Micron Technology 10-Q 2022-03-03

Filed 2022-03-30. 7 sections, 247K characters. Original on sec.gov · Markdown · JSON

Cover and table of contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 3, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-10658

Micron Technology, Inc.

(Exact name of registrant as specified in its charter)


Delaware		75-1618004
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
8000 S. Federal Way, Boise, Idaho		83716-9632
(Address of principal executive offices)		(Zip Code)
(Registrant’s telephone number, including area code)		(208) 368-4000

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.10 per share	MU	Nasdaq Global Select Market


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.					Yes	☒	No	☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).					Yes	☒	No	☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer	Accelerated Filer	Non-Accelerated Filer	Smaller Reporting Company	Emerging Growth Company
☒	☐	☐	☐	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.								☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).					Yes	☐	No	☒

The number of outstanding shares of the registrant’s common stock as of March 24, 2022 was 1,116,666,857.


Micron Corporate Profile











Founded on October 5, 1978 Headquartered in Boise, Idaho, USA 4th Largest semiconductor company in the world, excluding IP/software revenue* 135 On the 2021 Fortune 500 49,000+ Patents granted and growing 17 Countries 11 Manufacturing sites and 18 customer labs ~44,000 Team members**

	It’s All About Data
	Data is today’s new business currency, and memory and storage are a critical foundation for the data economy. Memory and storage innovations will help transform society and enable significant value for all.
	Who We Are
	Micron designs, develops and manufactures industry-leading memory and storage products. By providing foundational capability for AI and 5G across data center, the intelligent edge, and consumer devices, we unlock innovation across industries including healthcare, automotive and communications. Our technology and expertise are central to maximizing value from cutting-edge computing applications and new business models which disrupt and advance the industry.
	Our Vision
	As a global leader in memory and storage solutions, we are transforming how the world uses information to enrich life for all. By advancing technologies to collect, store and manage data with unprecedented speed and efficiency, we lead the transformation of data to intelligence. In a world of change, we remain nimble, delivering products that help inspire the world to learn, communicate and advance faster than ever.
	Our Commitment
Gartner Market Share: Semiconductors by End Market, Worldwide, 2020 (April 2021) *Micron data as of March 3, 2022		Our customers depend on our innovative solutions every day. We dedicate ourselves to demonstrating our environmental conscience, an inclusive team culture where all voices are heard and respected, and engaging in our communities to enrich life for all.

Media Inquiries mediarelations@micron.com Government Inquiries govaffairs@micron.com Investor Inquiries investorrelations@micron.com		Global Product Portfolio
	DRAM \| NAND \| NOR \| Solid-State Drives \| Graphics and High Bandwidth Memory (HBM) \| Managed NAND and Multichip Packages
Connect with us on micron.com
© 2022 Micron Technology, Inc. Micron, the Micron orbit logo, the M orbit logo, Intelligence AcceleratedTM, and other Micron trademarks are the property of Micron Technology, Inc. All other trademarks are the property of their respective owners. Products and specifications are subject to change without notice. Rev 03/22 CCMMD-1707390403-3712

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Introduction		4
Part I. Financial Information
Item 1.	Financial Statements:
	Consolidated Statements of Operations	6
	Consolidated Statements of Comprehensive Income	7
	Consolidated Balance Sheets	8
	Consolidated Statements of Changes in Equity	9
	Consolidated Statements of Cash Flows	10
	Notes to Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
	Results of Operations	31
	Liquidity and Capital Resources	34
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36
Item 4.	Controls and Procedures	36
Part II. Other Information
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 6.	Exhibits	58
Signatures		59

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Definitions of Commonly Used Terms

As used herein, “we,” “our,” “us,” and similar terms include Micron Technology, Inc. and its consolidated subsidiaries, unless the context indicates otherwise. Abbreviations, terms, or acronyms are commonly used or found in multiple locations throughout this report and include the following:


Term	Definition	Term	Definition

2023 Notes	2.497% Senior Notes due April 2023	Inotera	Inotera Memories, Inc.
2024 Notes	4.640% Senior Notes due February 2024	Intel	Intel Corporation
2024 Term Loan A	Senior Term Loan A due October 2024	LIBOR	London Interbank Offered Rate
2026 Notes	4.975% Senior Notes due February 2026	LPDRAM	Low-power DRAM
2027 Notes	4.185% Senior Notes due February 2027	MCP	Multichip packaged solutions with managed NAND and LPDRAM
2029 Notes	5.327% Senior Notes due February 2029	Micron	Micron Technology, Inc. (Parent Company)
2030 Notes	4.663% Senior Notes due February 2030	MTU	Micron Technology Utah, LLC
2032 Green Bonds	2.703% Senior Notes due April 2032	NVMe	Hardware interface for SSDs that connect via a PCIe bus
2041 Notes	3.366% Senior Notes due November 2041	Qimonda	Qimonda AG
2051 Notes	3.477% Senior Notes due November 2051	Revolving Credit Facility	$2.5 billion revolving credit facility due May 2026
DDR	Double Data Rate DRAM	SOFR	Secured Overnight Financing Rate
EUV	Extreme ultraviolet lithography	SSD	Solid State Drive
IMFT	IM Flash Technologies, LLC	TI	Texas Instruments Incorporated

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.

Micron, Crucial, any associated logos, and all other Micron trademarks are the property of Micron. Intel and 3D XPoint are trademarks of Intel Corporation or its subsidiaries. Other product names or trademarks that are not owned by Micron are for identification purposes only and may be the trademarks of their respective owners.

Available Information

Investors and others should note that we announce material financial information about our business and products through a variety of means, including our investor relations website (investors.micron.com), filings with the U.S. Securities and Exchange Commission (the “SEC”), press releases, public conference calls, and webcasts. We use these channels to achieve broad, non-exclusionary distribution of information to the public and for complying with our disclosure obligations under Regulation FD. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on such channels.

4 | 2022 Q2 10-Q

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Forward-Looking Statements

This Form 10-Q contains trend information and other forward-looking statements that involve a number of risks and uncertainties. Such forward-looking statements may be identified by words such as "anticipate," "expect," "intend," "pledge," "committed," "plans," "opportunities," "future," "believe," "target," "on track," "estimate," "continue," "likely," "may," "will," "would," "should," "could," and variations of such words and similar expressions. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. Specific forward-looking statements include, but are not limited to, statements such as those made regarding the impact of the new Idaho tax law; potential increases in our effective tax rate; the impact of coronavirus disease 2019, including variant strains (“COVID-19”) to our business; the sufficiency of our cash and investments; the payment of future cash dividends; capital spending in 2022; and funding of sustainability-focused projects. Our actual results could differ materially from our historical results and those discussed in the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, those identified in “Part II. Other Information – Item 1A. Risk Factors.”

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PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Micron Technology, Inc.

Consolidated Statements of Operations

(In millions, except per share amounts)

(Unaudited)


	Quarter ended				Six months ended
	March 3, 2022		March 4, 2021		March 3, 2022		March 4, 2021

Revenue	$	7,786	$	6,236	$	15,473	$	12,009
Cost of goods sold	4,110		4,587		8,232		8,624
Gross margin	3,676		1,649		7,241		3,385

Research and development	792		641		1,504		1,288
Selling, general, and administrative	263		214		522		428
Restructure and asset impairments	5		5		43		13
Other operating (income) expense, net	70		126		(5)		127
Operating income	2,546		663		5,177		1,529

Interest income	12		10		22		20
Interest expense	(55)		(42)		(100)		(90)
Other non-operating income (expense), net	6		4		(69)		17
	2,509		635		5,030		1,476

Income tax (provision) benefit	(255)		(48)		(474)		(99)
Equity in net income (loss) of equity method investees	9		16		13		29
Net income	$	2,263	$	603	$	4,569	$	1,406

Earnings per share
Basic	$	2.02	$	0.54	$	4.08	$	1.26
Diluted	2.00		0.53		4.04		1.23

Number of shares used in per share calculations
Basic	1,119		1,120		1,119		1,118
Diluted	1,130		1,144		1,130		1,139

See accompanying notes to consolidated financial statements.

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Micron Technology, Inc.

Consolidated Statements of Comprehensive Income

(In millions)

(Unaudited)


	Quarter ended				Six months ended
	March 3, 2022		March 4, 2021		March 3, 2022		March 4, 2021

Net income	$	2,263	$	603	$	4,569	$	1,406

Other comprehensive income (loss), net of tax
Gains (losses) on derivative instruments	(34)		(28)		(120)		12
Gains (losses) on investments	(13)		(3)		(20)		(4)
Pension liability adjustments	(1)		1		(1)		1
Cumulative translation adjustments	1		1		1		1
Other comprehensive income (loss)	(47)		(29)		(140)		10
Total comprehensive income	$	2,216	$	574	$	4,429	$	1,416

See accompanying notes to consolidated financial statements.

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Micron Technology, Inc.

Consolidated Balance Sheets

(In millions, except par value amounts)

(Unaudited)


As of	March 3, 2022		September 2, 2021

Assets
Cash and equivalents	$	9,116	$	7,763
Short-term investments	1,006		870
Receivables	5,384		5,311
Inventories	5,383		4,487
Assets held for sale	13		974
Other current assets	600		502
Total current assets	21,502		19,907
Long-term marketable investments	1,717		1,765
Property, plant, and equipment	36,171		33,213
Operating lease right-of-use assets	587		551
Intangible assets	414		349
Deferred tax assets	762		782
Goodwill	1,228		1,228
Other noncurrent assets	1,315		1,054
Total assets	$	63,696	$	58,849

Liabilities and equity
Accounts payable and accrued expenses	$	5,650	$	5,325
Current debt	123		155
Other current liabilities	1,145		944
Total current liabilities	6,918		6,424
Long-term debt	6,953		6,621
Noncurrent operating lease liabilities	535		504
Noncurrent unearned government incentives	704		808
Other noncurrent liabilities	741		559
Total liabilities	15,851		14,916

Commitments and contingencies

Shareholders’ equity
Common stock, $0.10 par value, 3,000 shares authorized, 1,223 shares issued and 1,118 outstanding (1,216 shares issued and 1,119 outstanding as of September 2, 2021)	122		122
Additional capital	9,816		9,453
Retained earnings	43,407		39,051
Treasury stock, 105 shares held (97 shares as of September 2, 2021)	(5,362)		(4,695)
Accumulated other comprehensive income (loss)	(138)		2
Total equity	47,845		43,933
Total liabilities and equity	$	63,696	$	58,849

See accompanying notes to consolidated financial statements.

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Micron Technology, Inc.

Consolidated Statements of Changes in Equity

(In millions, except per share amounts)

(Unaudited)


			Common Stock						Additional Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
			**Number of Sh

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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

We manufacture our products at wholly-owned facilities and also utilize subcontractors for certain manufacturing processes. We make significant investments to develop proprietary product and process technology, which generally increases bit density per wafer and reduces per-bit 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 ramp of 176-layer NAND and 1α (1-alpha) DRAM across our product portfolio delivers major technology breakthroughs to customers across markets. For the first time in our history, we achieved industry leadership across these two flagship technologies. We delivered initial products based on these process technologies to the market in 2021. In the second quarter of 2022, we expanded our 176-layer NAND-based SSD portfolio with the introduction of the Micron 7450 SSD with NVMe, the world’s first vertically-integrated 176-layer NAND SSD for the data center. An increasing portion of our SSDs incorporate vertical integration with proprietary controllers and firmware that we have developed. This new SSD joins our full portfolio of new product entries across memory and storage which have been well received by the market. In the second quarter of 2022, we achieved the first qualification of our 1α LPDDR5 DRAM, which delivers more than a 15% power improvement over the previous generation. We are leading the industry’s client DDR5 transition and are well positioned to lead the industry’s data center transition as platforms come to market later this year. We have partnered with customers to provide value-added innovation, and speed market adoption of our new solutions. 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.

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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 COVID-19 pandemic and their impact on economic activity have been unpredictable. As a result, we have experienced volatility in the markets in which we sell our products. The 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, some of our facilities and some of our subcontractors’ facilities at times have been required to operate at reduced staffing and capacity levels due to COVID-19 quarantines and other public health protocols. While our 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 each of our locations, we implement health and safety protocols based on applicable regulations and local conditions and, where possible, make testing and vaccination available and implement health and safety enhancements.
We require 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.

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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 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.

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.

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Results of Operations

Consolidated Results


	Second Quarter			First Quarter			Second Quarter			Six months ended
	2022			2022			2021			2022			2021

Revenue	$	7,786	100%	$	7,687	100%	$	6,236	100%	$	15,473	100%	$	12,009	100%
Cost of goods sold	4,110		53%	4,122		54%	4,587		74%	8,232		53%	8,624		72%
Gross margin	3,676		47%	3,565		46%	1,649		26%	7,241		47%	3,385		28%

Research and development	792		10%	712		9%	641		10%	1,504		10%	1,288		11%
Selling, general, and administrative	263		3%	259		3%	214		3%	522		3%	428		4%
Restructure and asset impairments	5		—%	38		—%	5		—%	43		—%	13		—%
Other operating (income) expense, net	70		1%	(75)		(1)%	126		2%	(5)		—%	127		1%
Operating income	2,546		33%	2,631		34%	663		11%	5,177		33%	1,529		13%

Interest income (expense), net	(43)		(1)%	(35)		—%	(32)		(1)%	(78)		(1)%	(70)		(1)%
Other non-operating income (expense), net	6		—%	(75)		(1)%	4		—%	(69)		—%	17		—%
Income tax (provision) benefit	(255)		(3)%	(219)		(3)%	(48)		(1)%	(474)		(3)%	(99)		(1)%
Equity in net income (loss) of equity method investees	9		—%	4		—%	16		—%	13		—%	29		—%
Net income	$	2,263	29%	$	2,306	30%	$	603	10%	$	4,569	30%	$	1,406	12%

Total Revenue**:** Total revenue for the second quarter of 2022 increased 1% as compared to the first quarter of 2022 primarily due to increases in both DRAM and NAND sales partially offset by decreases in 3D XPoint sales, which ceased in the first quarter of 2022.

Sales of DRAM products increased 2% primarily due to a high-single-digit percent increase in bit shipments partially offset by a mid-single-digit percent decline in average selling prices.
Sales of NAND products increased 4% primarily due to a mid-single-digit percent increase in average selling prices.

Total revenue for the second quarter of 2022 increased 25% as compared to the second quarter of 2021 primarily due to increases in both DRAM and NAND sales.

Sales of DRAM products increased 29% primarily due to a mid-10% increase in average selling prices and increases in bit shipments in the low-10% range.
Sales of NAND products increased 19% primarily due to a low-10% increase in average selling prices and increases in bit shipments in the mid-single-digit percentage range.

Total revenue for the first six months of 2022 increased 29% as compared to the first six months of 2021 primarily due to increases in both DRAM and NAND sales.

Sales of DRAM products increased 33% primarily due to a low-20% increase in average selling prices and increases in bit shipments in the low-10% range.
Sales of NAND products increased 19% primarily due to increases in bit shipments in the low-10% range and a high-single-digit percent increase in average selling prices.

Overall Gross Margin**:** Our overall gross margin percentage increased to 47% for the second quarter of 2022 from 46% for the first quarter of 2022, primarily due to higher NAND margins resulting from higher average selling prices and manufacturing cost reductions partially offset by lower DRAM margins resulting from declines in average selling prices.

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Our overall gross margin percentage increased to 47% for the second quarter of 2022 from 26% for the second quarter of 2021, primarily due to increases in average selling prices and manufacturing cost reductions resulting from strong execution in delivering products featuring advanced technologies. Our overall gross margin percentage increased to 47% for the first six months of 2022 from 28% for the first six months of 2021, primarily due to increases in average selling prices and manufacturing cost reductions. Effective as of the beginning of the second quarter of 2021, we changed our method of inventory costing from average cost to FIFO. Concurrently, as of the beginning of the second quarter of 2021, we modified our inventory cost-absorption processes used to estimate inventory values, which affects the timing of when costs are recognized. These changes resulted in a one-time increase to cost of goods sold of approximately $293 million in the second quarter of 2021.

Revenue by Business Unit


	Second Quarter			First Quarter			Second Quarter			Six months ended
	2022			2022			2021			2022			2021

CNBU	$	3,461	44%	$	3,406	44%	$	2,636	42%	$	6,867	44%	$	5,182	43%
MBU	1,875		24%	1,907		25%	1,811		29%	3,782		24%	3,312		28%
SBU	1,171		15%	1,150		15%	850		14%	2,321		15%	1,761		15%
EBU	1,277		16%	1,220		16%	935		15%	2,497		16%	1,744		15%
All Other	2		—%	4		—%	4		—%	6		—%	10		—%
	$	7,786		$	7,687		$	6,236		$	15,473		$	12,009

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

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

CNBU revenue increased 2% primarily due to increases in bit shipments to client, cloud, and networking markets, partially offset by declines in DRAM average selling prices.
MBU revenue decreased 2% primarily due to declines in mobile DRAM average selling prices partially offset by increases in bit shipments.
SBU revenue increased 2% primarily due to increases in bit shipments of SSDs partially offset by decreases in sales of component products.
EBU revenue increased 5% primarily due to increases in bit shipments to automotive and industrial markets, partially offset by declines in bit shipments to consumer markets.

Changes in revenue for each business unit for the second quarter and first six months of 2022 as compared to the corresponding periods of 2021 were as follows:

CNBU revenue increased 31% and 33%, respectively, primarily due to increases in bit shipments to cloud and networking markets combined with higher average selling prices for DRAM.
MBU revenue increased 4% and 14%, respectively, primarily due to higher average selling prices for mobile DRAM partially offset by declines in NAND bit shipments due to a mix shift in supply to SSDs.
SBU revenue increased 38% and 32%, respectively, primarily due to increases in bit shipments for NAND products and higher average selling prices for NAND.
EBU revenue increased 37% and 43%, respectively, primarily due to increases in bit shipments driven by strong demand growth in automotive and industrial markets combined with improved pricing for DRAM.

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Operating Income (Loss) by Business Unit


	Second Quarter			First Quarter			Second Quarter			Six months ended
	2022			2022			2021			2022			2021

CNBU	$	1,562	45%	$	1,524	45%	$	709	27%	$	3,086	45%	$	1,192	23%
MBU	588		31%	624		33%	464		26%	1,212		32%	834		25%
SBU	178		15%	152		13%	(59)		(7)%	330		14%	(55)		(3)%
EBU	421		33%	422		35%	141		15%	843		34%	257		15%
All Other	1		50%	3		75%	2		50%	4		67%	2		20%
	$	2,750		$	2,725		$	1,257		$	5,475		$	2,230

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 second quarter of 2022 as compared to the first quarter of 2022 were as follows:

CNBU operating income increased primarily due to higher bit shipments and manufacturing cost reductions partially offset by declines in DRAM average selling prices and higher R&D expenses.
MBU operating income decreased primarily due to declines in mobile DRAM average selling prices and higher R&D expenses, partially offset by manufacturing cost reductions.
SBU operating income increased primarily due to higher margins on SSDs.
EBU operating income was relatively unchanged.

Changes in operating income or loss for each business unit for the second quarter and first six months of 2022 as compared to the corresponding periods of 2021 were as follows:

CNBU operating income increased primarily due to higher average selling prices, increases in bit shipments, and manufacturing cost reductions.
MBU operating income increased primarily due to increases in mobile DRAM average selling prices and NAND cost reductions, partially offset by higher R&D expenses.
SBU operating income increased primarily due to increases in average selling prices, manufacturing cost reductions, and increases in bit shipments, partially offset by higher R&D expenses.
EBU operating income increased primarily due to manufacturing cost reductions from an increasing mix of leading edge bits, higher bit shipments, and improved DRAM pricing in industrial and consumer markets.

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 second quarter of 2022 were 11% higher as compared to the first quarter of 2022 primarily due to higher employee compensation as a result of increases in headcount and variable pay. R&D expenses for the second quarter and first six months of 2022 were 24% and 17% higher, respectively, as compared to the corresponding periods 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 second quarter of 2022 were relatively unchanged as compared to the first quarter of 2022. SG&A expenses for the second quarter and first six months of 2022 increased 23% and 22%, respectively, as compared to the corresponding periods of 2021, primarily due to increases in employee compensation, legal fees, professional services, and advertising.

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


	Second Quarter			First Quarter			Second Quarter			Six months ended
	2022			2022			2021			2022			2021

Income before taxes	$	2,509		$	2,521		$	635		$	5,030		$	1,476
Income tax (provision) benefit	(255)			(219)			(48)			(474)			(99)
Effective tax rate	10.2		%	8.7		%	7.6		%	9.4		%	6.7		%

Changes to our effective tax rate in the periods presented were primarily due to 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 $304 million (benefiting our diluted earnings per share by $0.27) for the second quarter of 2022, $290 million ($0.26 per diluted share) for the first quarter of 2022, $45 million ($0.04 per diluted share) for the second quarter of 2021, $594 million ($0.53 per diluted share) for the first six months of 2022, and $101 million ($0.09 per diluted share) for the first six months of 2021.

On March 16, 2022, the Idaho governor signed a new law that is expected to reduce our Idaho taxable income and as a result, we do not expect to utilize our tax credits in Idaho for the foreseeable future. We are in the process of assessing the impact of the new law but currently estimate it to result in a valuation allowance against Idaho’s net deferred tax assets and an increase to tax expense of approximately $200 million in the third quarter of 2022.

Beginning in 2023, provisions in the Tax Cuts and Jobs Act of 2017 will require us to capitalize and amortize R&D expenditures rather than deducting the costs as incurred. Unless the effective date is deferred or the law is repealed, we expect a low-single-digit increase to our effective tax rate for several years.

Various tax reforms are being considered in multiple jurisdictions that, if enacted, contain provisions that could increase our tax expense. We continue to monitor the potential impact of these various tax reform proposals 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 March 3, 2022, $2.50 billion was available to draw under our Revolving Credit Facility.

Cash and marketable investments totaled $11.84 billion as of March 3, 2022 and $10.40 billion as of September 2, 2021. Our cash and 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 March 3, 2022, $5.27 billion of our cash and marketable investments was held by our foreign subsidiaries.

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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. 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 March 3, 2022, we had purchase obligations of approximately $2.96 billion for the acquisition of property, plant, and equipment, of which approximately $2.55 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.”

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 Rule 10b5-1 trading plans. 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 March 3, 2022, we have repurchased an aggregate of $4.70 billion of the authorized amount. See “Item 1. Financial Statements – Notes to Consolidated Financial Statements – Equity.”

On March 29, 2022, our Board of Directors declared a quarterly dividend of $0.10 per share, payable in cash on April 26, 2022, to shareholders of record as of the close of business on April 11, 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


	Six months ended
	2022		2021

Net cash provided by operating activities	$	7,566	$	5,024
Net cash provided by (used for) investing activities	(5,176)		(5,974)
Net cash provided by (used for) financing activities	(979)		(209)
Effect of changes in currency exchange rates on cash, cash equivalents, and restricted cash	(16)		43
Net increase (decrease) in cash, cash equivalents, and restricted cash	$	1,395	$	(1,116)

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 six months of 2022 as compared to the first six months of 2021 was primarily due to higher net income adjusted for non-cash items, partially offset by an increase in inventories.

Investing Activities: For the first six months of 2022, net cash used for investing activities consisted primarily of $5.88 billion of expenditures for property, plant, and equipment; inflows of $66 million of partner contributions for capital expenditures; $893 million of net inflows from the sale of the Lehi, Utah fab; and $119 million of net outflows from purchases, sales, and maturities of available-for-sale securities.

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For the first six months of 2021, net cash used for investing activities consisted primarily of $5.76 billion of expenditures for property, plant, and equipment; inflows of $183 million of partner contributions for capital expenditures; and $425 million of net outflows from purchases, sales, and maturities of available-for-sale securities.

Financing Activities: For the first six months of 2022, net cash used for financing activities included $1.98 billion of repayments of debt primarily to redeem the 2023 Notes and 2024 Notes, $667 million for the acquisition of 8.4 million shares of our common stock under our $10 billion share repurchase authorization, $224 million of cash payments of dividends to shareholders, $112 million used for stock repurchases related to tax withholdings for employee equity awards, and $105 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.”

For the first six months of 2021, net cash used for financing activities consisted primarily of $123 million for payments on equipment purchase contracts and $103 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.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are affected by changes in currency exchange and interest rates. We are exposed to interest rate risk related to our indebtedness and our investment portfolio. As of March 3, 2022 and September 2, 2021, we had fixed-rate debt of $4.0 billion and $3.9 billion, respectively, and as a result, the fair value of our debt fluctuates with changes in market interest rates. In the first quarter of 2022, we issued new debt and repaid other debt, which significantly increased the average remaining maturity of our fixed-rate debt resulting in increased variability of its fair value from interest rate changes. We estimate that, as of March 3, 2022 and September 2, 2021, a decrease in market interest rates of 1% would increase the fair value of our fixed-rate debt by approximately $375 million and $200 million, respectively.

For further discussion about market risk and sensitivity analysis related to changes in currency exchange rates and interest rates, see “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended September 2, 2021.

Item 4. CONTROLS AND PROCEDURES

An evaluation was carried out under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, the principal executive officer and principal financial officer concluded that those disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including the principal executive officer and principal financial officer, to allow timely decisions regarding disclosure.

During the second quarter of 2022, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a discussion of legal proceedings, see “Part I – Item 3. Legal Proceedings” of our Annual Report on Form 10-K for the year ended September 2, 2021 and the sections titled “Part I. Financial Information – Item 1. Financial Statements – Notes to Consolidated Financial Statements – Contingencies” and “Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q, as well as in our Quarterly Report on Form 10-Q for the first quarter of 2022.

SEC regulations require disclosure of certain proceedings related to environmental matters unless we reasonably believe that the related monetary sanctions, if any, will be less than a specified threshold. We use a threshold of $1 million for this purpose.

Item 1A. RISK FACTORS

In addition to the factors discussed elsewhere in this Form 10-Q, this section discusses important factors which could cause actual results or events to differ materially from those contained in any forward-looking statements made by us. The order of presentation is not necessarily indicative of the level of risk that each factor poses to us. Any of these factors could have a material adverse effect on our business, results of operations, financial condition, or stock price. Our operations could also be affected by other factors that are presently unknown to us or not considered significant.

Risk Factor Summary

Risks Related to Our Business, Operations, and Industry

the effects of the COVID-19 pandemic;
volatility in average selling prices of our products;
our ability to maintain or improve gross margins;
the highly competitive nature of our industry;
our ability to develop and produce new and competitive memory and storage technologies, products, and markets;
dependency on specific customers, concentration of revenue with a select number of customers, and customers who are located internationally;
our international operations, including geopolitical risks;
limited availability and quality of materials, supplies, and capital equipment and dependency on third-party service providers for ourselves and our customers;
products that fail to meet specifications, are defective, or are incompatible with end uses;
disruptions to our manufacturing process from operational issues, natural disasters, or other events;
breaches of our security systems or products, or those of our customers, suppliers, or business partners;
attracting, retaining, and motivating highly skilled employees;
achieving or maintaining certain performance obligations associated with incentives from various governments;
future acquisitions and/or alliances;
restructure charges;
responsible sourcing requirements and related regulations; and
a downturn in the worldwide economy.

Risks Related to Intellectual Property and Litigation

protecting our intellectual property and retaining key employees who are knowledgeable of and develop our intellectual property;
legal proceedings and claims;
allegations of anticompetitive conduct;
claims that our products or manufacturing processes infringe or otherwise violate the intellectual property rights of others or failure to obtain or renew license agreements covering such intellectual property; and
alleged patent infringement complaints in Chinese courts.

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Risks Related to Laws and Regulations

compliance with tariffs, trade restrictions, and/or trade regulations;
tax expense and tax laws in key jurisdictions; and
compliance with laws, regulations, or industry standards, including environmental, social, and governance (“ESG”) considerations.

Risks Related to Capitalization and Financial Markets

our ability to generate sufficient cash flows or obtain access to external financing;
our debt obligations;
changes in foreign currency exchange rates;
counterparty default risk;
volatility in the trading price of our common stock; and
fluctuations in the amount and timing of our common stock repurchases and payment of cash dividends and resulting impacts.

Risks Related to Our Business, Operations, and Industry

The effects of the COVID-19 pandemic could adversely affect our business, results of operations, and financial condition.

The effects of the public health crisis caused by the COVID-19 pandemic and the measures being taken to limit COVID-19’s spread are uncertain and difficult to predict, but may include, and in some cases, have included and may continue to include:

A decrease in short-term and/or long-term demand and/or pricing for our products and global economic volatility that could reduce demand and/or pricing for our products, resulting from the spread of COVID-19 and/or the actions taken by governments, businesses, and/or the general public in an effort to limit exposure to and the spread of COVID-19, such as travel restrictions, quarantines, and business shutdowns or slowdowns;
Negative impacts to our operations, including:

◦reductions in production levels, R&D activities, product development, technology transitions, yield enhancement activities, and qualification activities with our customers, resulting from our efforts to mitigate the impact of COVID-19 through measures we have enacted at our locations around the world in an effort to protect our employees’ and contractors’ health and well-being, including working from home, limiting the number of meeting attendees, reducing the number of people in certain of our sites at any one time, quarantines of team members, contractors, or vendors who are at risk of contracting, or have contracted, COVID-19, and limiting employee travel;

◦increased costs resulting from our efforts to mitigate the impact of COVID-19 through physical-distancing measures, working from home, upgrades to our sites, COVID-19 testing and vaccination, enhanced cleaning measures, and the increased use of personal protective equipment at our sites;

◦increased costs for, or unavailability of, transportation, raw materials, components, electricity and/or other energy sources, or other inputs necessary for the operation of our business;

◦reductions in, or cessation of operations at any site or in any jurisdiction resulting from government restrictions on movement and/or business operations or our measures to prevent and/or mitigate the spread of COVID-19 at one or more of our sites, such as we have experienced at some of our facilities from time to time since the start of the COVID-19 pandemic;

◦our inability to continue, or increased costs of, construction projects due to delays in obtaining materials, equipment, labor, engineering services, government permits, or any other essential aspect of projects, which could impact our ability to introduce new technologies, reduce costs, or meet customer demand; and

◦disruptions to our supply chain in connection with the sourcing and transportation of materials, components, equipment and engineering support, and services from or in geographic areas that have been impacted by COVID-19, by efforts to contain the spread of COVID-19, or by follow-on effects on the worldwide supply chain;

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Deterioration of worldwide credit and financial markets that could: limit our ability to obtain external financing to fund our operations and capital expenditures; result in losses on our holdings of cash and investments due to failures of financial institutions and other parties; or result in a higher rate of losses on our accounts receivable due to credit defaults.

While several COVID-19 vaccines have been approved and are available for use in the United States and certain other countries, we are unable to predict how widely utilized the vaccines ultimately will be, whether they will be effective in preventing the symptoms and spread of COVID-19 (including its variant strains), and when or if normal economic activity and business operations will resume.

These effects, alone or taken together, could have a material adverse effect on our business, results of operations, or financial condition. The continuation of the pandemic or expanded or recurring outbreaks could exacerbate the adverse impact of such measures.

Volatility in average selling prices for our semiconductor memory and storage products may adversely affect our business.

We have experienced significant volatility in our average selling prices, including dramatic declines as noted in the table below, and may continue to experience such

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Item 6. EXHIBITS


Exhibit Number	Description of Exhibit	Filed Herewith	Form	Period Ending	Exhibit/ Appendix	Filing Date

31.1	Rule 13a-14(a) Certification of Chief Executive Officer	X
31.2	Rule 13a-14(a) Certification of Interim Chief Financial Officer	X
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350	X
32.2	Certification of Interim Chief Financial Officer Pursuant to 18 U.S.C. 1350	X
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document	X
101.SCH	Inline XBRL Taxonomy Extension Schema Document	X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	X
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)	X

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			Micron Technology, Inc.
			(Registrant)


Date:	March 30, 2022	By:	/s/ Sumit Sadana
			Sumit Sadana
			Executive Vice President, Chief Business Officer and Interim Chief Financial Officer
			(Principal Financial Officer)

			/s/ Scott Allen
			Scott Allen
			Corporate Vice President and Chief Accounting Officer
			(Principal Accounting Officer)