Micron Technology (NASDAQ:MU) is one of a handful of computer memory manufacturers in the world. The company builds DRAM, which is used as system memory in everything from smartphones to supercomputers; NAND flash, which is increasingly used for storage in a wide range of applications; and even manufactures another type of memory called 3D XPoint, which offers performance and endurance advantages over NAND flash (albeit in exchange for higher cost).

Manufacturing memory chips is an extremely capital-intensive endeavor, requiring heavy investments in both research and development to figure out how to build these increasingly sophisticated memories, as well as capital expenditures for the equipment and factory space to be able to manufacture them at scale.

A wafer of NAND flash.

A NAND flash wafer. Image source: Micron.

During Micron's Sept. 20 earnings conference call, the company issued a capital expenditure forecast for its 2019 fiscal year and provided some insight into why it plans to spend that much. Let's dive in.

A lot of capital

"We currently expect our fiscal year 2019 capex net of partner contributions to be in the range of $10.5 billion, plus or minus 5%," Micron CFO David Zinsner told investors. That's up about 28% at the midpoint of the range from the $8.2 billion that the company spent during fiscal 2018.

Micron CEO Sanjay Mehrotra said during the call that "future technology transitions in NAND and DRAM require substantially more clean room space than prior nodes."

"As a result, our fiscal 2019 capex related to manufacturing facility construction and facility upgrades is increasing by nearly $2 billion year over year, primarily due to our previously announced NAND and DRAM clean room expansions," Mehrotra added. 

The executive also said that the company's "fiscal year 2019 capex plans are consistent with our strategy to focus on technology transitions while maintaining existing wafer capacity." In other words, Micron is hoping to increase the amount of memory that it produces not by simply running more wafers through its factories but instead by developing new manufacturing processes that allow the company to get more bits of memory per wafer.

According to Zinsner, Micron's fiscal 2019 capital expenditures "will be more weighted toward the first half of the fiscal year" as the company's "expansion and upgrade projects are underway."

Is Micron being too optimistic?

On that earnings call, analyst Romit Shah observed that Micron's capital expenditure guidance "paints a fairly positive view of the [market] environment, and certainly more positive, Sanjay, than what we've heard from your largest competitor who appears to be reducing investment and preparing for a protracted downturn."

Micron's largest competitor in the memory market is Samsung. Last month, Bloomberg reported on Sept. 20 that Samsung is "planning to curtail growth in memory chip output next year to keep supplies tight amid an expected slowing in demand," citing "people briefed on the matter."

Mehrotra assured Shah that the company is "being very prudent, very disciplined in managing our capex, absolutely focused on profitability and [return on investment]." To highlight this discipline, he pointed out that Micron is spending less on equipment used to manufacture NAND flash memory in fiscal 2019 compared to what it spent during fiscal 2018.

The executive also reiterated that the company is "not adding wafer starts where some other competitors may have talked about those in the industry."

Ashraf Eassa has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.