Memory chip maker Micron launches new pricing experiment for stability

By Jane Lanhee Lee and Chavi Mehta

SANFRANCISCO – Chipmaker Micron Know-how Inc on Thursday introduced it was experimenting with a brand new pricing mannequin for its chips known as ahead pricing agreements that will goal to stabilize the steep worth fluctuations that plague the trade.

“I’m tremendous excited to announce that a prime 10 buyer has already signed up on this mannequin with us, a greater than $500 million a 12 months of income for a 3 12 months settlement,” mentioned Sumit Sadana, Micron’s chief enterprise officer on the firm’s investor day occasion.

He declined to undertaking how a lot of the long-term agreements with clients would migrate to this new mannequin of pricing, and emphasised that this was an “experiment”. He mentioned the present long-term agreements are primarily based on quantity and never on costs. The ahead pricing agreements have each quantity and pricing.

When requested about whether or not the contracts could be enforceable Sadana acknowledged that one social gathering or the opposite would all the time be on the incorrect aspect of the worth.

Sadana additionally mentioned that Micron doesn't plan to decrease its gross margins to push the ahead pricing agreements forward.

“There’ll be ups and downs, however the advantages finally outweigh the dangers of really doing an settlement like this,” mentioned Sadana.