‘Long-term Indicators For Both Micron And India Are Bullish’

The semiconductor industry has been undergoing some tough times in recent years as supply chain disruptions, Covid-19, geopolitics, wars and economic headwinds continue to affect all nations directly and indirectly. While the chip shortages seem to be easing in parts, there’s the question of how long will the hard times last. Would it last a quarter or several quarters? And how are these disruptions impacting a Semicon giant like Micron in India? BW Businessworld’s Rohit Chintapali caught up with Anand Ramamoorthy, Managing Director at Micron Technology, India, to know more.

Edited Excerpts:

How do you see the semiconductor industry panning out in the near future after mass disruptions? 

Semiconductors have historically been volatile because they have a value chain which is fairly complex. And I was telling my team the other day that there are signals which can be misread, and as a result what happens is inventory begins to start piling up in different parts of the value chain. So, what has happened is we went through the Covid period where we had a significant increase in work from home. This led to an increase in number of devices and gadgets and form factors being sold.

And then, of course, there has been a correction. But the inventory correction hasn’t kept pace with the demand correction, which has led to a little bit of pile-up. Micron has already said that we have inventory with us, we have inventory with our customers, and there is inventory in the channel and distribution. All three have to come to an acceptable level. We call it ‘days of inventory at hand’ before we can start producing more. This quarter is the best example of that inventory glut. And what happens when you have a lot of inventory is that you can still ship, but then pricing becomes a problem. So, just to protect our ASP and pricing, we will be more disciplined about what we ship. Meanwhile, our customers will try to finish up their inventory.

And then of course, the demand vector has also been impacted because of monetary policy, high inflation, US inflation reaching 10 per cent for the first time. Additionally, we have the Ukraine-Russia war and China still going through phases of lockdown. You put them all together – it creates a picture of a demand scenario, which is still not as strong as it used to be a year or two back.

In the last 10 years, 80 per cent of semiconductor chips where memory and it is the heart of computing, and AI. So, we are very bullish about the long-term opportunities. Wherever there is data, there is memory. So long-term, there are no concerns. We have to get through the next few quarters and then come out of it hopefully stronger and better.

How do you expect Micron to perform in the upcoming quarters?

We expect our fiscal year to be challenging. Broadly speaking, it's going to be a bit challenging in the short-term. But we hope to get back to good health in the mid-term and long-term.

How are the challenges on the international front going to impact your business in India?

As India becomes bigger as an economy, we cannot be decoupled from the global economy. But that said, India still is a very high consumption economy. In the past, if there were slowdowns in many parts of the world and India would be buffered because we have a very strong consumption engine. As we get more connected to the global economy, if something happens in other parts of the world – the supply chain disruptions have an implication. It would be safe to assume that there will be implications on the country level.

How will the slowdown impact your hiring plans? 

We have hired very strongly in India. In fact, we have grown to 3,500 plus people in less than four years. These are R&D, engineering and technology roles. We are proud of this ramp up but will be careful and selective in hiring. Earlier this year, we did some level of college hiring. But we will re-look at all our options and be a little more careful and calibrated as we ramp up. Our long-term indicators for both Micron and India are very bullish. This is because India represents almost 80 per cent of our engineering programmes. They have an implication from India, where we are either contributing directly or indirectly, but we are impacting so many programmes. So, clearly to maintain that volume we have to have the right kind of headcount.

Does Micron have any plans of manufacturing in India?

We have manufacturing in many different countries and have a strategic relationship with all the respective governments. They are all keen to grow the semiconductor chain. The Indian government has been extremely active in building a very good policy and we have been a consultant in the whole policy building process. We provided our feedback and inputs and are happy with how it has come out. We like the incentives being offered and we continue to talk to the government about the possibilities.

Do you think India can become a big player in semiconductor manufacturing? 

Remains to be seen. I think the first thing you want to do is have the right policy, which is what the government is currently focused on. Because unless you have the right business, political and economic condition – given the investment levels – no one will come in. So, the phase one of creating that environment is happening. We will see how the response is overtime.

Also Read: ‘For India, Focus Must Be Developing IPs Not Manufacturing Semiconductors’