Bloomberg News

Micron CEO Appleton Aims to Expand as Chip Supplier for Phones

November 03, 2011

Nov. 3 (Bloomberg) -- Micron Technology Inc. Chief Executive Officer Steve Appleton aims to expand into a broader range of products including mobile-device chips to lessen the company’s dependence on computer memory that can’t deliver sustainable profit.

Chips used to supply storage for mobile phones and devices such as Apple Inc.’s iPad will help balance out the troughs of the computer-memory market, Appleton, the longest serving CEO in the industry, said in an interview. Micron will also step up delivery of chip combinations, which can be priced higher than what the individual components would fetch, he said.

“We’re going to get to a stage where it’s mature, it’s rational and it’s consistently profitable,” he said. “Once you achieve that you can’t just keep doing the same old thing.”

Micron’s most recent quarter ended Sept. 1 was the first time the Boise, Idaho-based company didn’t get the majority of its sales from dynamic random-access memory chips, the main memory in personal computers. DRAM makers have struggled to balance supply and demand, sometimes hurting prices and forcing losses. Further consolidation will lead to sustained industry profits in “another two or three years,” Appleton said.

The $39 billion industry is down to four viable suppliers from a peak of 44, according to Appleton. He said there are no new companies willing to risk the billions of dollars needed to become a major supplier of DRAM chips.

Samsung Competition

Micron, which has reported eight annual net losses in Appleton’s 17 years as CEO, is now the only producer of computer memory chips outside of Asia. The list of companies that have given up the business includes Intel Corp. and Texas Instruments Inc., which helped create the industry.

The market is now dominated by Suwon, South Korea-based Samsung Electronics Co., the second-largest chipmaker, trailing Intel. Samsung can rely on its status as the second-largest maker of mobile phones and leadership in televisions and flat panel production to support profit as well.

Competing with Samsung, a company that can outspend Micron in research and development and advanced production, will remain a struggle, said Craig Barrett, former Intel chairman and CEO. Samsung had cash and equivalents of 21.75 trillion won ($19.4 billion) in the third quarter. Micron had $8.8 billion in sales in its fiscal year ended in September.

Appleton said the challenge of taking on larger competitors in a tough market is what keeps him motivated.

“I’ve had ups and downs and been criticized, I’ve been fired, I’ve been rehired,” he said. “If it were easy, and if it were on remote control, I wouldn’t have as much interest in it. This has never been boring and it’s never been easy.”

Full-Tilt

The Los Angeles native, who at 51 is receiving the Semiconductor Industry Association’s Robert N. Noyce Award for service to the business, is being honored in a way typically reserved for executives who are at the end of their careers. The award, being presented later today, is named after one of the founders of Intel and the inventor of the integrated circuit.

Two years after Appleton joined Micron in 1983, the company came close to bankruptcy and was down to just two weeks of cash, he said. In 1996, Appleton was fired in a boardroom dispute with one of the company’s original backers. After a week and a revolt by executives who supported him, he was reinstated. In 2004 one of his hobbies, flying stunt planes, almost cost him his life in a crash.

“Whatever he does, he does at full-tilt with an incredibly competitive personality,” Barrett said. “Being in the memory- chip industry, you’re either extremely competitive or you’re dead. I think he translates his personal lifestyle into the business and enjoys the competition.”

--Editors: Romaine Bostick, Stephen West

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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