美光科技 (MU) 2002 Q2 法說會逐字稿

Good afternoon ladies and gentlemen. Welcome to Micron Technology second quarter earnings release conference call. At this time all of the participants have been placed on a listen only mode and the floor will be opened for your questions and comments following the presentation. It is now my pleasure to turn the floor over to one of your hosts, Mr. Kip Bedard. You may begin.

Thank you. I'd like to welcome everybody to Micron Technology, second quarter, fiscal year 2002 conference call. On the call today are Steve Appleton, Chairman, CEO, and President, Bill Stover, Vice President Finance and Chief Financial Officer, and Mike Sadler, Vice President of World Wide Sales.

This conference call including audio and slides is also available on Microns' home page on the Internet at www.micron.com. If you have not had an opportunity to review the earnings press release it is available on our web site, again at www.micron.com. The call will be approximately 60 minutes in length.

There will be a tape replay of this call available later this evening at 5:30 p.m. Mountain Standard Time. You may reach that by dialing (973) 341-3080, and use a confirmation code of 3173500. This replay will run through Saturday March 23rd, 2002 at 12:00 a.m. Mountain Standard Time. The web cast replay is available through March 28th, 2002. We encourage you to monitor our web site, again at www.micron.com, throughout the quarter for the most current information on the company including information on the various financial conferences that we will be attending.

During the course of the call we may make projections or other forward-looking statements regarding future events or the future financial performance of the company and industry. We wish to caution you that such statements are predictions and actual events forward ultimately may differ materially. We refer you to the documents the company files on a consolidated basis from time to time with the Securities and Exchange Commission specifically the companies most recent form 10-K and form 10-Q.

These documents contain and identify important factors that could cause the actual results for the company, on a consolidated basis, to materially from those contained in our projections or forward-looking statements. These certain factors can found on the companies' web site.

Although we believe that the expectations reflected in the forward-looking statements are reasonable we cannot guarantee future results, levels of activity, performance, or achievements. We're under no duty to update any of the forward-looking statements after the day of the presentation to conform these statements to actual results. And with that I'd like to turn the power to Mr. Bill Stover, our Chief Financial Officer.

Thanks Kip. For our second quarter earnings sales totaled $6,748,600, and the company had a loss of 30 million or five cents per share. That compares to the immediately preceding quarter sales totaled 424 million and the company reported a loss of $266 million or 44 cents per share.

Our second fiscal quarter also reflecting operations for December, January, and February are certainly a significant improvement over the prior quarter. This period, historically, is a seasonally slow period on the heels of the Christmas consumer buy season. This year the post-Christmas season was in considerably greater strength than anyone foresaw. Average selling prices improved quarter over quarter by approximately 70 percent.

In our Q2

averaged a little more than $2.50. While it's true this percent is a 70 percent increase sounds impressive, we need to remember the price increase product a year ago, at the time this industry was approximately breaking even, was at about $5. I think Mike will provide additional information on current pricing.

The quick notes in the press release point out that the second quarter had no net realizable value adjustment on our DRAM and SRAM inventory, and had a $4 million write down on our flash inventory. Absent the effects of prior inventory write downs, cost of goods sold for the second quarter

, an estimated $260 million. In the best estimate of the amount NRB adjustments remaining in inventory is $160 million.

Financial and administrative expenses remain flat at about approximately 80 million as the company continues to discuss containment efforts. Research and development expanses in the second quarter are mostly reflective of efforts devoted to 256 meg, and five twelve megs,

devices. Micron Technology is in a variable position with cash and liquid investment balances of approximately $1.5 million. With that I'll turn it over to Mike.

Thanks Bill. Strong period of management that peaks industry has continued beyond what would typically been a seasonally slow period. This robust environment has resulted in a

recovery in devices for mainstream dm products over the course of fiscal Q2 and this upward trend has extended beyond the reporting period.

With a strong demand and price recovery we have substantially depleted our finished goods inventory and are now at minimum levels to enable adequate performance of our customer's business models without major supply disruptions. In the computing space, at the present time, our entire customer base is please with the recent strength of decision demand, and they are getting more optimism with respect to the prospects for a broad base market recover in 2002.

Until recently the vast majority of the strength was attributed primarily to consumer buying, but in the past few weeks we have seen multiple signs of life in the commercial sector, specifically with regards to unforecasted memory demands for servers. In addition to this generally bullish shift in demands we continue to benefit from memory content for system explosion.

This dramatic memory context growth is attributed to high rate of Windows XP penetration, proliferation of memory intent of applications, and of course price elasticity associated with dramatic price declines of 2001. While we are keeping steady the content for

developing commercial desktop platforms, it is worth noting, that commercial content is lagging consumer content significantly.

Based on historical norms this is unusual and we have no reason to believe that consumer and commercial platforms will not come balance with respective memory content as we move forward. We continue to proceed on course with two major transitions with the DRAM area. The first a shift to 256 meg evidently is essentially complete as are we reduce the

on 256 meg of a chips in the current quarter than on any other device. The second, a move from single data rate to double data rate is also branching as planned and we anticipate production volume crossover to occur in the second half of calendar 2002.

As I mentioned in last quarters update the networking and wire communications infrastructure business has generally stabilized across the entire customer base. We're rounding the

to include ternary cams. This proud offering adds a nice compliment to our flash, DRAM, and SRAM products and will be critical as high-speed working requirements proliferate.

Wireless hand set business has also come back to life for Micron in recent months. We have commercially re-engaged several customers building two and half g mobile phones with our flash SRAM

products and we continue to work elaborately with customers in defining and developing memory products for next generations more memory intensive platforms.

Throughout our hard work of broadening and industry consolidated efforts we believe that we are on the right track towards defining, developing, and delivering optimal flash solutions to our customers. Now I'll turn it over to Jack.

Thank you Mike. We'd now like to take questions from callers. In the interest of time please limit yourselves to one question. Just a reminder, if you could please pick up the handsets, so when asking a question we can hear you clearly. With that we would like to open it up to questions.

Thank you gentlemen. The floor is now open for questions. Please let the question to come in please numbers one followed by four on the touch-tone phone at this time. If at any point throughout the queue your question has been answered, please remove yourself from the queue by pressing the pound key. Questions will be taken in order they are received and as the gentleman please pick up your handsets to provide optimum sound quality. Thank you. Our first question is coming from

of SoundView Technology. Please state your question.

Thanks, good afternoon. I wonder if you can talk a little about the May quarter production. They've done some adjustments to, sort of, fine tune the cycle times. Is that any closer to coming to an end? And does that imply that you've got a pretty good potential to decrease pretty sharply

.

Yeah Scott, this is Steve. We, as you mentioned, noted that we actually we had the holiday season as well, then we had the organization align, and that took out the production that Bills' already referenced. That, essentially, after that period was over had the paying back, if you will, over the next quarter or two that will be completely restored to the levels that it was before. We are obviously continuing to do our shrinking technology as well as move forward so we will

probably in

as we move forward.

OK. Also Steve is this just basically relative to negotiations with NYNEX. Is there a timeline that you've got straight in your mind here where you start reaching goals and have negotiations that exist? You guys are obviously negotiating this here for quite some time. What's your thinking there as top down perspective?

Well a lot of them are kind of teamwork goals. A lot of

were on the discussions. As you say it has been going on for some time. I would really caution people normally that it is intermittent as we both prepare our positions forward and they go back and talk to their constituents. And we obviously discuss more. It just takes quite a bit of time to do that and in particular when we're halfway across the world. So we're continuing and we feel that we're are all still in discussions and we're just going to keep on moving forward with that until we see something work out that we think is more realistic.

OK thanks very much.

Thank you. Our next question is coming from

of Sanford Bernstein. Please pose your question.

Yeah, hi. Given the ASP's were up so much in the quarter, I was wondering your estimate of the impact of single portion

was in terms of earnings?

They've never simply provided us with specific information on a joint venture. Can indicate to you that there was certainly noticeable margin on that product.

OK thank you.

Thank you. Our next question is coming from John Cross of Morgan Stanley and Company. Please pose your question.

Thank you very much. Can you talk a little bit about inventory, perhaps a little more detail on the comment of finished goods inventory, and the augmented evaluation at the end of the quarter there. Thank you.

I can talk about inventory John. I don't really want to get to specific on what we have in inventory from a volume standpoint, but you're probably aware that the bulk of our customer base today requires a certain amount of inventory be held basically at our site. And we have drawn our inventories, at least of the liquid material, to make sure that we're moving day in and day out, but we've gone down to an absolute minimum with respect to our ability to adequately service the customers. That occurred throughout the quarter. I'm not sure if that addresses the question completely.

In the past you give some indication on, in terms of bits, where it was down

inventory. Does it also hold for work in progress and raw materials that, if I understand the commentary of the bits down, and if they look at dollar amount there?

.

Well the dollar value of inventories increased from 2001, period at the end 451 million up to 548 million, and that largely is the effect that prior quarters have had a net realizable value adjustment which reduced the carrying of the inventory as we said. At Q2 end there is no, in our view, adjustment at the end of Q2.

And John, this is Kip, let me just to reiterate Steve as said earlier as we begin to bring production back on line and get into that upper team sequential early growth you will see some additional

growth as well which I think was part of your question.

OK, thanks a lot.

Thank you. Next question is coming from

of Bear Stearns. Please pose your question.

Actually this is

for Charles. Just a clarification of the 256 megabit, you said that you'd cross over, was that in wafers or bits?

Yeah cheating cross over in the current quarter we're in right now and it's in bits.

OK thanks.

Thank you. Our next question is coming from

of Gerard Klauer. Please pose your question. garrity: Thanks. Mike I wonder if you can comment on what pricing has been like lately. There's been some ups and downs in the spot market and in general is there any major discrepancies now between spot and the contract market. Because you mentioned earlier in the call here that your commercial customers will be coming back on the market. I was just curious if they're worried about their own inventory more than looking an eye forward a bit.

Yes, the best we can tell there is some disparity between what we're hearing about the spot market pricing on them than what the pricing is at the OEM's. I would say that we're not moving a significant amount of any material into the spot market today so we really don't have an accurate gauge on what kind of prices spot market would bear.

There is a disparity we're just hearing about in the four dollar range for a 128 megabit equivalent on the spot market and our OEM pricing is in the, you know, five to low five range. So there is some disparity there. I would say that today all of our output is going to the OEM's. OEM customers are taking everything we can possibly produce right now so there is not a need for us to go into the spot market.

My take on what's available in the spot market is that the product in spot market is very penetrated and what is out there for a variety of reasons is not particularly attractive to the OEM customers. It may be perceived quality issues with models or prospect and so forth but for a variety of reasons the OEM's are not don't appear to be checking out for material in the spot market today.

So from your prospective they're perfectly willing to take product from you, as you say, as you mentioned the five dollar twenty-five cent range at this point. Is that fair enough?

They're taking everything I can produce right now and if I look forward, based on recent input from them, they'll take everything we can produce for the next quarter.

Great thanks very much Mike.

Thank you. Our next question is coming from

of Merrill Lynch. Please pose your question.

Hi this is Joe.

Hi Joe.

Hi.

Couple of, just a quick one for starters. Bill, is that remaining 160 million in NRV inventory likely to flow through the P & L this quarter?

Expecting about half of that to come through Q 3 and just by way of the inventory average costing process it'll trickle in to subsequent quarters.

OK but sort of at least half of it hitting the P & L in the third quarter.

Yep.

And secondly Mike, I've been hearing that that 256 meg parts we were seeing some pricing premiums over 128 in bit terms because of notebook related demand. Is that true?

Yeah, it has been true. Actually in the past, I would say the past couple of months there was a time there where there was a three significant premiums for notebook memory. Specifically, 256 megabit or higher as a notebook DIMM. Obviously they've

supply limitations. My observations of that's kind of shifted over now towards a high density DIMMS built with by four components and by eight components, primarily by

demand. So it's, I think the supply is trying to dial the mix to where is it or the better needs are and it's true 256 meg in general are getting an opinion that it's shifted from the notebook memory towards the server memory here just recently.

Can you give a sense as how much of a premium are we talking $12 or?

We probably couldn't quantify it Joe.

OK and then just one quick confirmation. Kip did you say that some of mid being sequential growth in production is going to go back in widths or prior shipment numbers should not necessarily trek with that?

Actually I was referencing a different question. John's prior question was would we expect some whip increase and start to increase wire through and the answer would be yes. We're not making any comment about, other than what Mike just said, about everything we produce he thinks he going to ship. And we think we'll be in that guidance for this quarter will be effort team kind of arrangement.

In terms of the shipments.

For production.

OK thank you very much.

You bet Joe.

Thank you. Our next question is coming from

of Bank of America. Please pose your question.

Hi good afternoon just a quick one. In the past you guys gave out, or have you given out, any sort of guidelines for kind of density, what percent revenues are at different densities? Can you give a feel of what that would look like in the quarter you just reported?

We have not broken it down by revenues but we have been able to give some reference of wafer tracking or bids. I can tell you that right now we're running close to about single digits on our 64 meg, and we're running about 40 percent or so in 128 meg, and as Mike indicated we're getting pretty close now to surpassing that in terms of 256 meg. So we're in that 40 to 50 percent range in terms of 256 meg bit chips as well.

OK that's great. And then, thank you for that Kip. And then for Mike, just a quick one, you mentioned that the explosion in memory for

. Can you give us an update on there? Do you think the consumer

content is versus the corporate right now? Thank you.

Right now our views share with you the third party agent that we have, and I think it was a slide now shown in the broadcast shown that consumer content, at least according to this board, is that 240 megabytes for systems. Commercial contents at about one and 66 megabytes per system. So there's quite a bit of eldering there in commercial and as we see XP penetration rates increase in the commercial events out there I think we're going to see some nice acceleration there in terms of memory content

.

That's right thanks very much.

Thanks Doug.

Thank you. Our next question is coming from

of Credit Suisse First Boston. Please pose your question.

Thanks hey Mike a quick question on contracts. You probably just went through a recent round of contract negotiations. I'm wondering were there any change to the prices from earlier in the month?

There may have been some changes here and there but in general the pricing has been flat here for the entire month of March.

OK great. And can you give me what kind of premium you might be getting on the contracts DDR today?

Basic prices are very, very close to parity with

.

OK and lastly can you give us any update on what you're doing with 300 millimeter?

Yes sure, I'll jump in. We are moving forward in the R&D stage, which I think we expect probably 200 installations later this year. As we gear up we'll prepare for production and

. This will not allow us to release any production plans yet

that will allow us to move in on the action.

All right thank you.

Thank you. Our next question comes from

of Neuberg-Bergman. Please pose your question.

Hi just a clarification and a question. Did you say that the cost of grossing the third quarter was better than 260 million ?

The reference was, if you did not have the fact of any of the cost being pulled forward, into earlier quarters by the

adjustments that were required by

cost of goods sold in the current quarter would have been 260 million higher.

So if I add that back and adjust it for the depreciation, which is sort of the fixed cost, in my mind, it comes out that your

margin would have been positive. So I'm trying to reason why would you cut back on production if your really minus

.

if you recall we began line thinning back in September. Primarily to do a couple of things, but primarily to become more responsive knowing if we had product transitions in both SDRAM EDR and 128, make that 256 meg, and our customers at the time couldn't give us enough visibility. So we wanted to make sure that we could be efficient and get the cycle times down, which we did very significantly. Of course that ended up having the effect of , in the short term less bids, which we've talked through.

Just one more question. Could you process geometric enterprise, what the production looks at point, at different process technologies?

Sure as you probably recall we were around five percent of our wafer starts at point one three at the end of the year. And as

talked about at the analyst meeting we're now on track worldwide to begin conversion and we should be effectively substantially complete with the point one three about this time next year. Right now we're running about 30 percent, a little less than that at .18, and about 65 percent at .15.

Thank you so much.

You bet.

Thank you. Our next question is coming from

of Salomon Smith Barney. Please pose your question.

Yeah, Mike I want to ask you about the pick up on the server market here in the last couple of weeks. Obviously a couple of weeks does not a trend make. But you seem to think that it was important enough to mention. How much weight are you placing that in terms of possibly just a little bit of an inventory rebuild here, or maybe the start of a bigger wave of spending?

Why I thought it was worth mentioning John was pretty significant in terms of a shift from we detected as primarily consumer driven buying behavior towards something different. I would not call it inventory building on some cases we've the end customer identified from some of our customers from some of these other modules. So I really don't believe this is inventory building based on account of the subject of emotional behaviors from customers, I certainly don't think that they're clamoring to put these server modules on the shelf. The type of parts we're talking about are both 512 meg and one gigabyte registered DIM so very clearly these are going into one piece or two piece servers and we'll see. You know it's going to take an amount of time before we see this as a real trend but it is pretty significant here just in the past couple of weeks.

This first shift that you identified of it's kind in some time or do you get these kinds of blips every couple of months?

For a very significant shift like this that we've seen in the last two or three months that we can specifically connect to servers.

OK but it's nothing like something stronger than you've seen the year or two years or anything like that?

No.

OK. And then second a follow on with regard to cap ex maybe a question to Bill. Can you just review cap ex plans for the year? I don't know if you have a preliminary number for next year, but just a sense of could cap ex be ticking up here a little bit or staying stable?

cap ex for fiscal year '02remains about $1 billion. Still about half of that's going into the

, R&D about 25 percent of that. And I just looked at it geographically you're looking at about three-quarters of it in the US. We've mentioned some of the improvements being made in Italy and Japan. Forward-looking for fiscal year '03 I think there are a number of factors that are going to have to come into play. We don't have good guidance on that yet. The numbers we have been speaking to are without yet have a

clause.

OK what kind of numbers have you been speaking to?

On Capital

forward for fiscal year '03 we throw out another billion dollars again as our place holder reference.

OK but the not including dominion and dominion would theoretically including

be a candidate for the 300 millimeter?

Yeah, this is Steve. Both of those

know what we're capable of. With respect to where we place that source we just haven't decided. And you're right the members that we're talking about we haven't really included the 300 millimeter. I think you have to contend it doesn't include our

either. You have to look at the size of the operations that we have and based on

mentioned and anything behind that would be beyond moving technology forward while the curtains still on the ground.

OK thank you.

Thank you. Our next question's coming from

of Bear Stearns. Please pose your question.

Hi. I don't know how I got on but I pass.

OK it was good to hear from you anyway.

Appreciate you listening, next question.

Our next question comes from

of SoundView Technology. Please pose your question.

Follow up more on what's going on with the migration of certain non DRAMS. What are you doing for

service right now that you've secured some things that are stabilizing a little bit more along the line than wireless? And also it seems to me productions are down into the higher speed DDR. Do you think we're really truly seeing kind of a broadening out here in terms of the

of DRAMS that'll be out in the market at the same time.

I think in terms of, first of all in respect to wafer starts on term flash, still relatively low level, certainly less than ten percent of our total wafer starts are in the S term flash area. You know the most significant thing we're going to see with respect to a volume driver for either in somewhat diversified RAM products or flash products for us are going to be the market penetration. Two and one half G and 3G mobile phones because the memory intensity of these devices is going to increase tremendously, particularly relative to the PC. But there are a variety of other allocations that we're currently, either commercially engaged in order to design our products in. Reduce

to year-end would be an excellent example I think of non-standard DRAM product which is very application specific in networking hardware area. Beyond this point it starts to pick up steam here commercially if not the end of '02certainly calendar 2003. They're several other examples like that but that's probably the best one I can think of.

In terms of the higher speed DDR subject been introduced, how do you feel applying the market?

High speed DDR?

Yeah.

While the highest speed, the demand for the highest DDR product today of volume significance would be in graphics applications in a variety of different computer platforms. But also, you know, we will for main memory applications in computer products we'll be accelerating the speed up of the current DDR products as well as adapting a fall on standards of the current DDR standard. So these devices are going to continue to need higher and higher performance.

Do you think that we're entering a period where there's likely to be a greater brother product out in the market at the same time for main memory.

Oh sure absolutely. I don't think we're entering that period I think we're in that period. And we have been in that period for, I don't know, a year now. As some of these non-PC applications have become pretty significant drivers the memory demands.

OK thanks.

Thank you. Our next question is coming from

of Capital Group. Please pose your question.

Yes, was the line thinning a permanent change or just temporary to respond to the transition.

Well the, on the line thinning, we were obviously to trim out the line a couple of times, and as a result of that we just have lost wafers because of the pretty

on the line. There was a permanent change associated with that but we also

somewhere in other words we had to run it a little bit thinner than you might normally. While we knew what it was on the thicker side, if you want to characterize it that way, so we did a little bit of

, and there was a permanent change as a result.

Will you, with the lower

basis go forward.

I think the thing here is that we wanted to optimize the cycle time so that we could react. And we wouldn't be allowed much cycle time until we did a little experimenting with where that was in the line. It resulted in a permanent reduction of cycle time, I guess is as plain as things go, because I was here

to affect it but now we've said that everything being started, it resulted in a permanent shift while resulting in a permanent reduction

. So, if you talk to people, in the operations

. That's achievable and that is a desirable goal and that's where it comes in.

Another question, 300 million in wafers you said in the past was too expensive. What are those prices doing now?

Well generally they've been coming down. Obviously, depends who you talk to I think if you commit to pretty large volumes you can probably get a $350 to $400 range. If you are not buying a very large volume you're probably still going to pay 500 to 600.

And commercial

what about there stocks and notes?

As I mentioned earlier better than expected. Again if I aggregate what our customers are telling us with respect to memory consumption what they sequentially see counter Q2 and counter Q1. There staying off ten percent of memory consumption, and generally it's going to be kind of a flatish to slightly bound system demand counter to Q2 counter to Q1 which is typically seasonal. I think if you looked at the last ten years you'd see a decrease counter Q2 to counter Q1

about one percent. A typical seasonal is what we're seeing and beyond that there's could be cycles.

Is there server demand for EDO anymore or is that completely gone now?

There is server demand for EDO as well as a demand upgrading a lot of the old, a lot of servers that are out in the field as well. So it's down significantly from where it was, say a year ago, but there are still servers built that utilize EDO memory and there are still a lot of installed servers that require memory upgrades EDO.

I have another question. When you move to Lehi, will you shut down Boise?

When we move to Lehi, I haven't bought a home there yet, myself, but we don't anticipate that we would have to shut any plant down as the result of bringing Lehi home. Obviously as we go through time all facilities will be re-positioned so that's not to say that we could adjust on the capacity a little bit. But we look at that as part of our

extension.

Thank you.

Thanks Steve, appreciate it.

Our next question comes from

of

. Please pose your question.

A couple of questions I think I'll start with Mike. Mike can you give us what is the inventory situation you know the whole industry is closed for two weeks.

You mean the industry inventory?

Yes.

My guess would be in the two-to-four week range.

And the second question is for Bill is that, John asked this question earlier. Just to go back to your inventory the

inventory. The US bill has increased and that is because you've said some of the numbers were misquoted by the inventory adjustment you're supposed to take because of the gap. On a bid, just on the US on a bid basis, what number would be low for the end of February compared to the end of November?

One thing, I think what Bill was saying in his previous discussion was that in prior quarters inventory had been impacted by riding that down to the lower of cost or market. And in this particular quarter it's much closer reflected to actual costs. Does that help you understand the dollar change?

I guess some, yeah I suppose. So that's probably yes.

OK.

Yeah the third question is can give us the

between the SDRAM and the DDR correction right now?

Sure, this must be

. I think in the last, in the first fiscal quarter of the year we were in the mid-teens in terms of our percentage of the DDR. In the quarter we are just reporting on were probably in the 25 to 30 percent range DDR versus SDR. And at same point within the course of the next couple of quarters we will cross over again, but going forward just depends on how rapidly DDR seems to be penetrating.

All right thanks a lot gentlemen.

Thanks

.

Thank you. The next question is coming from

of

. Please pose your question.

This, back on the commercial demand issue, if we could for a minute. Try to judge how much weight to put on this we are looking for some recovery in the commercial side and trying to judge if this the beginning of it, something unusual or something that will be extended for some period of time, in your judgment?

You know I think you're probably a lot better off talking to the system vendors than you would be to us. I am only sharing with you what we're getting, and we're one step removed from the end customers there. So we get a projection of demand of product type from our customers. And the last couple of weeks there have been multiple customers that actually just about every one of them have been pushing us on increased supply of modules can only be housed in servers and that all I can share with you. With respect to be getting any more granularity on that or trying to really assess the strength of it you're probably a lot better off going straight to the system manufacturer.

OK but for the corporate desktop you're not yet I think involved on availability of supply to accelerate on that side?

The products that we supply into either a corporate or a consumer desktop product would be the same so we don't have a lot of visibility when we provide a memory module to our customers when they're going into a corporate or a consumer desktop.

Understood. This

256 megabit devices would to support a move toward a 256 megabyte SIMM going into a lot of these systems. Can we look at that as confirmation that we're seeing this trend accelerate toward the higher memory content.

Sure absolutely yeah, that's one of the reasons for the move to 256 megabit. Of course another would be cost reduction per bit. But I think an answer to your question would be we are shipping more bids, if I'm not mistaken on 56 megabyte models today substantially more of this, on 56 megabyte models today than we are on 28 megs.

We've also seen in the spot market a little spread between, a little more spread open, recently between 128 and 256 meg bit devices. Would that also be consistent with a

board using the 256 megabit DIMMS more broadly and thereby creating a little greater demand outside than for the 128?

I guess it could but based on my assessment of the spot market it is very, very thin traded here in recent weeks. I wouldn't subscribe too much value to any information you get from the spot market.

All right. Thank you.

Thanks Tom.

Thank you. Our next question is coming from

of

. Please pose your questions.

Thank on one of the slides that you put up during presentation noting the cap ex for the industry at 5.8 billion, I believe that was referencing calendar '02. Curious, how does that number compare to what you estimate the industry cap ex be required simply to maintain current production and keep up.

Well I think analysis is you have to look at the installed base and remember it is obsolete in three point five years. If you're not spending that number divided by three point five per year you're not keeping up with technology.

And Steve what was that number divided by three and a half years?

. Basically you'll need to take that number and divide it by that three point five to get the per year upgrade required to keep technology going forward.

Thank you.

Thank you. Our next question is coming from

of

. Please pose your question.

Thanks guys. Most of my questions have been answered. One question I did have was given the

, seeing the content per box, do you have renewed expectations for what demand will be for the industry

.

Supply side or demand side?

On the demand side.

I'll tell you what our customers are telling us again. This is fresh data as of this week. By our gauge what our top looks like twelve, thirteen, fourteen customers telling us it adds up to about 75 percent demand growth for the year.

And supply side, are still sticking with 50 or 60 percent growth?

Yeah the latest we've seen from the various analysts who track it are still in a range, really, of about 35 percent, about 40

.

OK and one other question. I might have missed this part but did you break down the percentage of sales for PC's versus other applications?

We did not break it down for Micron Bill. I do believe we've shown the slide that shows revenue break down and we certainly and we could certainly get that if you'd call us after this call we'd be happy to show you where that slide is in the presentation.

Certainly thanks guys.

You bet.

Thank you. Our next question is coming from

of Prudential Securities. Please pose your question.

Hi it's Tracy

. I think I might have an asked you this but have any of the OEM's customers indicated that you might pare back some of their memory contents for boxes as a result of the

pricing?

Sure I think we've had discussions with, if I'm not mistaken, every one of our customers about the topic. And one of them in particular had indicated they tried to do so on a couple of consumer platforms and found they weren't selling the systems so they quickly brought them back up again.

I think there is no question with the four to five increase in the cost of memory per bit that there is some pressure to limit growth of memory content going forward. You know, I think an example of something that's likely to happen going forward would be that memory would be featured as an off sale item that was very, very inexpensive here as recent as three or four months ago, and it probably would be in this particular scenario. So to extend it there may be some leveling off or some slowing down in terms of the cost in per system but we certainly don't expect a move backwards.

OK and then also in terms of

of the make or is it that shipments is it typically pretty linear or is it rather back end loaded.

In regard to gauge our

we're just kind of looking at each other here around the room to see who can come up with what the norm is and I say we've seen just about everything Tracy. If you recall last year for example it was back end loaded. There have been previous years where all this was front end loaded and some with linears. So the answers to it is pretty tough to talk about how that demand will show up. But I characterize it, right now, is he is currently in pretty good demand and I expect you can continue to see that throughout the quarter.

Great, thanks so much.

Thank you. Our next question is coming from

from

. Please announce your question.

Yes this

my question is are you planning to increase your wafer

for the domain you have.

call is currently running at five k per week. Are you planning to increase that during this quarter?

The REM rave is really fluctuating from what

is trying to do towards lightly before we acquired the facilities. The, I think you could expect the wafer run rave is probably going to be actually more than the three and a half, four k rate. Then it would be running and we actually take over the operation.

Now we obviously in addition to taking over the operation, we're sort of taking on, we have to

our technology. And as a result it was a little difficult for us to give a prediction as to how it would affect the wafer as to time. I can tell you that over time we expect to realize the whole facility, not just half of the facility. It is capable of

thousand

per month. And as we're going through time I think we'll expect to utilize the whole event.

And my second question is now that a lot of chips that are now starting to come back to supporting the new DDR at three, three megahertz. When will you see the output for the demand will be for that type of memory versus DDR?

It would be very difficult for us at least with the information that I have at my fingertips it would be difficult to quantify it really.

So how do plan to for your product mix for your DDR? Do you plan to mix more of the

.

You know in the

the initial DR standards and we will migrate toward DR standards but certainly not in the immediate time frame.

Thank you.

Thank you. Our next question comes from

of

. Please announce your question.

Can you hear me?

Yep.

I notice your current assets and your liabilities took a big pop up there. Is that really....

Yeah, this is Mike I didn't make.

We're having a little bit of confusion on the line. We'll see if we can, I think we heard that question you're talking about current assets took a jump and maybe Bill you would like to answer that.

I think what you're mostly seeing is the effects, yes we do have some growth in receivable by way of product movement, increased ASP's, additional volume, not coming through lines raising the tables. But more likely you're seeing the effect of increases in

accounts we have both growth in deferred tax current assets, and deferred tax liabilities and that's just a function of differing jurisdictions and the operating results in different periods. So there is a gross of backed you're seeing by way of just tax accounts.

And that's a couple of hundred thousand dollars, at least?

A couple of hundred million.

OK yes.

Correct.

With regards to Toshiba, do you have a rough idea when during the quarter that might close?

It's hard to predict exactly because we've got to finish showing. We're expecting, I'd say, for it to close this quarter so that's about as good as I can tell you.

And whenever it closes obviously that would represent upsides to your current guidance.

Yeah, that's right.

Also in regards, can you catalog some depreciation last quarter? Do you have that handy?

Depreciation for Q2 was 291 million and we will be rounding about 300 million a quarter for

going forward. And the cap ex number, well I don't have it at my fingertips, I was thinking it was in the 160 million range. I'll have to follow up with you I missed that.

And the last quarter you said your business in the spot market is very thin. Was that true throughout last quarter or do you have a

.

Yeah it was in the twenty percent range for the last quarter. And based on what we've done here in the first three weeks at the current quarter it's

less than that. And Bill was pretty accurate there, the number for the cap ex for the quarter is about 150 million. OK next question please.

Thank you. Our next question comes from

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. Please post your question.

If you could just repeat the average price for the quarter and the end of the quarter and currently.

The average reference point we gave, 128 megs.

Our Q2 was a little bit more than 250.

The current pricing is in the low five dollar area and at the very end of the quarter, if my memory serves me correctly, it was probably in the four 25 to 450 range.

Thank you.

Yeah Larry thank you for the question. I'd also like to thank everyone else for participating in the call today. If you would please bear with me I need re-page the safe harbor protection language during the course of this call. We may have made forwarding looking statements regarding the company the industry.

These particular forward-looking statements and all other statements that may have been made on this call that are not historical facts are subject to a number of risks and uncertainties and actual results may differ materially. For information on the important factors that may cause actual results to differ materially just refer to our filing with the SEC including the companies most recent 10-Q and 10-K. Thank you.

Thank you very much ladies and gentlemen. This concludes this evenings teleconference. You may all disconnect your line at this time and have a wonderful evening.