Micron Technology SWOT and PESTLE Analysis

Strength

1. A strong and reputed brand portfolio: Through its global brands like Micron, Crucial and Ballistix, the company is able to offer the industry’s broadest portfolio of memory and storage products for the latest application in a variety of fields. Over the years, nearly a period spanning over four decades, the company has been able to build this strong brand portfolio which is helping people to transform the way they use information in their daily life. This rich product diversity is extremely useful to the organization for its expansion plans into new product categories. With swelling demand of storage and technology solutions in diverse fields of automobile, Virtual glasses, smart watches, 4K televisions, Industrial IOT, High end mobile device sophistication, Networking solutions in-between devices, Cloud computing and Large servers, there is massive growth potential in some of these high scope areas where Micron can gain market share and continue to leverage its expertise through its world class brands.

2. Reliable network of suppliers: Micron Technology practices very stringent Suppliers Quality Requirement protocols which it diligently follows. It works towards a mutually profitable relationship that reduces risk, provides for compliance and business continuity, and goes beyond competitive pricing. All its suppliers follow RBA standard of labor, health, safety, environment, ethics and management system, regardless of the local laws or customs cradled by any supplier. The company even claims to address strongly any conflict material sourcing that may be directly or indirectly supporting civil disobedience or human right abuses in the Democratic Republic of the Congo (DRC) or adjoining countries. Every year the American technology giant runs the Micron Technology’s Award program for encouraging its suppliers to better business in future and reinforcing its relationship with them for long term sustainability and seamless business operations.

3. Increased manufacturing scale through successful acquisitions, expansion, and partnerships: Micron Technology manufactures their products at state-of-the-art, wholly-owned and joint venture facilities located in Taiwan, Singapore, the United States, Japan, and China and also employ subcontractors to run specific manufacturing processes. In recent years, the Company has ramped up manufacturing scale massively by engaging in successful acquisitions and joint ventures. Right from its flagship major acquisition of Toshiba’s commodity DRAM operations at Dominion Semiconductor, LLC (Subsidiary of Toshiba Corporation of Japan, located at Manassas, Virginia) in the year 2002, the company has conducted a series of successful mergers and acquisitions which are highlighted below. The acquisition of Numinyx B.V. from Intel in Feb 2010, helped Micron to further diversify its business amid the booming mobile device market as smart-phones nurse a growing need of expanding memory. Again in 2013, Elpida Memory Inc. and Rexchip Electronic Corporation was acquired which improved the production capacity of the company by 45%. Fiscal 2015 was a year full of acquisitions after the company was named #1 in Top 50 Employers by Electronic Design Magazine some of which are Tidal systems, Convey Computer, and Pico Computing thus strengthening its market space, particularly in DRAM. Micron Technology was successful in merging all these different companies into itself very smoothly. The Company even strategically divested Lexar - one of its famous brands to stay focused on its core and upcoming businesses. The company in the last few years had been able to streamline its operations and supply chain through vertical integration and has reached the #150 spot among fortune 500 American companies in terms of revenue.

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Weakness

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Opportunity

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Threat

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Political

1. Micron will most likely come under scrutiny of all US-based tech companies: Since Micron is one of the biggest suppliers of DRAM and NAND with half of its sales coming from China it is facing the heat of US-China trade wars directly. US has put restrictions on any US company which is selling components or parts to Chinese telecom companies without government approval. The move has been to tangle Huawei, of which Micron is the fifth largest supplier. The company gets 14% of its revenue from large Chinese firms Huawei tech & ZTE Corporation. This move is likely to face a backlash in China and thus putting Micron’s sales and stock under pressure. Also, the demand for DRAM and NAND is weak with plenty of supply available, which works in favor of buyers looking to switch suppliers.

2. Restrictions for MMJ in Japan: Micron Memory Japan (MMJ) which started doing corporate reorganization since 2012, but it was prohibited from paying dividends, including any cash dividends. Also pursuant to an order of the Tokyo District court will be a subject to approval of the legal trustee. Thus assets of MMJ are not available for the rest of the micron technology for use so its money is struck in that venture which it can’t do much about. Micron have to use the external money for its proceedings as a result it will be able to generate sufficient cash flows, use cash held by MMJ to fund its capital expenditure, access capital market and find other sources of financing to fund its operations, make debt payments, and make adequate capital investments to remain competitive in terms of technology development and cost efficiency.

3. Governments being partial towards state owned companies: In the semiconductor space micron faces cutthroat competition from firms like Intel, Samsung Electronics, SK Hynix Ltd., Toshiba Memory corporations, and western Digital Corporation. Many of these competitors are large corporations or conglomerates that may have greater resources to invest in technology, capitalize on growth opportunities, and withstand downturns in the semiconductor markets in which they compete. This put micron at a competitive disadvantage on the top of that many governments provide favor to some company mostly to state owned players to create an entry barrier for the new entrants like providing significant assistance, financial or otherwise, or may intervene in support of a national industries and/or competitor. E.g. Micron is facing a threat of increasing competition as a result of significant investment in the semiconductor industry by the Chinese government. If government is continuously interfering and investing in its own state owned companies then the competitive nature of this industry could have a material adverse effect on its business, results of operations, or financial conditions.

4. Reduction in the US corporate tax: The reduction in the US corporate tax rate from 35 percent to 21 percent has created a favorable business environment for companies in the US semiconductor industry. The act encourages investments in the US, thus, making semiconductor companies more competitive for research, design, and manufacturing. The new act provides 100% tax exemption on dividends received by US companies from their foreign subsidiaries in which they have at least 10% stake. The act allows a minimum 10.5% tax on the foreign profits of US companies. This rate includes the tax collected by local authorities where the profit is earned. These provisions can work well for companies such as Intel and Micron Technology (MU), which annually spend $10 B and $5 B, respectively on upgrading their fabrication facilities. This will benefit all US based companies who earns more than 80% of its revenues overseas.

Economic

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Social

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Technological

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Legal

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Environmental

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