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Micron exec: New Idaho semiconductor factory ‘not possible without’ CHIPS Act

Micron Executive Vice President of Global Operations Manish Bhatia joins Yahoo Finance Live to discuss the building of the company’s semiconductor factory in Idaho, balancing supply and demand, driving demand, and how the CHIPS Act is driving investment.

Video transcript

- Micron, that is on the move here today. And we're tracking shares after yesterday. It broke ground on a new plant in Boise, Idaho.

Shares down by about 4% right now. But this new plant, it's going to be focused on producing DRAM chips. This is the latest move by Micron to increase its chip production in the US.

Joining us now to discuss the company's future manufacturing plans, we've got Micron Executive Vice President of Global Operations Manish Bhatia. Manish, great to have you here with us this morning.

Help us really break down the timeline that we should expect from Micron on really getting capacity up off the ground and running at this new plant.

MANISH BHATIA: Well, thank you, Brad. Thank you, Julie, for having me back on. Yes, we broke ground yesterday here in Boise, a historic day for Micron, for Boise, and for the United States.

We broke ground yesterday, expect to begin construction next year. But these clean rooms take a long time to build. The lead time is very long.

We expect that they will be beginning to be concluded, the first phases will come online, in 2025. And that's when we'll be beginning our production ramp.

And then the production will come online gradually across the second half of the decade, in line with the market demand trends that we see.

- You brought up an interesting point there, Manish, which is the complexity and difficulty in building a semiconductor manufacturing operation. Right? Because you could say, well, why weren't these plants built here before? And I know there is enormous cost as well as complexity.

You mentioned the clean room. Walk us through some of the things that are necessary when you're building a plant like this and why it is such a tricky operation.

MANISH BHATIA: Sure. So first of all, I'll just explain that semiconductor manufacturing, at the leading edge, is among the most complex manufacturing processes in the world. Thousands of steps, each at nanoscale.

So the clean room that needs to be built to be able to manage all of those processes and have them be defect free is absolutely an incredible marvel. The clean room that we've announced is going to be the largest clean room ever built in the United States, 600,000 square foot single clean room.

It's going to require tremendous amount of engineering effort, tremendous amount of construction steel going into the ground. And then a lot of high purity work to be able to make that clean room effective for the significant and high precision equipment that we need to be able to make these leading edge processes work successfully.

And I do want to point out that, yes, it has been a long time. It's been more than 20 years since a project like this in the memory industry has been initiated here in the United States. And this would not be possible, Julie, without the strong support coming from the CHIPS and Science Act.

And we really want to thank the Biden administration, Secretary Raimondo, others in the Biden administration as well as the bipartisan coalition in Congress, that really had the vision to know that semiconductor manufacturing was an important foundational element for the national economic security as well as national security. This would not be possible without that CHIPS and Science Act.

- So with all of that in mind, what percentage, in terms of the shift of fabrication processes, do you believe that is set to be brought domestically into the US once some of these plants start coming online?

MANISH BHATIA: So our goal is to increase the share of our own production here today. Today, less than 10% of our memory is made here in the United States.

And we expect, through this project and others, that we're going to be announcing here in the near term that we'll be able to target 40% or more of that supply here in the United States, so really diversifying our supply across the globe.

We'll still be continuing to invest in our facilities in Asia. But we'll be bringing more of that manufacturing for DRAM back here to the United States with a target of 40% of our total production here.

- Manish, I want to ask you as well just where we are in the chip cycle right now. And I know that there's only so much you can say about financials. But I will ask you where we are right now.

Because we've been hearing from a lot of chip makers in the last month or so that things are slowing down, and in some cases, slowing down dramatically in certain sectors. What are you seeing?

MANISH BHATIA: So the near term is challenged for us. We've made some comments about that publicly. And we'll make some more at our earnings call at the end of this month.

But to keep in mind, when we're thinking about the clean room expansions, these are long-term endeavors. As I mentioned, it's going to take us, even with construction starting in 2023, until 2025, so more than two years, to be ready to move the first piece of equipment in.

And so these are long-term decisions that we're making with an eye towards 2030 era demand, and even beyond that, even looking towards 2040 era demand.

And so we will bring our production in line with the market demand so that we are targeting having a balanced supply and demand environment for memory.

But we need to have these clean room investments started because of the long lead time because of the complexity and just to make sure that we're able to keep up with the strong demand trends that we see.

We still expect that the pillars of artificial intelligence, 5G and autonomous are going to continue to drive demand for memory and memory solutions through this decade and well into the next decade, expecting to double the size of the memory industry to more than $300 billion by 2030. So those are the trends that we're focused on with these long-term strategic investments.

- All right. Micron Executive and Vice President of Global Operations Manish Bhatia. Thank you so much, Manish. Good to see you.

MANISH BHATIA: Thank you, Julie. Nice to see you again.