Newsmaker: Flash goes the notebook

Micron Technology CEO Steve Appleton lives with a little more excitement than most of us.

A stunt pilot, Appleton crashed a plane in 2004, but managed to make a keynote speech a few days later. As the head of the world's second-largest memory manufacturer after Samsung, he is also accustomed to plunging from profitability into the red on a regular basis.

To free Micron, the only memory maker based in the U.S., from the sudden and dramatic turns of fate that often send the industry into a downward spiral, the company has begun to branch out into other areas. Appleton spoke recently with CNET News.com about Micron's push into imagers for digital cameras, the future of consumer electronics and the difficulty of keeping tech companies based in the United States.

Q: Why don't you first give us an overview of Micron's current markets?
Appleton: A few years ago, we decided that the fundamentals of the DRAM business were changing and that we had a skill set that we could apply better than by just producing the highest-density memory into the PC desktop market. So we embarked on a strategy to leverage our technology into a couple of other areas--not too many, but a couple of other areas--and at the same time, tried to make sure that we were appropriately addressing the more attractive areas that existed in DRAM (dynamic random access memory, used mainly in computers).

We have emerged in the last couple of quarters as the biggest supplier of CMOS (silicon) imagers in the world. We have a No. 1 position in the mobile space.

How did that come about? I can understand how you moved from DRAM into flash memory with Intel, because they are both memory. But getting into camera imagers seems like a whole different beast.
Appleton: It kind of is, but we have been flirting with imaging for quite sometime. Our very first patent back in the 1980s was actually in imaging, believe it or not. It had to do with light being captured by a DRAM cell.

There will always be a need for storage, but when was the last time you tapped out a drive?

Back in the mid-'90s, we had a pretty big effort on devices for flat-panel displays. That didn't work out for us, but we've always been on the fringes of imaging. What triggered the most recent effort was a company we acquired a few years ago called Photobit.

Getting into imagers five years ago looks now like it was good timing, but at the time, people thought putting a camera on a cell phone was sort of nuts.
Appleton: That's right. There were a lot of nonbelievers, a few years ago. Most people I knew thought I was crazy. All the corporate antibodies came out and tried to kill it. But we nurtured it, and it today, of course, has critical mass, and everybody is a believer.

How does the market differ? Is the imager more like the processor market, where a few companies dominate and the margins are fairly high, or is it more like memory, where there are lots of competitors hammering on price?
Appleton: It probably will end up having a little bit of both. Right now, it behaves a lot more like an ASIC (custom chip) market.

A simple example would be if I call a desktop PC customer on memory, and I say, "You know what? Tomorrow, I'm not going to ship you a million parts." They might get a little mad. They might complain a little bit, but as soon as I hang up the phone, they're going to call Infineon, Hynix, Samsung, Powerchip, ProMos, etc. They'll probably get their million parts. They may have to pay a nickel more, but they'll get their parts.

However, if I call one of my customers in the imaging space and I say, "Tomorrow, I'm not going to ship your images," they won't ship their product. They have a sole source in many cases. It is because the software has to work, and the interface has to work.

The deal with Intel under which you will build a fabrication plant for NAND flash memory turned some heads. Intel for years said they weren't interested in NAND. Then they began to change slightly in early 2005. Had you been negotiating this one quietly for years, or did it come on fairly suddenly?
Appleton: We haven't been negotiating if for years, but we've had a relationship with Intel for years. In 2003, they invested $450 million in us. We've done joint development work on interface stuff for DRAM.

The price elasticity of NAND is fabulous, and the growth rate and the application penetration are great. It's got all those characteristics that DRAM had about 20 years ago.

Just a quick macroeconomic review here: What does "price elasticity" mean again?
Appleton: Basically, it means that every penny the price drops, the more you will sell. When you think about what happened in DRAM, we had great price elasticity in the '80s and throughout the '90s. The price elasticity of DRAM exists today, but it's not that great. The PC guys have, essentially, kind of peaked on putting in more (DRAM). Maybe when (Microsoft) Vista comes out, it will require a lot more DRAM.

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