Chipmaker sharply raises capital expenditure; share price slips in after-hours trade on scale-up concerns

The Micron logo [Reuters]
The Micron logo [Reuters]

Micron Technology, the US memory chipmaker that just posted record earnings, has locked in long-term supply contracts covering more than a third of its projected 2030 sales and plans to sharply expand capital expenditure. The company expects AI-driven demand for HBM and a broader memory supply shortage to persist for years.

CEO Sanjay Mehrotra said on a conference call Wednesday (local time) following the company's fourth-quarter (June–August) earnings release that Micron had signed 26 strategic customer agreements, or SCAs, to date. "We estimate these will represent more than 35 percent of revenue through 2030," he said.

SCAs are long-term supply contracts under which customers commit in advance to future purchase volumes. The number of agreements Micron has signed jumped from 16 in the previous quarter to 26.

"Customer financial commitments have grown to $32 billion, with the majority in the form of cash prepayments," Mehrotra said.

He added that when SCAs and other customer commitments are combined, more than 75 percent of Micron's fiscal 2027 output is already secured. "Memory and storage supply-demand conditions will be significantly tighter in fiscal years 2027 and 2028 than in 2026," he said.

The outlook for HBM was equally upbeat.

Micron said HBM prices in 2027 would be "significantly higher" than this year and forecast that HBM demand would grow faster than conventional DRAM through 2028.

The company also disclosed that NV-HBM — the industry's first customized HBM — will be integrated into Nvidia's next-generation GPU.

To meet rising demand, Micron is sharply increasing capital expenditure.

Chief Financial Officer Mark Murphy said first-quarter capital expenditure is expected to reach approximately $11.5 billion, with the first half of fiscal 2027 projected at around $25 billion, and that spending would increase further in the second half.

That means Micron plans to spend in just the first half of fiscal 2027 an amount roughly equal to its full-year capital expenditure of $27.37 billion in fiscal 2026, putting the full-year figure on track to exceed $50 billion.

Micron's HBM factory in Singapore is set to begin operation in early 2027, with its first plant in Idaho and its Tongluo facility in Taiwan coming online in mid-2027.

Micron's share price was volatile. The stock closed little changed at $1,065.11 in regular trading before climbing into the $1,080 range in after-hours trade immediately after the earnings release.

The shares then retreated to around $1,050 after the capital expenditure expansion plan was announced on the conference call, before paring losses to trade at $1,067.80, up 0.25 percent, as of 7:45 p.m. Eastern time.

Analysts attributed the pullback to lingering concerns about the memory industry's well-known boom-bust cycle, in which aggressive capacity expansion during upturns can lead to oversupply and sharp price declines.


mokiya@heraldcorp.com