The Party Rages On for Micron Technology

Just about the best-case scenario is playing out for memory chip manufacturer Micron Technology (NASDAQ: MU). Demand for the company's DRAM and NAND chips is high, supply is constrained, costs per bit are dropping, and prices per bit are soaring. During the fiscal fourth quarter, Micron produced $2.4 billion of net income on $6.1 billion of revenue. That's up from just $3.2 billion of revenue and a net loss during the same period last year.

Historically, periods of lush profits for Micron have never lasted all that long. Like in any commodity market, a prolonged period of elevated prices encourages capacity expansion, which eventually erases the gap between supply and demand. This process can take a while, as there's a lag between when capital is committed to new capacity and when that capacity comes online. But it has played out without fail in the past, and there's no reason to believe it won't play out again in the future.

Image source: Micron Technology.

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Source: Fool.com