Micron CEO Sanjay Mehrotra said artificial intelligence has changed the economics of the memory industry, creating a stronger and more sustained source of demand for memory chips than the industry has historically experienced.
"Today there is no AI without memory. AI systems need more memory. They need higher performance memory. They need lower power memory," Mehrotra told CNBC's Jim Cramer on Mad Money on Thursday. "So, the value of memory, that equation has totally changed."
The comments came as Micron builds a semiconductor manufacturing complex near its headquarters in Boise, Idaho. The project forms part of the company's planned $250 billion investment in U.S. manufacturing and research, according to CNBC.
The Boise complex is expected to eventually house two fabrication plants, each about the size of 10 football fields. Mehrotra told CNBC that one fab will use enough steel rebar to circle Earth twice. The first Boise fab is expected to start producing wafers in mid-2027.
Demand Growth
Memory has traditionally been a cyclical industry. Manufacturers have tended to increase capacity when demand and prices rise, which can eventually result in excess supply and lower prices.
Mehrotra, an engineer who has spent more than four decades in the semiconductor industry and previously co-founded SanDisk, said AI is creating a more persistent demand driver for memory, according to the CNBC interview.
He said the opportunity is not limited to data centres. Autonomous vehicles, robots and consumer devices with AI capabilities are also expected to need increasing amounts of memory.
"Memory today is essential," Mehrotra told CNBC. "That's why I call it the strategic infrastructure of the AI era."
Supply Deals
The growing importance of memory is also changing how customers work with chip suppliers, Mehrotra said. Customers are increasingly involving memory suppliers earlier in product development rather than choosing components primarily on price.
"We are working closely with them earlier and earlier in their development cycle," he said. "Our customers recognize the value of memory, because memory is what is enabling them to design products that are driving growth engines for them."
Micron remains unable to meet all of the demand from its customers, Mehrotra said.
"All our customers across our end markets will buy everything that we make," he told CNBC. Data-centre customers, he said, are seeking about 50% more supply than Micron can currently commit.
The company is also securing longer-term commitments from customers, giving it greater visibility into future demand. Historically, the memory industry has been more exposed to fluctuations in the spot market.
Micron said during its late-June earnings call that it had signed five-year strategic agreements with 16 customers. Mehrotra told CNBC that the company has entered into more such agreements since then.
"They have committed to taking the supply," Mehrotra said. "So, this gives us assurance of demand."
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