Micron Technology's (MU -0.94%) stock price surged after the company's fiscal 2022 first-quarter results were released on Dec. 20, showing that its revenue, earnings, and guidance exceeded Wall Street's expectations. Micron's revenue shot up 33% year over year in Q1 to $7.69 billion, while its earnings jumped to $2.16 per share from $0.78 per share in the year-ago period. One of the reasons behind Micron's impressive growth last quarter was the jump in the company's revenue from the mobile business.
Let's look closely at how Micron's mobile business performed, and see why it should continue to be a long-term catalyst for the chipmaker.
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Micron Technology is riding the 5G smartphone tailwind
Micron's revenue from the mobile business unit (MBU) increased 27% year over year to $1.9 billion in the fiscal first quarter. The segment produced nearly a quarter of the company's top line and was its second-largest source of revenue.
Micron pointed out that smartphones nowadays are using more DRAM (dynamic random-access memory) and NAND (short for "not and") flash memory. Management estimates that 5G smartphones are using 50% more DRAM to enable faster processing compared to 4G devices. Meanwhile, the amount of flash storage in 5G smartphones has doubled in comparison to 4G smartphones.
What's more, Micron management anticipates that the amount of memory and storage used in 5G smartphones will increase further thanks to the increasing adoption of data-intensive applications, which should create the need for more bandwidth and computing speed. Management pointed out that smartphone applications powered by artificial intelligence, 5G wireless technology, and emerging tech trends such as the metaverse will drive secular growth in the memory and storage demand.
So 5G smartphones are expected to create an additional content opportunity for the likes of Micron Technology -- but that is just one side of the coin. The sales of 5G smartphones are also expected to grow rapidly in the coming years, thereby creating a huge volume opportunity for memory manufacturers to tap into.
Micron estimates that 700 million 5G smartphones could be shipped in 2022, up significantly from this year's shipments of 500 million units. By 2025, annual 5G smartphone shipments are expected to hit 1.5 billion units as per third-party estimates, indicating that Micron's mobile revenue opportunity is all set to expand rapidly in the coming years.
As such, Micron's mobile business could keep growing at an impressive pace for a long time to come, especially considering its standing in the industry and the efforts it is undertaking to capture a bigger share of the market.
Pulling the right strings
According to Strategy Analytics, Micron controlled 14% of the memory market in the first quarter of 2021. More specifically, its share of the mobile DRAM market stood at 20%. The company gets 73% of its revenue from selling DRAM chips, so it is not surprising to see it trying to capture a bigger share of the mobile DRAM market.
Micron's low-power double data rate 5X (LPDDR5X) DRAM was recently validated by Taiwanese chipmaker MediaTek for use with its Dimensity 9000 5G flagship smartphone chipset. According to Micron, its LPDDR5X DRAM can deliver a peak performance that's 33% faster than the previous generation LPDDR5 memory.
The good part is that Micron's validation by MediaTek could open an opportunity for the company to increase its mobile DRAM market share. That's because MediaTek commands a 40% share of the smartphone application processor market, according to Counterpoint Research. One of the reasons why MediaTek dominates the smartphone processor market is because of its 5G chips, which is a positive sign for Micron.
All of this indicates that Micron could keep benefiting from the 5G smartphone market in the long run, and that could help it remain a top growth stock for a long time to come.
