After the market closed on Monday, Nov. 9, memory chipmaker Micron Technology (NASDAQ:MU) made an announcement that slipped under most investors' radar. Given the unfolding political drama, positive vaccine news, and massive rotation from growth stocks to value stocks, it's unsurprising that Micron's recent press release and presentation were overlooked.

Yet in the words of President-elect Biden, Micron's announcement could very well be a "big f---ing deal" -- at least in the storage industry.

A NAND-based flash drive.

Image source: Getty Images.

176-layer NAND flash

In the press release, Micron announced that it had begun volume shipments of the world's first 176-layer NAND flash chips. For those unfamiliar with NAND flash technology, it's becoming the nonvolatile storage medium of choice for many applications.

Nonvolatile storage retains information even when power is turned off. Legacy hard disk technology still has a place in cheap bulk storage in cloud data centers. Yet cost reductions have made NAND closer to hard disk drives in terms of cost-per-bit, and with much better performance and resilience, less space, and better total cost of ownership in many cases. NAND flash is found in data center servers, smartphones, game consoles, and laptops these days.

With the data revolution taking off, NAND flash demand is supposed to compound at a 30% annual growth rate. Yet many NAND manufacturers have had a hard time making profits in recent years despite that insatiable end demand. Companies have begun stacking NAND modules on top of each other in a 3D vertical structure, with each layer significantly boosting storage capacity. While demand for bits has gone up, the NAND flash producers have oversupplied the market, crashing NAND prices along with profits.

However, Micron's innovation could give it a significant leg up on rivals next year.

A lead over rivals

In a tough industry defined by high capital intensity and cost reductions, Micron's new NAND flash technology could give it a serious lead and a path to better profits. A total of 176 layers is almost 40% more than the closest rivals, who are currently on 128-layer chips. According to a September news report, current cost and market share leader Samsung, which is on a 128-layer chip, said it would accelerate development of its own 160-layer or 176-layer chip by April 2021.  Micron has seemingly beaten Samsung to the punch, despite having only about a third of Samsung's NAND market share. Given the difficulty of stacking NAND layers in mass production, it's still unclear whether Samsung or any of the five major NAND producers will be able to bring 176-layer technology to market in that time frame.

How Micron did it

Micron was able to accomplish this feat with a combination of unique approaches developed in-house. One move completed last year involved shifting from floating gate to replacement gate technology. Micron then combined this with charge trap technology as well as a technique that puts the logic circuity underneath the memory modules, reducing die size.

The end result is a NAND chip that's 30% smaller, 33% faster, and with 35% lower latency than Micron's previous 96-layer floating gate NAND chip.

Can rivals catch up?

Micron's replacement gate architecture is a proprietary feature of Micron's NAND technology, although it's a bit unclear if it can be replicated by well-funded rivals. Whether or not this current technology lead is sustainable is an open question, but if Micron continues its cost leadership, it will be able to sell NAND flash bits at lower prices than others and still make a profit. Since NAND is somewhat of a commodity, producing denser chips more efficiently is key to winning in the sector.

There are other positive developments in the beaten-down NAND sector. Rival SK Hynix just agreed to purchase Intel's (NASDAQ:INTC) NAND flash unit, bringing the large NAND players outside of China from six companies down to five. While still a competitive business, industry consolidation should make it less cutthroat and increase the likelihood of better industry profits after two difficult years. When you combine industry consolidation with Micron's new technology leadership, it's possible Micron's struggling NAND business could turn around in a big way next year. That's especially true with storage-heavy artificial intelligence and 5G applications starting to kick in.