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Micron leaps forward with imaging chips for cell phones

Four years from now, Micron Technology will be more than just a computer memory company.

The Boise semiconductor firm that has specialized in personal computer memory since its inception 25 years ago announced Friday it will start a transition in 2004 that its executives hope will make it a stronger — but different — company.

Julie Howard
The Idaho Statesman

http://www.idahostatesman.com/Business/story.asp?ID=59238

Micron´s Steve Appleton, chairman, president and CEO, on Friday said the firm will boost production of its imaging chips, tiny electronic cameras that are used in camera cell phones, digital cameras and some medical supplies.

“It will change the flavor of the company as we move forward,” Appleton said at Micron´s annual analysts´ meeting in Sun Valley.

The shift will not result in a restructuring or layoffs, said the company´s top executive. Instead, it will provide stability for the firm that historically has bounced from billion-dollar profits to billion-dollar losses, he said.

Micron, the world´s second-largest producer of DRAM — dynamic random access memory — is also Idaho´s largest private employer. The firm´s three years of losses, which ended with a break-even quarter late last year, created a ripple effect in Idaho´s economy, reducing collected taxes and contributing to the state´s budget shortfall.

While just 5 percent of Micron´s production is now in imaging chips, that figure could rise to 15 percent by the end of this year, said Appleton, and more resources will be poured into that area over the next four years.

That doesn´t mean the demise of the company´s standing in the industry for DRAM, used predominantly in personal computers. Instead, executives said, the firm will broaden its reach into products that are potentially more stable than DRAM, which sees volatile price swings.

“Today we have critical mass in the DRAM space, but whether that means we have 15 percent or 20 percent of the world market is not going to change our stature,” said Appleton. “As the opportunity arises for more silicon to go in (imaging) sensors, we will do it to make sure we have critical mass in that area.”

The move toward making tiny electronic camera chips from silicon wafers won´t result in another restructuring of the firm, said Appleton, who said current manufacturing workers and process engineers will be able to make the shift. The company laid off 1,800 workers — 1,100 in Boise — last February as part of a large restructuring of the worldwide firm.

Analysts said the planned changes make sense and didn´t come as a surprise.

“They continue to heighten development in the imaging chip area. There were no surprises here,” said John Lau, managing director of research for semiconductors for Banc of America Securities in New York. “They´re looking for the right product mix.”

Lau said that while the U.S. market is slow in adopting the camera phone phenomenon, Japan and other Asian countries are seeing rapid sales. According to market research companies, camera phone sales worldwide are expected to double in 2004 and then double again by 2007.

“Think about it — a year ago, 18 months ago, there was no such thing as a camera phone,” said Lau. “This is a very interesting area, and Micron´s shift comes at the right time.”

Digital still cameras, which also use Micron´s imaging chips, are another growth area, said analysts.

Local economist John Church said Micron´s ability to make a quick leap onto an emerging industry could only help the firm.

“It´s a good thing for Micron to diversify its base and do more than DRAM chips,” said Church. “Imaging is a hot area. Everything has a camera on it these days.”

But don´t expect Micron to transform into an imaging company.

“There are longer-term prospects for DRAM chips although competition is keen,” said Church.

Appleton emphasized to analysts that a move into the imaging industry is not a DRAM de-emphasis. “We are not retreating from the DRAM industry,” said Appleton. “We´re not pulling DRAM out of the market. We´re just not going to grow output as fast as the market.”

Appleton acknowledged that the firm might lose some DRAM market share as it drives production of imaging chips forward.

“There will be a short period of time where we probably won´t have as much growth in DRAM production as we otherwise would have,” said Appleton. “If the demand grows significantly, we won´t be able to keep up. But clearly these new products have a better margin, and we´re pursuing them because we believe our overall margins will be better.”

DRAM sales could be stronger this year even as Micron reworks its product mix.

Stronger personal computer sales are expected in 2004, said Mike Sadler, Micron´s vice president of worldwide sales.

“At the very end of the year, we saw a very strong consumer market for personal computer units,” Sadler told analysts at Friday´s conference.

“We´re also seeing early signs of corporate spending. We´re optimistic there will be more bullish growth in ´04,” he said.

Sadler said demand for personal computers grew by 11 percent in 2003 while memory content per system also continues to grow. The combination of unit sales and memory content growth drives climbing DRAM sales, he said.

Mobile phones are also using more DRAM because they are becoming more complex as consumers require them to perform more functions, said Sadler.

He added that the Asia-Pacific region, most notably Japan, Hong Kong, China and Taiwan, are increasingly important regions for Micron as it increases sales there.

“Those areas are growing faster for us than any other area in the world,” he said.

To offer story ideas or comments, contact Julie Howard
[email protected] or 373-6618

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