Micron is spending $10bn on a lab betting the memory cycle has changed

Micron is putting $10bn into a research lab built on the premise that AI has permanently changed what memory is worth.

The company announced Micron Research Labs on Thursday, headquartered in Boise, Idaho, with a planned $10bn over the next decade.

It is separate from the more than $250bn Micron has committed to American manufacturing and research, and the company calls it the first dedicated memory research hub of its kind in the United States.

What the lab is meant to do

The research areas are memory technologies, memory and compute architectures, packaging and future semiconductor manufacturing. Micron says the work will look beyond a ten-year horizon.

The money funds a flagship Boise campus, university collaborations, satellite labs and partnerships across the industry. The lab connects to Micron research sites in the United States, Europe, Japan, India, Singapore and Taiwan.

Micron expects to break ground in 2027 on a facility able to host hundreds of researchers. The company holds 62,000 lifetime patents.

“Micron Research Labs gives that legacy a dedicated home for long-horizon innovation, the kind of research that sits upstream of every product we build,” said Scott DeBoer, the company’s chief technology and products officer.

The argument behind the spending

Sanjay Mehrotra made the case on CNBC the same day.

“Today there is no AI without memory. AI systems need more memory. They need higher performance memory. They need lower power memory,” the chief executive told Jim Cramer. “So, the value of memory, that equation has totally changed.”

He put it more bluntly elsewhere in the interview. “Memory is no longer the component in a system. Memory is the strategic infrastructure for AI.”

Memory has always been cyclical. Strong demand pulls in new capacity, the capacity arrives late, supply overshoots and prices collapse. CNBC reported that Mehrotra argues AI is creating a more durable source of demand than the industry has seen before.

He also said the buying has changed shape. Customers used to solicit bids and take the lowest price. Now memory is designed alongside the processors it will sit next to, which brings Micron into the customer’s development cycle earlier.

The demand figures he gave

Mehrotra said Micron cannot make enough.

“All our customers across our end markets will buy everything that we make,” he said, adding that data centre customers want roughly 50% more supply than the company can commit to.

The company is also locking that demand down. At its late-June earnings call Micron said it had signed five-year strategic agreements with 16 customers, and Mehrotra said more have been signed since.

“They have committed to taking the supply,” he said. “So, this gives us assurance of demand.”

Ten endorsements in one press release

The announcement arrived with an unusually long list of supporting quotes.

Commerce Secretary Howard Lutnick and Michael Kratsios, who directs the White House Office of Science and Technology Policy, both supplied statements framing the lab as an achievement of the current administration. Kratsios described it as accelerating “the AI-driven Golden Age of American Innovation”.

Jensen Huang and Tim Cook also contributed quotes, as did the chief executives of Applied Materials and Lam Research, the president of the National Academy of Engineering, the chairman of imec, and the presidents of Stanford and the University of Texas at Austin.

Micron has been granted up to $6.2bn in CHIPS Act funding, awarded under the Biden administration.

What the changed equation looks like elsewhere

The desk has spent three months reporting the other end of Mehrotra’s value equation.

High-bandwidth memory is built by stacking DRAM, and DRAM was 76% of Micron’s revenue last quarter. As AI absorbs that supply, prices have risen across everything else that uses it.

The shortage reached DDR2, a standard from 2003, which saw 60% price rises. T-Mobile started letting customers pay off handsets more slowly because phones got more expensive.

Micron’s own margins show the same thing from the profitable side. Its revenue quadrupled last quarter and gross margins passed 81%.

The cycle argument has evidence against it

Micron shares fell 29% in July, the worst month since 2002. They are up 14% in August. The company disbanded its consumer Crucial brand last year to concentrate on data centre memory.

The stock is still up roughly 670% over the past year, ahead of SK Hynix at about 470% and Samsung at over 250%, and Micron passed a $1 trillion market value this year. TNW reported in June when it briefly overtook Meta and Tesla.

Micron is not the only one building. SK Hynix is spending $720bn on memory fabs in Korea, and Samsung is building too. All three top HBM suppliers are adding capacity at once, which is how the previous cycles started.

CNBC found someone in Boise who has watched this before. Dave Petso, a wealth manager there since the 1980s, told the network that Micron shares rose more than 50% in 1999 after almost doubling the year before, then lost three quarters of their value over the following three years.

“You guys are killing it out there, but I’ve been around a long time,” Petso said of the conversations he is having with clients now. “You were killing it in 1999 too.”

What is not settled

Nothing has been built. Ground breaks in 2027, and Micron has not said how many people the lab will employ or what the first projects are.

The $10bn is described as planned. Micron’s own release carries a forward-looking statements warning saying actual results could differ materially.

Mehrotra did not say the cycle is over. He said the value equation has changed and that demand is more durable, which is a narrower claim than the one some coverage has attached to him.

The 50% supply gap and the 16 customer agreements are Micron’s figures, given by its chief executive on television, with no independent verification.