Free
Message: e.Digital Corporation v. Huawei - dismissed with Prejudice

D. Mark Durcan

Chief Executive Officer, Micron Technology, Inc.

.media-carousel .media-carousel-content .width-210 div{ width:210px; }

D. Mark Durcan
Micron Technology, Inc.

CEO Q&A

We are in an environment where for the first time we’re seeing the beginning of a real convergence of memory and processing. That’s exciting because it presents the opportunity to think about new ways of solving problems and of partitioning data, new ways of driving value for the customer and enabling solutions that couldn’t even happen before.

PwC met with Durcan as part of our 2015 CEO Survey interview program, a series designed to gain insights on how leaders are setting a course for growth.

The interview has been edited and condensed.

PwC: Where do you see the US economy and the global economy, especially in Micron’s key international markets, going over the next 12 months and then looking out over the next three years?

Mark Durcan: When we think about the US economy, we’re very bullish. We see that as the center of strength for infrastructure build-out and for all the things that go into the cloud-computing networks for mobile devices around the world. With the currency where it is, that continued strength will be a tail wind for the US economy.

When we think about the global economy, things are certainly slower in China, but we’re pretty bullish on our opportunities in the consumer market there. In Europe, although there is definitely a head wind in the economy, we like what we see in certain segments. Certainly in the automotive industry, we see some pretty good growth there.

Back to top >

PwC: As you consider each of Micron’s business segments and your product portfolio, where do you see most of the company’s growth coming from over the next year?

Mark Durcan: For us, growth always has two meanings. There’s growth in bits, and then there’s growth in revenue. Growth in bits for us is clearly going to be in the mobile arena. There’s such an explosion in the number of consumers demanding mobile service around the world. That’s going to be a big market for our products in terms of bits, and over time that’s a good market for us to add value for customers in differentiated ways in terms of power consumption as well.

The bigger opportunity for Micron, from a revenue and margin perspective, is in some of the slightly slower-growing markets where we have the opportunity to differentiate in more fundamental ways. In the enterprise and data center markets, there’s huge opportunity to continue providing differentiated solutions, whether it’s nonvolatile storage systems or optimized memory solutions for high-performance computing or networking.

Back to top >

PwC: Your acquisition of Elpida has been referred to as a game changer. Is that an apt description?

Mark Durcan: The acquisition of Elpida for Micron was certainly an important event, but I don’t know if I would call it a game changer as opposed to the right deal at the right time. There are trends in the semiconductor industry that have to do with what’s going on with customers, with technology, with the competitive environment. For Micron, the Elpida deal was significant because it brought us a lot of capacity at the right time and consolidated the supply base at the right time. It was another step in a migration that’s been happening relative to consolidation and adding to our 300-millimeter capacity and broadening our product portfolio.

In aggregate, it made a big difference to us, and we’re certainly glad that we have the larger team and larger presence today.

Back to top >

PwC: Are there more threats to your growth today? What are the major impediments to Micron’s growth that you’re most concerned about?

Mark Durcan: The semiconductor industry is very dynamic, and there are always many threats to deal with. In particular, we worry about the slowing of Moore’s Law [that overall processing power for computers will double every two years] and what the implications of that are. It’s a threat, but it’s also a huge opportunity. As we are able to deliver less and less bits to the marketplace through technology migration, we’re also able to deliver more and more differentiated solutions and penetrate more market segments.

The big threat to us is making sure we can adapt quickly enough and get close enough to our customers so that we can deliver the solutions they want for the future as opposed to pushing technology that just drives cost.

Back to top >

PwC: Do you think that Micron will need to take more risks to successfully compete over the rest of this decade than it did over the previous decade?

Mark Durcan: Our business has always been very risky, but when we think about the risks we have going forward, they’re not more, they’re not less. They’re just different. The risks we’ve dealt with historically are around capital deployment, when to invest, how to invest and capacity. The risks we encounter going forward are, which customers do we get really close to, and how do we deploy our technology in ways that create value add for the customers? It’s a different dynamic and a different type of risk, but one that provides lots of opportunity as well.

Back to top >

PwC: And keeps you nimble and ready to adjust to changes in the marketplace?

Mark Durcan: Agility is always critical in the memory business. It’s one of the most volatile segments of the economy, so we’re always focused on agility. But today we’re also focused on building new capabilities, new products, and the infrastructure to deliver differentiated value. That’s a different kind of agility for us. It’s not about getting the right component to the customer. It’s about getting the right end system to the customer.

Back to top >

PwC: Where do you think the semiconductor industry is headed? What are the key trends that you see, especially surrounding consolidation, and how will those trends affect your customers, as well as your investors?

Mark Durcan: It’s a very exciting time in the memory industry right now. We’re dealing with dynamics that we haven’t encountered in the past. The movement of storage from hard drives to solid-state drives is creating a disruption in the storage environment that we haven’t seen since the transition from tape drives to hard drives. In fact, it’s an even bigger transition, because now we have the ability to change the way storage is used in interfaces with processors and in systems.

We have the ability to dramatically change the cost structure in the enterprise and the data center. We are in an environment where for the first time we’re seeing the beginning of a real convergence of memory and processing. That’s exciting because it presents the opportunity to think about new ways of solving problems and of partitioning data, new ways of driving value for the customer and enabling solutions that couldn’t even happen before.

Back to top >

PwC: Do you foresee any change in the competitive landscape in the near future? One analysis stated that the memory industry has become a true oligopoly.

Mark Durcan: If you took a snapshot today, one would say that the memory industry is an oligopoly, but I don’t know that that’s a steady state. Every day we’ve got to make sure we’re creating value for the future and differentiating what we deliver to the customer, because the market around us is so dynamic. Over time, providing just components in a component oligopoly is not sufficient for success and not sufficient to have the shareholder return that we want.

Yes, there is concentration in the supply of components, but there’s no lack of innovation in the end memory systems that people want to buy. In that environment, and in an environment where new technologies will enter the marketplace over time, we have to still be nimble and still think innovatively about how to add value for the customer tomorrow. Is it a new system, is it value-added software and firmware on top of our components, is it using memory in ways that memory hasn’t been used before to solve security problems or to solve large data analytic problems? Those are all opportunities for us in the environment of today.

Back to top >

PwC: Considering the growth of the memory industry in China, is that a competitive landscape that you see impacting the industry?

Mark Durcan: The importance of China to Micron is hard to overstate. It’s a fabulous, growing consumer market, but it’s also a geography where we have a significant manufacturing presence and development capabilities. But China is also trying to grow its own semiconductor industry very rapidly.

We believe there are opportunities to interact with Chinese companies, but we also believe that over time there will be new companies that potentially compete from here and there with Micron. That’s nothing new to us. That’s nothing that we shy away from. Competition is great, and it helps make us stronger, and we look forward to working with and competing with Chinese companies as we move into the future together.

There will be new entrants, not necessarily manufacturing components in the memory industry. They’ll be competing in different places in the value chain with different types of memory systems, and that is a good thing, because innovation is what will create new markets for the future.

New entrants into memory component manufacturing have a tough hurdle to get over. There is high capital expense and significant ongoing technology development required.

So it’s probably the toughest place in the semiconductor industry for a new entrant to engage. That doesn’t mean it couldn’t happen, but it’s very difficult. As long as the end customers are getting the solutions they need from the existing suppliers, my guess would be we’re not going to see any significant new entrants in the component space any time soon.

Back to top >

PwC: Considering companies that are disrupting business models and reshaping industries, do you anticipate any disruptive changes, particularly in technology, that could redraw your industry’s boundaries over the next few years?

Mark Durcan: It’s a very interesting time in the semiconductor industry. We’re seeing a change in the entire value chain and how companies compete, who are customers and who are competitors, who are customers’ customers. That whole landscape is changing, and so we’re going to see disruption in the value chain and the supply chain. It can be as simple as customers today are partners of tomorrow, or it can be as disruptive as entire new ways of valuing the products that Micron, at least, builds.

In some of the most disruptive new business models, we’re seeing goods that historically were purchased becoming free. If you think about information technology today, in many of these business models, the value is the information, not the underlying hardware. Micron needs to contemplate how we’re providing solutions for our customers, not just hardware.

Back to top >

PwC: What changes, if any, are you planning to Micron’s businesses in order to lead and stay competitive in the face of these types of disruptions?

Mark Durcan: Micron is focused on adding capabilities and developing customer intimacy, because to deliver value for our customers, whoever they may turn out to be, we have to have a deep knowledge of what problems they’re trying to solve and make sure the solutions we bring are differentiated and provide value to the end customer in a way they can appreciate beyond just a component.

Back to top >

PwC: In your industry and others, we’re seeing an increase in merger and acquisition activity, consolidations, conglomerates. Is it likely that organizations will increasingly enter and compete in sectors other than their own?

Mark Durcan: Just about anything is possible in M&A today. These things are always cyclical in nature. Sometimes you have a lot of M&A at the peak of a cycle, sometimes at the bottom of a cycle. With the turmoil in business models that exists today, and the maturing of the networking era, the opportunity for M&A up and down the value chain is as high as it’s ever been. We will see businesses engage in M&A in a way that vertically integrates them and ensures that they can get as close to the final customers as they possibly can.

Back to top >

PwC: Are partnerships and joint ventures critical to Micron’s strategy?

Mark Durcan: Success in our business is all about innovation, and to the extent we can bring partnerships into the mix in order to foster innovation, we’re going to do it every time. We’ve got a number of different and exciting partnerships today, but in most cases they revolve around getting the right talent at the table to bringing the right solution to the customer.

That might be in a new memory technology where we need input from enablers and other pieces of the end system. Or it might be in a consumer application where we want to make sure we have the right information going into the definition of the technology so we design something that’s optimal.

Partnerships can be around economics, but usually that’s not sufficient to drive the right outcome, because dollars are fungible. Partnerships really pay off when you’re bringing more than just the economics; you’re bringing the mind share and the capability to deliver something that’s game changing.

In our business, development is a big investment, and sometimes we engage in partnerships in a way that brings real economic value to our business model. If you make what might be a many hundreds of millions of dollars investment in new technology, having partners to share the risk on the bets you’re placing on the table is a nice thing to have. You can cover more technology areas and diversify your risk.

What’s more important is making sure that the solutions you’re developing are the real winners, and partnerships are very important from that perspective as well.

Another thing that comes with partnerships is that once a technology is developed, sometimes it can have application in many different spaces. Those aren’t necessarily always the places where Micron wants to focus, so having a partner at the table that can take the technology and deploy it in a slightly different piece of the market, or in a way that is not dead center of Micron’s bull’s-eye, creates more economic value. Whenever you’re creating a bigger pie, there’s more to share.

Back to top >

PwC: Are your partnership structures and goals different today than they were a few years ago, and, if so, what are the factors?

Mark Durcan: Over time, partnerships always mature and change. Today more of our partnerships are around technology development. Maybe historically more of them were around manufacturing capacity. That’s just the natural evolution of where the semiconductor industry has gone.

At least for memory, we’re starting to see a de-commoditization of the business. With that comes added emphasis on differentiated solutions and getting the right product to the right customer at the right time, as opposed to the same product as your competition at the lowest cost point.

Back to top >

PwC: What barriers and challenges do you face with regard to partnerships and strategic alliances, including your dependence on suppliers?

Mark Durcan: The toughest thing about partnerships is making sure both partners have a clear vision as to what they’re going to do with the output of the partnership. When I think about suppliers, it’s usually relatively easy to craft an agreement that contemplates exactly how both Micron and the supplier are going to use the output from the partnership.

It could be in products they sell to other competitors, with a timeline or at a differentiated cost point. Micron’s partnerships with our competitors in the marketplace—and we do that from time to time—are more about the focus of the competitor and Micron’s focus. When one can get comfortable that there is enough value in the collaboration and in the innovation that comes with that relative to the cost of having a competitor in the marketplace with a slightly different solution, but one that, nonetheless, is competitive with the one you plan to deploy, you can still reach the conclusion that the partnership has significant value, and we have many like that today.

Back to top >

PwC: Looking at the rapid rise of connected wireless devices, cloud computing, data analytics, and other digital technologies, where is the greatest business value for Micron? Where is the business value for your customers?

Mark Durcan: At Micron we play in so many segments that we feel we can add value across the entire IT infrastructure. In the mobile client, we can do things that are innovative in driving down power and improving performance in mobile systems, whether it’s from a form factor perspective, bandwidth perspective or simply a lower cost point.

When we think about the enterprise or the cloud, there are things we can do, from a storage perspective, that are revolutionary in terms of how memory is tiered and how accessible it is to mobile clients in the marketplace. In the automotive industry, it’s a whole new world of not only the infotainment, but the networks that are deployed and how those memory products can be optimized for networks in that environment.

In networking, we’re developing products that may not actually be thought of primarily as memory, but look like memory internally and can be used for cybersecurity or for analyzing data streams in real time. There are many areas in the IT industry where Micron can bring differentiated value, and we’re focused on all of them.

Our focus is making sure we’re covering all those segments—medical and industrial as well—in a way that optimizes the end solution for that particular application.

Back to top >

PwC: How much is cybersecurity a concern for Micron as far as your development, the end products, and your partnerships?

Mark Durcan: All people worry about cybersecurity. It impacts us in terms of how we run our business, but also opportunities in the marketplace, how it impacts our customers and their ability to deploy information technology.

There’s no trend more significant than people’s concerns about the security of their networks and their data. At Micron, we worry about protecting our intellectual property inside the company, but, as important, we worry about developing memory solutions for the future that will provide additional security in a dangerous world.

Back to top >

PwC: Considering Micron’s significant investments in R&D, what are the keys to ensuring a strategic and justifiable return on those investments?

Mark Durcan: Nobody’s ever guaranteed a return on their investment in this world, so the key is to make sure you understand your customers and technology trends, and that you execute well. At Micron, we’re focused on all three of those. Customer intimacy today for Micron is job one. When we as the executive team talk to the Micron team members around the world, we’re talking about how our business is so different, we’re only going to be successful if we truly understand our customers’ end demand.

Micron’s investments in R&D cover a broad gamut. It can be pure technology development for advanced memory types, like storage-class memories or high-performance computing solutions for the future. Or it can be investments in firmware and software, and system capability or advanced packaging techniques that support the mobile space.

They all come with varying levels of risk, but there’s risk everywhere. The key for us is targeting the right solution for the right customer at the right time, as well as having a plan to execute and get the solution we want in a timely manner.

Back to top >

PwC: How important is talent diversity and inclusiveness in Micron’s businesses, not only in the US, but in the various foreign markets where you manufacture and market products?

Mark Durcan: Micron is a truly global company. We interact with customers and with technical talent all over the world. We can’t function without diversity. Within a local market, we may have less diversity of a global perspective, but we certainly want to have the global resources we need to interact with those customers and get the best and the brightest from people around the world.

We tend to manage locally, so in any given country, we’ll make sure we have the best and brightest from that location, and we’ll import here in the United States. We import from all over the world. Our mix in any given location depends on our success in identifying the best and brightest that want to live and work in that area.

Back to top >

PwC: Do you see a connection between a diverse workforce and the bottom line, business performance and competitiveness?

Mark Durcan: Today a company without a global workforce is at a significant disadvantage, and that means you have to have diversity, people that can interact in all cultures and all environments and understand what consumers want and need, as well as understand how people think about the value of different solutions. Diversity is a fundamental underpinning of a successful company.

Back to top >

PwC: What is Micron’s strategy toward achieving talent diversity and inclusiveness as you move forward?

Mark Durcan: We’ll go anywhere in the world to find talent, and if we can’t find it in a location where we are, we’ll find it in a new location and keep it there.

We have significant manufacturing capability in China, but we also look there for design expertise, firmware, and software. In the European Union, we have large pockets of nonvolatile memory expertise, as well as folks working on advanced memory systems and products that probably won’t hit the market for five to ten years.

In the United States, we’re all over the country. Wherever we can find memory expertise and memory system knowledge, we’re there. In Japan, we have a large presence. With Micron’s long-term merger and acquisition strategy, we have talent from competitors all over the world, and we continue to build on that wherever we can find it.

Back to top >

PwC: Talk about Micron setting up technical labs for your auto industry businesses. Is that a strategy that you use not only in that arena, but in other ones?

Mark Durcan: Micron’s overwhelming imperative going forward is to get close to our customers. In the automotive industry, we’re setting up labs in close proximity to our automotive customers to make sure we’re working closely with their engineering teams and understanding their needs for the future. But it goes beyond that. We do that with customers in other segments, in particular close relationships with some of the hyper-scale cloud support companies, as well as traditional OEMs that we’ve worked closely with for many years.

Back to top >

PwC: What one capability do you think will be most critical for tomorrow’s CEOs to cultivate in this emerging business environment, and why?

Mark Durcan: Micron’s future is all around value-added differentiated solutions, and that’s different than our past. In Micron’s environment, the most important thing I can do to be a value-added CEO is make sure I understand our customers’ needs in a deep way and then communicate that to my whole team around the globe. They need to understand it as well, and they need to understand not just the high level but all the nuances, so that they can be the best support team for those customers.

Micron has local cultures, as well as a strong global culture. The job of the CEO is to make sure the whole team is functioning seamlessly and effectively. Getting that message out and making sure that we’re all heading in the same direction is critical.

Share
New Message
Please login to post a reply