Sanjay Mehrotra
President and Chief Executive Officer at Micron Technology
Thank you, Farhan. Good afternoon. We delivered outstanding results in fiscal Q4, achieving robust profitability and the second highest quarterly revenue in Micron's history. Strong execution drove healthy results across segments, including record quarterly revenue in NAND as well as in our embedded business.
Fiscal 2021 was a year of many records for Micron. We achieved our highest ever mobile revenue, driven by all-time-high managed NAND revenue and MCP mix. Our embedded business had a tremendous record breaking year, with auto and industrial businesses both at substantial new highs. And our crucial branded consumer business and overall QLC mix in NAND all hit records in fiscal 2021. Through the year, we successfully navigated multiple obstacles brought on by the pandemic and reached several key milestones. For the first time in Micron's history, we established technology leadership concurrently in both DRAM and NAND. Micron's 1-alpha DRAM and 176-layer NAND are the industry's most advanced nodes in high-volume production. And we further strengthened our product leadership by becoming first to introduce LP5X DRAM and uMCP5 managed NAND in mobile, and the industry's first functional safety capable LP5 for automotive applications. The secular demand for memory and storage, combined with Micron's focused execution and our rock solid balance sheet, positions us well to deliver strong financial performance and create significant shareholder value in fiscal 2022 and beyond. Demonstrating our confidence in our business trajectory, we initiated a quarterly dividend that we aim to grow over time.
Memory is at the leading edge of semiconductor manufacturing, and Micron has leadership in both DRAM and NAND technology. This quarter, we reached mature yields in our ramp of 1-alpha DRAM and 176-layer NAND 20% to 30% faster than prior nodes and delivered performance and feature improvements that will help unleash customer innovation. We believe we are several quarters ahead of the industry in deployment of these process technologies. Additionally, through deeper customer collaboration, we have further accelerated the time to market for value-added solutions built using these nodes. 1-alpha and 1z DRAM nodes combined now represent the majority of our DRAM bit production driven by strong growth of 1-alpha production, and by the end of the calendar year, 176-layer NAND will make up the majority of our NAND bit production.
Looking beyond 1-alpha DRAM and 176-layer NAND, we are investing to sustain scaling in both technologies for the next decade. Adding momentum to our years of R&D in EUV, we recently took delivery of the industry's latest EUV system, NXE 3600, at our Boise headquarters, where we operate one of the world's most advanced centers for semiconductor research and development. The delivery of this tool is an important milestone toward our previously disclosed plan of implementing EUV in high-volume manufacturing in the 2024 time frame. We expect that the integration of EUV with our existing multi-patterning immersion lithography expertise will help us maintain DRAM technology leadership for many years to come. In addition to being a technology leader and an innovation partner, we are uniquely positioned as a strategic supplier to our customers. Micron is the only US-based memory company, and our strong global manufacturing network provides us with a diversified source of supply, which has become increasingly critical to ensure that we continue to deliver product reliably to our customers. The advantages of this unique position have been proven throughout the past 18 months, as we have successfully navigated the challenges of COVID-19 across our global manufacturing network while maintaining continuity of supply to our customers.
Now let us review our end markets. The demand for memory and storage has evolved dramatically from the PC-centric era. Today, demand for memory and storage is driven from diversified end markets that extend from the data center to the intelligent edge and to a growing diversity of user devices. As a result of growing memory and storage content per device, DRAM and NAND now account for an ever increasing portion of the bill of materials for our customers. DRAM and NAND TAM share of the semiconductor industry has steadily grown over the last two decades from around 10% to approximately 30% today. The AI and 5G revolution is only in its infancy, and as these secular growth drivers gain further traction, we expect new data-intensive applications to continue to fuel significant increases in DRAM and NAND TAM.
In the fiscal fourth quarter, data center revenue grew sequentially and year-over-year, fueled by secular drivers in cloud demand and a resurgence of enterprise IT investment linked to improving economic growth. Data center has become the largest market for memory and storage, driven by the rapid growth in cloud. With our broadening portfolio of differentiated products across memory and storage, we are in a strong position to drive strong growth and profitability in this important segment. We have been engaged on DDR5 from initial specification development and are well placed to support customer transitions to DDR5-enabled platforms starting later this calendar year. We are also enhancing our NVMe SSD portfolio and will soon introduce PCIe Gen4 data center SSDs with Micron-designed controllers and leveraging the full benefit of vertical integration. These SSDs will strengthen our market position over the course of the coming quarters and years in the fast-growing data center NVMe storage market.
Work and learn from anywhere trends are driving a second consecutive year of double-digit PC unit sales growth in calendar 2021. In the fiscal fourth quarter, PC DRAM revenue was up significantly year- over-year. We are making strong progress transitioning our PC DRAM to our 1-alpha node, which represented a meaningful portion of our FQ4 PC bit shipments. Client QLC SSD bit mix hit a new record and made up the majority of our client SSD bit shipments in FQ4. Our QLC leadership enhances our bit supply capability and product profitability. We also have continued momentum ramping 176-layer NAND products for the PC market, and we qualified our 176-layer NAND-based Gen4 NVMe client SSDs with several PC OEMs during the quarter.
In graphics, revenue increased sequentially and year-over-year, driven by a continuation of last quarter's strong next-generation game console and graphics card shipments. Micron holds an excellent position in the fast-growing graphics market, with a broad product portfolio featuring our proprietary GDDR6X product line and deep partnerships with leading GPU suppliers.
FQ4 mobile revenue increased more than 25% year-over-year, driven by continued unit sales and content growth. We expect overall smartphone unit sales to grow this year, with sales of over 500 million 5G mobile phones forecasted. These content rich 5G phones feature more than 50% higher DRAM and double the NAND content than 4G phones. We expect 5G and AI to drive new innovation in applications such as AI-optimized video capture and editing that will fuel DRAM and NAND content growth for years to come. Our 1-alpha LP4 16 gigabit design is now fully qualified and ramping at multiple OEMs, while our 176-layer NAND achieved its first UFS 3.1 qualifications at two OEMs. These wins demonstrate Micron's leadership in the mobile market and our continued strength in managed NAND products, where MCP sales surpassed $1 billion for the third straight quarter.
We are continuing to see strong demand in our edge markets, which include automotive and industrial IoT. We expect the automotive and industrial markets to be the fastest-growing memory and storage markets over the next decade. As the number one player in these markets, Micron is exceptionally well positioned to benefit from these secular growth trends. Our automotive business delivered a fourth consecutive record quarter, driven by continued recovery in auto manufacturing and the growth of memory and storage content driven by in-vehicle infotainment and driver-assistance applications.
Industrial IoT revenues also set records in the fiscal fourth quarter, benefiting from the continued growth of applications such as point-of-sale devices, factory automation and surveillance. We expect industrial demand trends to accelerate further as 5G speeds the adoption of data-intensive applications powered by intelligent edge infrastructure. We are also seeing an acceleration in our consumer IoT business, driven by rapid growth in devices such as VR headsets, smart exercise equipment and smart speakers.
Turning to market outlook, calendar 2021 is shaping up to be a strong year. We expect calendar 2021 industry DRAM bit demand growth to be in the low 20% range and industry NAND bit demand growth to be in the high 30% range. Overall, our preliminary view is that calendar 2022 industry bit demand growth will be consistent with long-term industry bit demand growth CAGRs in the mid to high teens for DRAM and approximately 30% for NAND. We anticipate underlying demand in calendar 2022 to be led by increasing data center server deployments, 5G mobile shipments and continued strength in automotive and industrial markets. Additionally, non-memory supply shortages that are constraining customer builds across various end market segments and that are pushing out some demand should ease throughout 2022, supporting demand growth during the year. Given prudent industry capex and very lean supplier inventories, we expect healthy industry supply-demand balance and robust profitability for both DRAM and NAND in the year.
In the near term, our FQ1 bit shipments will decline modestly in both DRAM and NAND from very strong levels in FQ4. Some PC customers are adjusting their memory and storage purchases due to shortages of non-memory components that are needed to complete PC builds. We expect this adjustment at our PC customers to be largely resolved in the coming months. We are also seeing constraints within our supply chain for certain IC components, which will somewhat limit our bit shipments in the near term. Bit shipment growth will resume in the second half of the fiscal year, and we are planning to deliver record revenue with solid profitability in fiscal '22. Our calendar year '22 bit shipment growth for DRAM and NAND will be inline with the industry. However, due to the strong shipments in fiscal year '21 and our below-normal current inventory level, for fiscal year '22, our bit shipment growth for DRAM and NAND will somewhat lag the long-term CAGR.
In fiscal year '22, the continued ramp of 1-alpha and 176-layer NAND should provide us with good front end cost reductions. Our efforts to increase supply chain resilience and provide business continuity to our customers will cause headwinds to our assembly and packaging costs, consistent with the trend in the overall industry. Overall, we expect annual cost per bit reductions to be competitive with the industry in fiscal year '22 and over the long term.
Turning to capital expenditures. We expect fiscal year '22 capex in the range of $11 billion to $12 billion. The year-on-year increase in capex is driven by our continued 176-layer NAND transition, pilot line enablement for next-generation NAND and DRAM, and continued infrastructure and prepayments to support the introduction of EUV. Fiscal year '22 DRAM equipment capex for manufacturing will decline from fiscal year '21, as we benefit from the capital efficiency of our mature 1-alpha node. For fiscal year '22, our bit supply growth will be achieved through node transitions alone, as we are a few years away from needing wafer start additions to keep up with the industry demand. We also expect to increase fiscal year '22 R&D investment by approximately 15% from fiscal year '21 to deliver bold product and technology innovations designed to fuel the data economy, as well as to expand our portfolio to capitalize on opportunities such as high bandwidth memory and CXL solutions.
Our leadership portfolio, product quality, supply chain agility and deep customer relationships make us a preferred partner in many of our markets, and we are confident in our ability to continue to create long-term, sustained profitability and returns built on that leadership.
I will now turn it over to Dave.
