In an investor conference call today Micron Technology announced that it would discontinue further development of the 3D XPoint memory that the company had developed in partnership with Intel, phasing out production and selling off the Lehi, Utah fab (pictured) that makes 3D XPoint.
Micron said that it has determined that the market for the product is too small to justify the ongoing high levels of investments needed to successfully commercialize the chip. Readers of The Memory Guy already understand this since both Intel’s Optane losses and Micron’s 3D XPoint losses have been very visible from their earnings statements.
The Memory Guy sees this as a very positive move for Micron both in the short term and the longer term. In the short term, Micron can stop the $400 million in annual losses that stemmed from its production of 3D XPoint while benefiting from the sale of the Lehi fab for which it has no other use. The development resources that have so-far been assigned to 3D XPoint can be re-deployed to products that need help today.
Over the longer term expect for Micron to take a keener focus on markets in which it excels, and to concentrate on higher-volume businesses that afford the company better economies of scale. Micron’s decision should positively impact its profitability, while minimally reducing revenues.
Intel shouldn’t be hurt by this move. Even though Micron’s Lehi fab is Intel’s only source of supply for production volumes of 3D XPoint, Micron has committed to continue to supply 3D XPoint for “The next several quarters” to fulfill existing commitments.
After that there will be a change, but it’s not clear what it will be. Previously Intel planned to produce 3D XPoint at its Dalian China NAND flash fab, but when the company sold its NAND business to SK hynix in October that transaction didn’t include the Optane business.
Since Micron is selling its Lehi fab, Intel could simply provide the highest bid. Another option would be to ramp up manufacturing volume at its Rio Rancho, New Mexico, fab which is now used to run prototype volumes of next-generation 3D XPoint.
Overall we can expect for this action to be a positive for Micron and to have little impact on Intel or Intel customers. Although it was a sudden announcement, it’s a very sensible move.
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