Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual report on Form 10-K for the year ended September 2, 2021. All period references are to our fiscal periods unless otherwise indicated. Our fiscal year is the 52 or 53-week period ending on the Thursday closest to August 31. Fiscal years 2022 and 2021 each contain 52 weeks. All tabular dollar amounts are in millions, except per share amounts.

Overview

Micron Technology, Inc., including its consolidated subsidiaries, is an industry leader in innovative memory and storage solutions transforming how the world uses information to enrich life for all. With a relentless focus on our customers, technology leadership, and manufacturing and operational excellence, Micron delivers a rich portfolio of high-performance DRAM, NAND, and NOR memory and storage products through our Micron® and Crucial® brands. Every day, the innovations that our people create fuel the data economy, enabling advances in artificial intelligence and 5G applications that unleash opportunities — from the data center to the intelligent edge and across the client and mobile user experience.

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We manufacture our products at wholly-owned facilities and also utilize subcontractors to perform certain manufacturing processes. We make significant investments to develop proprietary product and process technology, which are implemented in our manufacturing facilities. Advancements in product and process technology generally increase the density per wafer and reduce manufacturing costs of each generation of product. We continue to introduce new generations of products that offer improved performance characteristics, including higher data transfer rates, advanced packaging solutions, lower power consumption, improved read/write reliability, and increased memory density.

The introduction of 176-layer NAND and 1α (1-alpha) DRAM represent major technology breakthroughs for our company and the first time in our history that we have achieved industry leadership across these two flagship technologies. In 2021, we introduced our industry leading 1α memory node, the world’s most advanced memory node in high-volume production. This advancement has been realized across our standard compute DRAM and LPDRAM product lines. We also launched 176-layer NAND-based solutions into the market in 2021. Our managed NAND and SSD products incorporate NAND, a controller, firmware, and in some cases, DRAM. An increasing portion of our SSDs incorporate proprietary controllers and firmware that we have developed. We are shipping these new memory and storage products in volume, and we have partnered with customers to provide value-added innovation, speed market adoption of our new solutions, and prepare the ecosystem for broad adoption of our offerings across markets. Development of advanced technologies enables us to diversify our product portfolio toward a richer mix of differentiated, high-value solutions and to target high-growth markets and specific customer requirements across data center, intelligent edge, client, and mobile environments.

We face intense competition in the semiconductor memory and storage markets and to remain competitive we must continuously develop and implement new products and technologies and decrease manufacturing costs. Our success is largely dependent on obtaining returns on our research and development (“R&D”) investments, efficient utilization of our manufacturing infrastructure, development and integration of advanced product and process technologies, market acceptance of our diversified portfolio of semiconductor-based memory and storage solutions, and efficient capital spending.

Lehi, Utah Fab and 3D XPoint

In the second quarter of 2021, we updated our portfolio strategy to further strengthen our focus on memory and storage innovations for the data center market. In connection therewith, we determined that there was insufficient market validation to justify the ongoing investments required to commercialize 3D XPoint at scale. Accordingly, we ceased development of 3D XPoint technology and engaged in discussions with potential buyers for the sale of our facility located in Lehi, Utah that was dedicated to 3D XPoint production. As a result, we classified the property, plant, and equipment as held for sale as of the second quarter of 2021 and ceased depreciating the assets. On June 30, 2021, we announced a definitive agreement to sell our Lehi facility to TI and closed the sale on October 22, 2021.

In the first quarter of 2022, we received $893 million from TI for the sale of the Lehi facility and disposed of $918 million of net assets, consisting primarily of property, plant, and equipment of $921 million; $55 million of other assets, consisting primarily of a receivable for reimbursement of property taxes, equipment spare parts, and raw materials; and $58 million of liabilities, consisting primarily of a finance lease obligation. As a result of the disposition of the Lehi facility and other related adjustments, we recognized a loss of $23 million included in restructure and asset impairments in the first quarter of 2022.

In the third quarter of 2021, we recognized a charge of $435 million included in restructure and asset impairments in connection with the definitive agreement with TI (and a tax benefit of $104 million included in income tax (provision) benefit) to write down the assets held for sale to the expected consideration, net of estimated selling costs. In the second quarter of 2021, we also recognized a charge of $49 million in cost of goods sold to write down 3D XPoint inventory in connection with our decision to cease further development of this technology.

Impact of COVID-19 on Our Business

Events surrounding the ongoing COVID-19 pandemic initially resulted in a reduction in economic activity across the globe, and the timing and extent of the ongoing economic recovery remains uncertain. As a result, we have experienced volatility in the markets that our products are sold into, driven by the move to a stay-at-home economy and fluctuations in consumer and business spending, which has affected demand for certain of our products. The

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ultimate extent to which COVID-19 will impact our business depends on future developments, which are highly uncertain and very difficult to predict, including the effectiveness and utilization of vaccines for COVID-19 and its variants, the severity of COVID-19 and its variants, and the effectiveness of the actions to contain or limit their spread.

From the start of the COVID-19 pandemic, we proactively implemented preventative protocols, which we continuously assess and update for changes in conditions and emerging trends. These preventative protocols are intended to safeguard our team members, contractors, suppliers, customers, distributors, and communities, and to ensure business continuity. Government restrictions or severe outbreaks can impact our operations at certain sites. For example, our Xi’an, China facility and the facility of our subcontractor in Xi’an have recently been required to operate at reduced staffing and capacity levels due to COVID-19 quarantines and other public health protocols, though we expect to return to normal staffing and production levels as the situation in Xi’an improves. While our other global manufacturing sites are currently operating with close to full staff and at normal capacity levels, our facilities or those of our subcontractors could be required to temporarily curtail production levels or temporarily cease operations based on government mandates or our health and safety protocols. We may be required, or deem it to be in the best interest of our employees, customers, partners, suppliers, and stakeholders, to alter our business operations in order to maintain a healthy and safe environment. It is not clear what potential effects any such alterations or modifications may have on our business, including effects on our customers, employees, or on our financial results. We are following government policies and recommendations designed to slow the spread of COVID-19 and remain committed to the health and safety of our team members, contractors, suppliers, customers, distributors, and communities.

We continuously assess our efforts to respond to the COVID-19 pandemic, which have included the following:

• In locations experiencing continued community COVID-19 infections, we prohibit onsite visitors and are generally requiring team members to work from home where possible or practical. Where work from home is not possible, all on-site team members must complete health questionnaires, pass through thermal scanning equipment to ensure they do not have an elevated body temperature, and adhere to physical distancing requirements, mask protocols, and team member separation protocols. We have also enhanced our contact tracing, significantly decreased business travel, and where possible, made ventilation and other health and safety enhancements at our facilities, and provided COVID-19 testing and vaccinations for our team members.

• We required that all U.S. employees and, in addition, contractors that enter our U.S. buildings and certain other locations, be fully vaccinated against COVID-19, subject to disability and religious exemptions.

• We continue to work closely with our customer base to best match our supply to changing market conditions.

• We evaluate our supply chain and communicate with our suppliers to identify supply gaps and have taken steps to provide continuity, to the extent possible. In some cases, we have added alternative suppliers, executed long-term supply agreements, and increased our on-hand inventory of raw materials needed in our operations.

• We have added assembly and test capacity to provide redundant manufacturing capability through our network of captive operations and external partners.

• We have evaluated all our construction projects across our global manufacturing operations and enacted protocols to enhance the safety of our team members, suppliers, and contractors.

• We have developed strategies and implemented measures to respond to a variety of potential economic scenarios, such as limitations on new hiring and business travel and reductions of discretionary spending.

• We are working with government authorities in the jurisdictions where we operate and continuing to monitor our operations in an effort to ensure we follow government requirements, relevant regulations, industry standards, and best practices to help safeguard our team members, while safely continuing operations at our sites across the globe.

We believe these actions are appropriate and prudent to safeguard our team members, contractors, suppliers, customers, and communities, while allowing us to safely continue operations. We cannot predict how the steps we, our team members, government entities, suppliers, or customers take in response to the COVID-19 pandemic will ultimately impact our business, outlook, or results of operations.

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Product Technologies

Our product portfolio of memory and storage solutions, is based on our high-performance semiconductor memory and storage technologies, including DRAM, NAND, and NOR. We sell our products into various markets through our business units in numerous forms, including wafers, components, modules, SSDs, managed NAND, and MCP products. Our system-level solutions, including SSDs and managed NAND, combine NAND, a controller, firmware, and in some cases DRAM.

DRAM**:** DRAM products are dynamic random access memory semiconductor devices with low latency that provide high-speed data retrieval with a variety of performance characteristics. DRAM products lose content when power is turned off (“volatile”) and are most commonly used in client, cloud server, enterprise, networking, graphics, industrial, and automotive markets. LPDRAM products, which are engineered to meet standards for performance and power consumption, are sold into smartphone and other mobile-device markets (including client markets for Chromebooks and notebook PCs), as well as into the automotive, industrial, and consumer markets.

NAND**:** NAND products are non-volatile, re-writeable semiconductor storage devices that provide high-capacity, low-cost storage with a variety of performance characteristics. NAND is used in SSDs for the enterprise and cloud, client, and consumer markets and in removable storage markets. Managed NAND is used in smartphones and other mobile devices, and in consumer, automotive, and embedded markets. Low-density NAND is ideal for applications like automotive, surveillance, machine-to-machine, automation, printer, and home networking.

NOR**:** NOR products are non-volatile re-writable semiconductor memory devices that provide fast read speeds. NOR is most commonly used for reliable code storage (e.g., boot, application, operating system, and execute-in-place code in an embedded system) and for frequently changing small data storage and is ideal for automotive, industrial, and consumer applications.

Results of Operations

Consolidated Results

			First Quarter						Fourth Quarter						First Quarter
			2022						2021						2021
Revenue			$	7,687		100%			$	8,274		100%			$	5,773		100%
Cost of goods sold			4,122			54%			4,362			53%			4,037			70%
Gross margin			3,565			46%			3,912			47%			1,736			30%
Research and development			712			9%			705			9%			647			11%
Selling, general, and administrative			259			3%			236			3%			214			4%
Restructure and asset impairments			38			—%			22			—%			8			—%
Other operating (income) expense, net			(75)			(1)%			(6)			—%			1			—%
Operating income			2,631			34%			2,955			36%			866			15%
Interest income (expense), net			(35)			—%			(38)			—%			(38)			(1)%
Other non-operating income (expense), net			(75)			(1)%			19			—%			13			—%
Income tax (provision) benefit			(219)			(3)%			(230)			(3)%			(51)			(1)%
Equity in net income (loss) of equity method investees			4			—%			14			—%			13			—%
Net income			$	2,306		30%			$	2,720		33%			$	803		14%

Total Revenue**:** Total revenue for the first quarter of 2022 decreased 7% as compared to the fourth quarter of 2021 primarily due to decreases in both DRAM and NAND sales. Sales of DRAM products for the first quarter of 2022 decreased 8% as compared to the fourth quarter of 2021 primarily due to a mid-single-digit percent decrease in bit shipments and a low-single-digit percent decline in average selling prices. Sales of NAND products for the first

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quarter of 2022 decreased 5% as compared to the fourth quarter of 2021 primarily due to a mid-single-digit percent decline in average selling prices. For the first quarter of 2022, DRAM and NAND bit shipments were adversely impacted by weakness in demand from some customers due to their shortages of non-memory components.

Total revenue for the first quarter of 2022 increased 33% as compared to the first quarter of 2021 primarily due to increases in both DRAM and NAND sales. Sales of DRAM products for the first quarter of 2022 increased 38% as compared to the first quarter of 2021 primarily due to a mid-20% increase in average selling prices and increases in bit shipments in the low-10% range. Sales of NAND products for the first quarter of 2022 increased 19% as compared to the first quarter of 2021 primarily due to increases in bit shipments in the mid-10% range and a mid-single-digit percent increase in average selling prices.

Overall Gross Margin**:** Our overall gross margin percentage decreased to 46% for the first quarter of 2022 from 47% for the fourth quarter of 2021, primarily due to decreases in DRAM and NAND average selling prices partially offset by cost reductions resulting from strong execution in delivering products featuring advanced technologies.

Our overall gross margin percentage increased to 46% for the first quarter of 2022 from 30% for the first quarter of 2021, primarily due to increases in average selling prices and cost reductions. Our gross margins in the first quarter of 2021 included an approximate 2% adverse impact from MTU underutilization costs. MTU underutilization costs adversely affected gross margins by less than 1% in each of the fourth quarter of 2021 and the first quarter of 2022 due to cessation of depreciation on MTU assets. See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Lehi, Utah Fab and 3D XPoint.”

Revenue by Business Unit

			First Quarter						Fourth Quarter						First Quarter
			2022						2021						2021
CNBU			$	3,406		44%			$	3,794		46%			$	2,546		44%
MBU			1,907			25%			1,892			23%			1,501			26%
SBU			1,150			15%			1,203			15%			911			16%
EBU			1,220			16%			1,360			16%			809			14%
All Other			4			—%			25			—%			6			—%
			$	7,687					$	8,274					$	5,773

Percentages of total revenue may not total 100% due to rounding.

Changes in revenue for each business unit for the first quarter of 2022 as compared to the fourth quarter of 2021 were as follows:

• CNBU revenue decreased 10% primarily due to declines in average selling prices for DRAM and decreases in bit shipments due to lower sales to client markets.

• MBU revenue increased 1% primarily due to a slight increase in mobile DRAM sales.

• SBU revenue decreased 4% primarily due to decreases in bit shipments of component products.

• EBU revenue decreased 10% primarily due to decreases in bit shipments as a result of customer shortages of non-memory components and other supply constraints.

Changes in revenue for each business unit for the first quarter of 2022 as compared to the first quarter of 2021 were as follows:

• CNBU revenue increased 34% primarily due to higher average selling prices for DRAM and broad-based increases in bit shipments across markets.

• MBU revenue increased 27% primarily due to higher average selling prices for mobile DRAM and increases in bit shipments for high-value mobile MCP products.

• SBU revenue increased 26% primarily due to increases in bit shipments for NAND products and higher average selling prices for NAND.

• EBU revenue increased 51% primarily due to increases in bit shipments driven by strong demand growth in automotive, industrial, and consumer markets and improved pricing in industrial and consumer markets.

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Operating Income (Loss) by Business Unit

			First Quarter						Fourth Quarter						First Quarter
			2022						2021						2021
CNBU			$	1,524		45%			$	1,761		46%			$	483		19%
MBU			624			33%			656			35%			370			25%
SBU			152			13%			175			15%			4			—%
EBU			422			35%			467			34%			116			14%
All Other			3			75%			14			56%			—			—%
			$	2,725					$	3,073					$	973

Percentages reflect operating income (loss) as a percentage of revenue for each business unit.

Changes in operating income or loss for each business unit for the first quarter of 2022 as compared to the fourth quarter of 2021 were as follows:

• CNBU operating income decreased primarily due to lower average selling prices and decreases in bit shipments, partially offset by manufacturing cost reductions.

• MBU operating income decreased primarily due to NAND price declines and higher DRAM costs associated with new product transitions, partially offset by NAND cost reductions.

• SBU operating income decreased primarily due to decreases in bit shipments.

• EBU operating income decreased primarily due to decreases in bit shipments.

Changes in operating income or loss for each business unit for the first quarter of 2022 as compared to the first quarter of 2021 were as follows:

• CNBU operating income increased primarily due to higher average selling prices, increases in bit shipments, manufacturing cost reductions, and lower MTU underutilization costs.

• MBU operating income increased primarily due to increases in DRAM average selling prices and increases in bit shipments.

• SBU operating income increased primarily due to manufacturing cost reductions, increases in average selling prices, and increases in bit shipments.

• EBU operating income increased primarily due to improved pricing in industrial and consumer markets, cost reductions from an increasing mix of leading edge bits, and higher bit shipments.

Operating Expenses and Other

Research and Development**:** R&D expenses vary primarily with the number of development and pre-qualification wafers processed, the cost of advanced equipment dedicated to new product and process development, and personnel costs. Because of the lead times necessary to manufacture our products, we typically begin to process wafers before completion of performance and reliability testing. Development of a product is deemed complete when it is qualified through internal reviews and tests for performance and reliability. R&D expenses can vary significantly depending on the timing of product qualification.

R&D expenses for the first quarter of 2022 were relatively unchanged as compared to the fourth quarter of 2021 as increases in employee compensation were substantially offset by reductions in volumes of development and pre-qualification wafers. R&D expenses for the first quarter of 2022 increased 10% as compared to the first quarter of 2021 primarily due to increases in employee compensation and higher volumes of development and prequalification wafers.

Selling, General, and Administrative**:** SG&A expenses for the first quarter of 2022 increased 10% as compared to the fourth quarter of 2021 primarily due to increases in employee compensation. SG&A expenses for the first quarter of 2022 increased 21% as compared to the first quarter of 2021 primarily due to increases in employee compensation, legal fees, and advertising.

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Income Taxes**:** Our income tax (provision) benefit consisted of the following:

			First Quarter			Fourth Quarter			First Quarter
			2022			2021			2021
Income before taxes			$	2,521		$	2,936		$	841
Income tax (provision) benefit			(219)			(230)			(51)
Effective tax rate			8.7		%	7.8		%	6.1		%

Our effective tax rate for the first quarter of 2022 increased as compared to the fourth and first quarters of 2021 primarily as a result of the geographic mix of our earnings.

We operate in a number of jurisdictions outside the United States, including Singapore, where we have tax incentive arrangements. These incentives expire, in whole or in part, at various dates through 2034 and are conditional, in part, upon meeting certain business operations and employment thresholds. The effect of tax incentive arrangements reduced our tax provision by $290 million (benefiting our diluted earnings per share by $0.26) for the first quarter of 2022, by $381 million ($0.33 per diluted share) for the fourth quarter of 2021, and by $56 million ($0.05 per diluted share) for the first quarter of 2021.

The United States government is considering various tax reform proposals that, if enacted, contain provisions that could increase our tax expense. We continue to monitor the legislative process and the potential impact of the proposed legislation to our overall global effective tax rate and financial statements.

See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Income Taxes.”

Other: Further discussion of other items can be found in “Item 1. Financial Statements – Notes to Consolidated Financial Statements.”

Liquidity and Capital Resources

Our primary sources of liquidity are cash generated from operations and financing obtained from capital markets and financial institutions. Cash generated from operations is highly dependent on selling prices for our products, which can vary significantly from period to period. We are continuously evaluating alternatives for efficiently funding our capital expenditures and ongoing operations. We expect, from time to time, to engage in a variety of financing transactions for such purposes, including the issuance of securities. As of December 2, 2021, $2.50 billion was available to draw under our Revolving Credit Facility.

Cash and marketable investments totaled $11.40 billion as of December 2, 2021 and $10.40 billion as of September 2, 2021. Our investments consist primarily of bank deposits, money market funds, and liquid investment-grade, fixed-income securities, which are diversified among industries and individual issuers. To mitigate credit risk, we invest through high-credit-quality financial institutions and by policy generally limit the concentration of credit exposure by restricting the amount of investments with any single obligor. As of December 2, 2021, $4.05 billion of our cash and marketable investments was held by our foreign subsidiaries.

To develop new product and process technology, support future growth, achieve operating efficiencies, and maintain product quality, we must continue to invest in manufacturing technologies, facilities and equipment, and R&D. We estimate capital expenditures in 2022 for property, plant, and equipment, net of partner contributions, to be between $11 billion and $12 billion, and we expect the timing of our capital expenditures to be weighted more toward the first half of 2022. Capital expenditures for 2022 are driven by our continued 176-layer NAND transition, pilot line enablement for next generation NAND and DRAM, and continued infrastructure and prepayments to support the introduction of EUV lithography. Actual amounts for 2022 will vary depending on market conditions. As of December 2, 2021, we had purchase obligations of approximately $3.76 billion for the acquisition of property, plant, and equipment, of which approximately $3.57 billion is expected to be paid within one year. For a description of other contractual obligations, such as debt and leases, see “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Leases” and “– Debt.”

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On November 1, 2021, we issued $1 billion in aggregate principal amount of unsecured 2032 Green Bonds. Over time, we intend to allocate an amount equal to the net proceeds to fund eligible sustainability-focused projects involving renewable energy, green buildings, energy efficiency, water management, pollution control, and a circular economy.

Our Board of Directors has authorized the discretionary repurchase of up to $10 billion of our outstanding common stock through open-market purchases, block trades, privately-negotiated transactions, derivative transactions, and/or pursuant to a Rule 10b5-1 trading plan. The repurchase authorization has no expiration date, does not obligate us to acquire any common stock, and is subject to market conditions and our ongoing determination of the best use of available cash. Through December 2, 2021, we have repurchased an aggregate of $4.30 billion of the authorized amount. See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Equity.”

On December 17, 2021, our Board of Directors declared a quarterly dividend of $0.10 per share, payable in cash on January 18, 2022, to shareholders of record as of the close of business on January 3, 2022. The declaration and payment of any future cash dividends are at the discretion and subject to the approval of our Board of Directors. Our Board of Directors' decisions regarding the amount and payment of dividends will depend on many factors, including, but not limited to, our financial condition, results of operations, capital requirements, business conditions, debt service obligations, contractual restrictions, industry practice, legal requirements, regulatory constraints, and other factors that our Board of Directors may deem relevant.

We expect that our cash and investments, cash flows from operations, and available financing will be sufficient to meet our requirements at least through the next 12 months and thereafter for the foreseeable future.

Cash Flows

			First Quarter
			2022			2021
Net cash provided by operating activities			$	3,938		$	1,967
Net cash provided by (used for) investing activities			(2,485)			(3,418)
Net cash provided by (used for) financing activities			(513)			(214)
Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash			(6)			27
Net increase in cash, cash equivalents, and restricted cash			$	934		$	(1,638)

Operating Activities: Cash provided by operating activities reflects net income adjusted for certain non-cash items, including depreciation expense, amortization of intangible assets, asset impairments, and stock-based compensation, and the effects of changes in operating assets and liabilities. The increase in cash provided by operating activities for the first quarter of 2022 as compared to the first quarter of 2021 was primarily due to higher net income adjusted for non-cash items and less of a decrease in accounts payable and accrued expenses from timing of payments, partially offset by an increase in inventories.

Investing Activities: For the first quarter of 2022, net cash used for investing activities consisted primarily of $3.27 billion of expenditures for property, plant, and equipment; inflows of $55 million of partner contributions for capital expenditures; $893 million of net inflows from the sale of the Lehi, Utah fab; and $91 million of net outflows from purchases, sales, and maturities of available-for-sale securities.

For the first quarter of 2021, net cash used for investing activities consisted primarily of $2.74 billion of expenditures for property, plant, and equipment; inflows of $40 million of partner contributions for capital expenditures; and $741 million of net outflows from purchases, sales, and maturities of available-for-sale securities.

Financing Activities: For the first quarter of 2022, net cash used for financing activities included $1.95 billion of repayments of debt primarily to redeem the 2023 Notes and 2024 Notes, $259 million for the acquisition of 3.6 million shares of our common stock under our $10 billion share repurchase authorization, $112 million of cash payments of dividends to shareholders, $102 million used for stock repurchases related to tax withholdings for employee equity awards, and $78 million of payments on equipment purchase contracts. Cash used for financing activities was partially offset by aggregate proceeds of $2.00 billion from the issuance of the unsecured 2032 Green Bonds, 2041 Notes, and 2051 Notes. See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Debt.”

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For the first quarter of 2021, net cash used for financing activities consisted primarily of $97 million for payments on equipment purchase contracts and $84 million for repayments of debt.

Critical Accounting Estimates

For a discussion of our critical accounting estimates, see “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates” of our Annual Report on Form 10-K for the year ended September 2, 2021. There have been no changes to our critical accounting estimates since our Annual Report on Form 10-K for the year ended September 2, 2021.