Say Goodbye to Micron's Fat Profits
Soaring demand for PCs and other consumer gadgets during the pandemic created the ideal market conditions for memory chip manufacturer Micron (NASDAQ: MU). The average selling price for DRAM chips rose 8% in Micron's fiscal 2021 as demand outpaced supply. Combined with higher bit volumes and the constant driving down of per-bit manufacturing costs, Micron's profits went through the roof.
Micron churned out $5.86 billion of net income on $27.7 billion of revenue in fiscal 2021. For a producer of commodity products, sky-high margins are normal when the stars align. Strong demand pushes up prices, and that extra revenue flows right through to Micron's bottom line.
But this situation was never going to last forever. Markets correct, and shortages give way to gluts. When demand starts to fall short of supply in a commodity market, prices can plunge rapidly. Combined with tumbling unit volumes, profits can very quickly dry up.
Source Fool.com
