>> Announcer: Live from San Francisco, it's theCUBE.
Covering Micron Insight 2019.
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Brought to you by Micron.
>> Hi, everybody, welcome to Pier 27 in San Francisco.
My name is Dave Vellante
and I'm with my co-host, David Floyer.
And you're watching theCUBE,
the leader in live tech coverage.
This is our coverage of Micron Insight 2019, #microninsight.
David, I love this show because, well,
of course we're going to talk about Micron and memories
and DRAMs and NANDs and all that techy stuff.
We're also going to sort of set the tone on this day.
It's a really thought leadership day
and we talk a lot about AI and Edge
and the big mega trends and superpowers, the cloud, mobile,
that are really affecting demand
and it all starts with data.
So, Micron is a company that we're going to talk about
and talk about in detail.
But what are you seeing, David,
as the big trends that are driving demand for bits?
>> For bits.
Well, let's start with the Edge
that you were talking about.
The Edge is growing
and it's going to grow very, very strongly indeed.
It's going to grow with smaller processes,
it's the ARM processors at the Edge
doing inference processing, capturing the data,
and wanting to do that capturing of the data
and the processing of that data
as close to the origin of that data as possible.
So memory and all of the,
the NAND is moving out to the Edge itself.
And it's going to be lots of smaller processes
as opposed to the lots of big processes.
>> Let me ask you a question.
We've been following these markets for many, many years
and, of course, when we started in the business
it was all mainframe, and that was really what drove
the consumption of data, and then the PC changed that.
>> David: Took over, yep.
>> And then that, you used to count markets.
We used to do that all the time,
and there was much more data going to the laptops
and desktops, the Internet began to change that
and of course, cloud sort of re-centralized
a lot of the spending, and a lot of the buying power.
Do you see, is it a pendulum swing again,
is it that dramatic?
Or do you see it as different?
>> Like all big trends, the center still remains.
So, the center now is cloud.
Still mainframes is part of that cloud.
That has to remain, and that is just much more economical
for large-scale processing.
That's the most economical.
However, also the economics of it
is that moving data is very expensive.
It's very expensive in terms of the effort
and it also, when you move data, you lose context.
So, if you want the best context,
and if you want to do things in real time,
you want to process that data in real time
as close to where it was produced as possible.
So, yes, there will be a very big swing
in the amount of processing and the amount
of important processing that happens at the Edge.
>> So, from the standpoint of things like NAND and flash,
Steve Jobs changed everything
when they decided to put flash inside of the iPhone.
>> Actually not the iPhone. >> In the iPod, actually.
>> iPod, yes. >> That drove massive massive,
that was the beginning, the dam breaking,
and what happened is that volumes went through the roof,
cost went down, and that's really when you first predicted
way back in the early part of this decade
that NAND and flash would affect spinning disc,
and it clearly has.
Pricing maybe hasn't come down as fast as we thought
because of supply constraints.
But, nonetheless, it's happening.
And now the prices are coming down more.
You've seen somewhat of an oversupply in NAND.
Prices have come down pretty substantially.
And there's elasticity.
Ever since we've been following this market,
you've seen when prices drop, people buy more.
At the same time, you saw like Pure Storage last quarter
said, well, the prices dropped faster than we thought,
it actually hurt our revenue.
Because it just happened so fast
in the middle of the quarter, that it hurt pricing overall
for the subsystems, but nonetheless,
that's the trend that we see happening.
It feels like there's a new wave
or a new step function of consumption going on
with regard to flash.
What are you seeing?
>> Yes, flash was always about performance before,
and there were two constraints to flash,
in terms of its impact on the whole industry.
The first was that the protocols that were used in flash
were the old fashioned protocols that were used for HDD.
Now, those have improved enormously with NVMe, et cetera,
and those have got much, much better.
So, that increases the demand for that flash.
The usefulness of flash is now much better.
And the second is, in terms of, that's high performance,
there's high-capacity flash,
and now flash is growing in two dimensions.
It's growing in the number of layers,
but it's growing from SLC to MLC to TLC to QLC
in terms of the number of bits that it can pack into it.
>> So, those all have cost implications
on the cost per bit, obviously?
>> Sure.
Both of those are reducing the cost per bit,
and making it available for different markets.
So the capacity market, now as the prices come down,
mean that it's going to take a bigger bite into the HDDs.
In data center, it's going to become the norm
just to have flash only.
>> Micron's a little bit late to NVMe,
but they're now hopping on board.
Actually, you've made the comment to me
in previous discussions, that they've actually timed
things pretty well. >> Yeah.
>> You kind of didn't want to over-rotate to NVMe.
I know Pure was first,
but Pure's a relatively small part of the marketplace.
It seems like now everybody's going to NVMe.
And basically what this does, as you pointed out,
it eliminates a lot of the sort of older, slow,
over head chatty protocols,
and now it's like a bat phone right to the data.
What are you seeing in terms of NVMe adoption?
Is it now mainstream?
>> Yes, we're predicting that in 2019
50% of the drives will be NVMe drives.
That's a very rapid change.
>> Let's up-level a little bit.
We're talking about all of this geeky stuff down here,
but what I'm interested in is why we need this.
And the obvious question is there's so much more data now
but it's also, AI.
We talk a lot about the new innovation sandwich
of being data plus AI plus cloud,
combine those things together
and that's really what's driving innovation.
How real is AI?
I presume we need all this stuff
to be able to support these data-driven workloads,
but how real is AI?
It feels like it's pretty substantive.
When we go to a lot of these shows,
you hear about digital transformation
and all these buzzwords and the Edge and IOT.
'Course, AI's one of the big buzzwords,
but it does really actually feel like a superpower
to invoke one of Pat Gelsons' work.
>> Yeah, it is.
And AI could only operate if there was all that data
available, so it's the availability of that data,
because the algorithms and AI go back a long way.
There's nothing new in that.
But AI has now the availability of processing that data,
large amounts of data, which makes it much more powerful.
And now you're getting AI in things like a cellphone,
the amount of AI that goes into recognizing
your face is enormous.
And it's now practical,
everyday things are being done in AI,
and it's going from being a niche
to being just everyday use.
And it's impact longterm is profound.
It'll do all the jobs that humans do,
many of the jobs that humans do, much more efficiently.
Driving a car.
It'll be better at driving a car than human beings are.
>> Yeah, you see AI everywhere, you're right.
Ad serving still stinks, but it's getting better.
Fraud detection's getting much, much better.
Email is now finishing my sentences for me.
Right, you've noticed that in the last year or so.
Basically say, oh, I like that choice, boom, I'll take it.
And so as much as we hate autocorrect...
And so those are some small examples,
but what the industry likes to talk about
is how it's changing lives,
what it's going to do for healthcare, autonomous vehicles.
Those are some of the big-picture items.
>> David: Really big things.
>> Which really haven't kicked in yet, just in terms of,
or have they?
In terms of consuming demand, for things like DRAM and NAND?
>> It's relatively small at the moment
but it has the potential to be very large, obviously.
>> Dave: Go ahead, finish your thought.
>> Because in the next 10 years
we're going to see automated cars, it's going to be in pieces.
You're going to have the trucks going first,
and then other cars later.
>> I know you're fairly sanguine and optimistic
about autonomous vehicles,
I know there are a lot of skeptics out there
that talk about, we don't have enough data
and we'll see, but we'll talk more about that.
But I want to talk about Micron a little bit.
Micron's a company,
last year they were a $30 billion company,
they got $23 billion in revenue this year
so dramatic drop in revenues.
And that was really due to the change
in the supply/demand dynamic.
Now, historically, when these things happen
the stocks of these companies would just,
you could predict it, you'd say, okay, time to sell,
'cause here comes the over-supply.
And then when they hit the bottom, time to buy.
Micron's done an amazing job of sort of steadying that.
Managing its demand and supply balance.
Also, obviously doing share buybacks
that help the stock price,
but the stock price has held up pretty well.
So Micron's now a $23 billion company,
last year they threw off $17 billion in free cash flow,
this year, 13 billion.
But still, well over 50% of their revenue's going back
to free cash flow, which is quite large.
Their market cap's 51 billion,
so they're trading at a 2.2X revenue multiple,
which is very strong.
And they've got a 30% gross margin, right?
The PC business, think about that.
The DRAM, this is a good business, right?
That's a nice business, because they don't have
a giant direct sales force,
so they don't have that cost, it's all through OEM.
It's a fairly efficient business,
and they've managed it pretty well.
Your thoughts on Micron as a company.
>> Yes, they have.
They've managed the timing of every new release
very well indeed.
If you go too early, you over-rotate,
then you are struggling to get that out.
The costs are higher, and the people who are selling
the previous generation are going to do better.
But they've always timed it perfectly.
>> Yeah, now they're facing some challenges.
I talked about the supply/demand imbalance,
but they're managing that.
China, the tariffs hurt them.
Huawei, was a big customer.
They can't sell the Huawei anymore.
China coming after companies like Micron,
really going after consumer flash,
building fab capacity to begin with,
and then eventually China
is going to aim at the higher value enterprise.
What are you seeing there?
>> I agree with you.
They've had to rotate because of this problem
with the tariffs that have been put on China.
So, what's the reaction?
They're going to have to invest.
And that, long term, is good news for consumers
and good news for everybody else,
but it's going to be bad news for other people in the business.
>> So, a bunch of announcements today.
We can't talk about it, 'cause they're not public yet,
but you're going to see some SSD stuff coming out.
Maybe some acquisitions announced,
you might see some other things around 3D XPoint,
which is something that we really haven't talked much about
but we will, I know your thoughts on that are
it's still kind of niche.
Remember the HP Memristor, right?
Which is, nobody talks about that anymore.
But now Micron's in a different situation.
They'll figure out, okay, where that fits,
but it's still a niche in your view
because it doesn't have the volume.
But we're going to be talking about that stuff.
But, again, up-leveling the conversation
to some of those big mega trends, those superpower drivers,
data, AI, IOT, and the Edge,
and some of the things that are really driving change,
in not only industry but also our lives.
So, David, appreciate the insight.
David and I will be here all day today.
You're watching theCUBE from Micron Insight
from San Francisco.
We'll be back with our next guest
right after this short break.
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