Memory chips are at the center of all devices, helping store and access data in smartphones, computers and the servers training generative artificial intelligence models.
Just three companies make more than 90% of the world’s dynamic random-access memory, or DRAM, chips. With Samsung and SK Hynix both headquartered in South Korea, Idaho-based Micron is the only manufacturer in the U.S. — that has made it the latest target of China’s bans on U.S. technologies.
About a quarter of Micron’s revenue comes from China, and “about half that revenue is at risk,” Micron CEO Sanjay Mehrotra told CNBC in an interview.
Meanwhile, Micron is doubling down on U.S. manufacturing. Its current leading-edge chips are made in Japan and Taiwan, but Micron is aiming to bring advanced memory production to the U.S. starting in 2026 with a new $15 billion chip fabrication plant in Boise, Idaho. Micron celebrated its 45th anniversary in October by pouring the first cement at the new fab.
The facility is located next to Micron’s huge research and development facility, where CNBC got a behind-the-scenes tour.
Micron’s existing research and development facility in Boise, Idaho, shown here on Oct. 6, 2023.
“Memory is very cost-sensitive and we have to get economies of scale to mass produce our chips on a level that meets the market demands,” said Scott Gatzemeier, Micron’s corporate vice president of front end U.S. expansion.
DRAM and NAND memory chips are a cheaper type of semiconductor than the high-powered central processing units from Intel and AMD and graphics processing units that sparked Nvidia’s growth. But multiple memory chips are needed to support each GPU or CPU, so making memory requires more fab space.
That’s why Micron is planning the biggest chip project in U.S. history, spending $100 billion over 20 years to build four 600,000 square foot fabs in upstate New York.
Mehrotra told CNBC that Micron’s goal is to vastly increase the U.S. share of DRAM production, which he said currently sits at just 2%. That production comes from Micron’s fab in Manassas, Virginia. The company is getting assistance from the federal CHIPS and Science Act, which offers billions of dollars to incentivize domestic production.
“With Micron’s investments through CHIPS support in Boise, Idaho, as well as in Syracuse, New York, that 2% over the course of nearly 20 years will be changing to about 15% of the worldwide production coming from the U.S.,” Mehrotra said.
The U.S. share of overall chip manufacturing has plummeted from 37% to 12% in the last three decades, largely because it costs at least 20% more to build and operate a new fab in the U.S. than in Asia. Labor is also cheaper there, the supply chain is more accessible and government incentives have been far greater. That’s why the CHIPS and Science Act set aside $52.7 billion for companies that manufacture in the U.S.
Senate Majority Leader Chuck Schumer, D-N.Y., co-sponsored the bill.
“When it came to chips so essential to everything we do, we had lost that edge,” Schumer told CNBC in an interview. “And if we didn’t get back that edge, not just on chips but on science broadly, we would no longer be the No. 1 economic power in the world.”
Micron and at least 460 other companies have applied for funds from the CHIPS Act. States are also offering incentives to entice chip companies. Micron told CNBC it’s eligible for up to $5.5 billion from the state of New York for the four fabs it’s building just north of Syracuse. New York Gov. Kathy Hochul signed the state’s Green CHIPS Act into law last year.
“If they hadn’t passed the CHIPS and Science Act first, I don’t think it would have been as many incentives as necessary,” Hochul said. “I knew I had to woo them, talk about our incentives, but also we get out of it 50,000 jobs. That’s a good deal for us any day of the week.”
These promises come on the heels of a major price slump for memory chips, which led to layoffs at Micron and SK Hynix, and resulted in Samsung slashing production. Now, Micron is betting big that the memory market will grow.
“The large language learning models and other things like that continue to increase large demand,” Gatzemeier said.
“We’re now moving into things like FaceTime, higher resolution images, movies on demand,” he said. “All of that requires more and more memory to be made available.”
Micron says construction in New York will begin at the end of 2024 and chip production there will start in 2027. With both Idaho and New York fabs online, Mehrotra told CNBC that Micron plans to increase the share of chips it makes in the U.S. from 10% to nearly 60% in the next two decades.
Micron CEO Sanjay Mehrotra shows CNBC’s Katie Tarasov a 300mm silicon wafer at the memory company’s San Jose office on Oct. 2, 2023.
‘Feast or famine’
Micron was founded in 1978 by three chip engineers, along with one of their twin brothers, in the basement of a dental office in Boise. By 1980, it was building its first fab and a year later was pumping out a revolutionarily small 64K DRAM chip. These chips, used for storing bits of data that can be quickly accessed by a CPU, ended up in many of the early PCs.
Gatzemeier, who joined as an intern in 1997, explained the two main kinds of memory: DRAM and NAND.
DRAM is “volatile memory, which means that when the power is removed, it loses all of its information. It’s very fast but has to be, and it sits near the CPU and it’s used for real-time processing,” he said. “NAND flash memory is what’s in your SSDs or your storage cards. And NAND flash is nonvolatile, meaning it’ll still store your memory even when the power’s removed.”
Micron went public in 1984. Memory was a crowded field, but over the years, it has whittled down to just three top players.
“The name of the game is high performance and low cost at the same time,” said Patrick Moorhead, CEO of Moor Insights and Strategy. “Otherwise, you’re going to be blasted out of the market.”
When it comes to the biggest type of memory, DRAM, Samsung is by far the leader, followed by SK Hynix and then Micron. Micron has made 11 acquisitions since 1998, including Texas Instruments’ memory division, Numonyx, Elpida and Inotera.
“For a very long period, they had not invested in a new fab,” said Gaurav Gupta, an analyst at Gartner. “But they were still able to retain their market share by acquiring other smaller memory firms, which were either going out of business or bankrupt.”
Unlike many kinds of chips, memory wasn’t in short supply during the chip shortage. Micron and its competitors saw a major upswing in the pandemic-fueled boom in consumer electronics. Micron’s profits then fell significantly due to weakened demand for PCs and smartphones and a chip oversupply that led to lower prices. It’s a downturn that has affected much of the chip industry.
“When I look at this market over the past 30 years, it’s always feast or famine,” Moorhead said. “We have an oversupply now. But guess what? Give it a couple of months and we will be in an undersupply and prices will go up.”
Even amid the downturn, Mehrotra is optimistic about the growth of Micron’s smartphone business. It supplies memory in phones from Apple, Motorola, Asus and more.
“The mix of smartphones is going more and more toward higher-end smartphones, toward the flagship smartphones, which require more memory as well,” Mehrotra said. “When we look ahead at 2024, we actually expect that year-over-year total worldwide smartphone unit sales will increase.”
Micron is also focused on rapid growth markets such as automotive and AI. The next generation of its most advanced product, High Bandwidth Memory, is set for volume production next year. HBM helps AI models such as ChatGPT remember past conversations and user preferences to generate more humanlike responses.
“It is able to pack 50% more memory capacity in a memory cube,” Mehrotra said. “It is able to give you 50% faster performance and is able to give you about 2.5 times better power and performance efficiency. And these are all the elements that are critically important in AI applications.”
Banned in China
Micron is facing one major specific challenge. In May, China’s cybersecurity administration banned some of its sales to key China infrastructure projects, saying it failed a security review. Last year, the U.S. barred chip companies from supplying China with certain key technologies.
“Micron is absolutely just a pawn in this game right now,” Moorhead said. “They weren’t the first and they were not the last.”
Mehrotra offers a more diplomatic approach.
“It’s very important for U.S. and China to provide an environment to the businesses so that they can invest in a predictable manner,” he said. “And what I can also tell you is that Micron, of course, is totally committed to bringing the value of its technology and products and manufacturing scale to the benefit of our customers across various end markets in China.”
“Micron is obviously trying to diversify its base,” Gartner’s Gupta said. “It has testing and packaging facilities in China. And obviously they are trying to move, diversify out of China.”
China can still rely on chips from Samsung, SK Hynix and smaller Chinese memory makers. That’s because memory is considered a commodity, meaning it’s relatively easy to switch between products from different companies. But that’s not guaranteed to last.
“When we get back to the boom days and Hynix and Samsung can’t fulfill all the volumes, you might see China diving back into Micron and suddenly lifting any restrictions,” Moorhead said.
Moorhead added that China’s cybersecurity risk accusation about Micron is “a front.”
“Compared to a CPU or a GPU system, it’s pretty hard to embed something nefarious into something like storage or memory,” he said. “That would be technology that I have never heard of.”
Schumer led a delegation of senators to visit China in October for a rare meeting with President Xi Jinping, in part to discuss the ban on Micron.
“We think China was being very nasty about this to Micron,” Schumer told CNBC ahead of the visit. “China’s upset with the Biden administration’s very smart prohibition of selling certain types of chip manufacturing equipment to China. But we’re going to stick up for Micron.”
This also isn’t the first time Micron has been at the center of U.S.-China tensions. In 2018, the U.S. accused Chinese chip company Fujian Jinhua of stealing intellectual property from Micron, a claim the Chinese company denied.
With no slowdown in geopolitical tension, Micron is instead focusing on U.S. expansion. Water and power were both significant reasons Micron settled on New York for its biggest project.
A rendering of Micron’s planned four memory chip fabs it will build north of Syracuse, New York, spending $100 billion over the next 20 years.
“Not just the Finger Lakes, but two Great Lakes: Lake Erie and Lake Ontario,” Hochul said. “There’s plentiful water and low-cost power generated primarily by hydroelectric and wind and solar. So we’re ready for it. We know it’s going to be a transition, but that’s what we want to do.”
Micron said each of its new fabs will use the equivalent of 25 Olympic-size swimming pools worth of water each day, with a goal of reusing or recycling 75% of that. Micron will also use the same amount of energy required to power some 25,000 homes.
“The energy costs are, interestingly enough, lower in the United States than most parts of the world,” Moorhead said. “People are more expensive in the United States, and so is the materials and the cost to build that factory. But that gap is narrowing over time.”
In Arizona, the world’s advanced chip leader, Taiwan Semiconductor Manufacturing Company, recently blamed a shortage of skilled labor for delays to its massive $40 billion fab under construction.
“That won’t happen in New York because we already have a legacy,” Hochul said. “We have Wolfspeed, we have GlobalFoundries. So this is not a new industry to us.”
Micron runs a Chip Camp in Boise for middle schoolers, which Gatzemeier’s daughter attended over the summer, and is investing in university programs to feed the pipeline for future semiconductor engineers.
“We’re actively starting our hiring ramp now,” Gatzemeier said. “We’ve started aggressively targeting all the universities. We’re also really going to draw on the global resources that Micron has across the world and bring in some of that semiconductor expertise to help train these new team members.”