Intel will likely have to pay more to Micron for Optane memory chips, under a new supply deal that kicked in on March 7.
Terms of the agreement are confidential but as Wells Fargo analyst Aaron Rakers notes: “Given Micron’s entire ownership of the 3D Xpoint [another name for Optane], we would assume that the new wafer supply agreement reflects net-positive pricing and forecast terms for Micron.” Micron supplies Intel with 3D XPoint wafers made at its Lehi, UT fab.
Jim Handy, a senior analyst at Objective Analysis, told Blocks & Files: “Intel is losing money in its NVM Solutions Group (NSG) because 3D XPoint is proving very unprofitable to produce. By my estimate Intel lost about $2 billion on 3D XPoint in each of 2017 and 2018, and $1.5 billion in 2019.”
According to Rakers, Micron had $158m in Lehi-based XPoint and NAND sales to Intel in its first fiscal 2020 quarter. The new agreement will not be hugely material to Micron revenues. The company records an under-utilisation charge averaging $150m per quarter for the Lehi XPoint fab.
Micron maxes credit line in COVID-19 precaution
Micron said in a SEC 8K filing dated March 12 it had increased borrowings by $2.5bn “as a precautionary measure in order to increase its cash position and preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 outbreak”.