's there's there's plenty to be done there too. And, Ron? Yeah. So in terms of the purchase accounting impact on inventory. So we've got 1 month of LP that we'll have in our fiscal fourth quarter. Anything that was on the balance sheet and inventory at that time, we mark the fair value, which means it will have a 0 margin at the stage of completion it was at. So any margin we get on LP to business on our GAAP financials in the fourth quarter will be value add beyond the inventory that we're shipping that was already on the LP to books. So that's why I said it'll be low single digits impact in the 4th quarter in terms of the margin. I'll plan on pro form a all in all of this for you so you can understand the fundamental flow when we do our earnings release. Then, they've got a 3 to 4 inventory flow through. So that's gonna wash through that that original inventory at 0 margin over 3 to 4 months. So by the end of the fiscal first quarter, it'll be, virtually completely behind us and we'll be reporting margins that are more consistent with what's really happening with the fundamentals. Just wanted to understand that because it will affect the numbers, but we will plan on doing a pro form a of that and the other effects so you understand the underlying contribution. Thanks. Last question here on CapEx here Vijay from strategy. When you look at your CapEx for next year, 3,000,000,000, not not a whole not not too high, but and you had to push your own CapEx out to next year. But embedded in that, the Peter push on the CapEx, is that mostly flattish year on year? Any color on that? Thanks. In terms of the Alpeter CapEx trends? Yeah. Here on here, as you look at fiscal 14 or fiscal 13 for Alpeter. 13. Thanks. Yeah. Well, So, you you you may know from, public communications in our earnings calls that we have been involved with the the planning, including CAPEX Planning, and then we had an operating plan that we put out there with LPDA when we signed up a sponsorship agreement. They've been working to that operating plan, including capital investments that go with that operating plan pre close. So their CapEx activities have been going on exactly as planned and consistent with the rollout of, now they're either DRAM for example, that was commented on. And, now as we go into 2014, it's just a continuation of that in terms of CapEx and the merge 20 nanometer, DRAM that we'll be working together. All that's factored into the the guidance I gave you of 2 6to3.2 for pain. Alright. I think I think with that, we'll, we'll say thank you all very much for coming. I appreciate your your attendance and and interest, and, we'll get back to work. So thank you very

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