Micron CEO Sanjay Mehrotra, speaking with CNBC, has shed light on the intricate dynamics behind the current memory chip shortage, emphasizing that the industry’s supply-demand imbalance is not solely attributable to memory manufacturers. Mehrotra argued that aggressive pricing pressures from customers in preceding years significantly hampered the sector’s ability to invest in the necessary capacity to meet the burgeoning demand driven by the artificial intelligence revolution.
“Certain customers drove pricing significantly down in our industry,” Mehrotra stated during an appearance on CNBC’s “Mad Money.” He elaborated that in 2023, memory chip prices plummeted to a mere third of their previous levels. This drastic price erosion pushed companies like Micron into negative gross margins, severely limiting their financial capacity for critical investments in new manufacturing infrastructure precisely when AI-driven demand began to surge. Financial filings confirm this narrative, with Micron reporting a negative gross margin of 7.3% for its fiscal year ending August 2023.
“Companies were losing money. They couldn’t afford it,” Mehrotra explained, highlighting the direct impact on the industry’s investment capabilities. Despite the challenging environment, Micron continued its strategic investments, albeit with significant reductions compared to prior years. Capital expenditures were curtailed to $7.7 billion in fiscal year 2023, down from $12.1 billion in the preceding year.
The tide began to turn as AI-driven demand for memory chips steadily climbed from its 2023 trough. This acceleration became markedly evident last year, providing a substantial boost to Micron’s financial performance. The trend has escalated further in 2026, positioning Micron as one of the stock market’s standout performers. The company’s stock surged by over 240% in the second quarter, adding approximately $920 billion in market value and bringing Micron’s market capitalization to an impressive $1.3 trillion.
Looking ahead, Mehrotra predicts that the supply crunch is likely to persist well beyond 2027. This outlook is underpinned by the protracted timelines required for constructing new semiconductor fabrication plants and the increasing complexity of manufacturing next-generation memory technologies. To address this anticipated gap, Micron is embarking on a substantial investment of roughly $200 billion in manufacturing and research and development. This ambitious undertaking includes the establishment of new memory fabrication facilities in Boise, Idaho, and Syracuse, New York. The Boise project is currently the most advanced, with initial chip production slated to commence in the middle of next year, with subsequent ramp-ups expected. The Boise site is designed to eventually house two fabrication plants.
The impact of this semiconductor scarcity is already rippling beyond the tech industry. Last week, Apple announced price increases on several Mac and iPad models. CEO Tim Cook cited soaring memory and storage costs as “unavoidable,” underscoring how the insatiable demand for AI is translating into higher component costs for consumer electronics. This move by Apple serves as a clear indicator of the widespread economic consequences stemming from the current memory chip supply constraints.
Original article, Author: Tobias. If you wish to reprint this article, please indicate the source:https://aicnbc.com/23327.html
