Micron looks forward to ten years of “physical AI” opportunities: humanoid robots will drive demand for DRAM and the supply of memory chips will be tight or will continue beyond 2027

The Zhitong Finance App learned that at the KeyBanc Capital Market Annual Technology Leaders Forum, Sumit Sadana, Executive Vice President and Chief Commercial Officer of Micron Technology (MU.US), said that as the wave of artificial intelligence continues to drive up demand and the pace of industry capacity expansion is difficult to keep up, the tight supply situation in the memory chip market is expected to continue beyond 2027. Sadana revealed that since Micron's latest earnings report was released, customer demand signals have been further strengthened. The company expects the supply and demand pattern for the 2027 calendar year to “be tighter than 2026,” and it is currently impossible to determine when the industry's supply will match demand.

Sadana pointed out that for customers, the “primary constraint” is DRAM (dynamic random access memory) itself, not power supply, real estate, data center capacity, or logic wafers. He attributed part of the imbalance between supply and demand to the difficulty and long cycle of building advanced memory chip manufacturing plants and climbing production capacity.

AI demand is reshaping the storage market

Sadhana characterized the current environment as fundamentally different from previous storage industry cycles, and cited generative AI, proxy AI, and future expansion of general artificial intelligence applications. He said that agent-based AI workloads require 5 to 30 times the number of tokens required for traditional chat interface tasks, while the number required for deep inference workloads is even higher.

He also emphasized the growing importance of high-bandwidth memory (HBM) in AI systems. Sadana said that the processor may be idle while waiting for DRAM data, so higher memory bandwidth and capacity are critical to improving system utilization.

Micron has previously discussed the trade-off between HBM production and conventional DDR memory supply. Sadhana said that producing a 100-bit HBM3E will reduce DDR output by about 300 bits, or about a 3:1 capacity replacement ratio; and with the advent of HBM4E, this ratio may be close to 4:1, which will further increase the pressure on conventional memory supply.

Sadhana pointed out that although data centers are the area where demand is most concentrated, demand in all market segments is high. Some data center customers can't get more than half of their target purchases, even if they are willing to pay a high price.

Sadana emphasized that the main reason customers adjust system memory configurations is limited supply rather than price factors. Although reducing stand-alone DRAM capacity allows customers to ship more systems, it may also reduce processor utilization and create potential demand for higher capacity configurations as supply improves.

Strategic client agreements

Sadhana detailed Micron's Strategic Customer Agreement (SCA) and pointed out that it is fundamentally different from historical long-term storage industry agreements. The agreement covers a multi-year period, and most of the SCA related revenue will be covered by the terms of the agreement up to the end of the 2030 calendar year.

Unlike previous arrangements, Sadhana stated that SCA includes binding procurement commitments, “pay-as-you-go” clauses, and that customers are not allowed to withdraw contractually. As of the release of Micron's earnings report, the company had announced 16 agreements involving $22 billion in cash and cash equivalent commitments, of which $18 billion in cash is expected to be kept on Micron's balance sheet.

Sadana said that some agreements use market-based pricing, while sales covered by most agreements will set a price range, and the lower price limit is set above the gross margin level of the previous industry cycle peak.

He also said that these agreements have also promoted deep collaboration with customers at the engineering level, covering products and R&D roadmaps, extending the time span beyond 2030. Using the Micron HBM3E product as an example, he said that its power consumption is 30% lower than that of competing products, and mentioned cooperating with Nvidia to introduce low-power DRAM into data centers.

Investment and manufacturing in the US

Sadhana said that Micron is increasing its planned investment in the US from 200 billion US dollars to 250 billion US dollars, while making global network investments in back-end manufacturing in Japan, Taiwan, Singapore, and India. He also revealed that Micron has promised to invest 500 million US dollars in raw wafers (GlobalWafers) and participate in a broader $3 billion supply chain investment plan.

Sadana said that Micron is the only company to invest in front-end memory chip manufacturing in the US. Its Idaho No. 1 plant is expected to be put into operation by the middle of next year, and the Idaho Plant 2 is expected to be put into operation by the end of 2028; in addition, the company is also planning to build a cluster of fabs in New York and invest in Virginia, including introducing 1-alpha DRAM technology. Sadana anticipates that Micron's manufacturing layout in the US will enjoy a pricing premium and provide customers with greater supply chain resilience.

HBM and physical AI opportunities

Looking ahead, Sadhana indicated that HBM4E will bring opportunities for customized HBM products. Because certification and co-engineering processes are time-consuming and expensive, he expects most HBM projects to use one or two vendors.

He also specifically mentioned “physical AI” (including robots and humanoid robots) as a driver of emerging long-term demand. Sadana said that a humanoid robot may require hundreds of gigabytes of DRAM and several terabytes of solid-state storage to support its in-vehicle computing, security performance, and ability to respond quickly when cloud connectivity is unavailable. Although the robotics sector is still in its early stages, he expects the market segment to grow in the late end of this decade and may enter a more rapid growth period in the early next decade.

Micron Technology Co., Ltd. is a global semiconductor company dedicated to the design and manufacture of memory and storage solutions. Its product portfolio includes dynamic random access memory (DRAM), NAND flash memory, solid state drives (SSD), memory modules, and embedded memory solutions for a wide range of computing and electronic devices. Micron provides core components for data centers, enterprise and cloud infrastructure, client computing, mobile devices, automotive systems, and industrial applications, while targeting the consumer market under the Crucial brand. The company was founded in 1978 and is headquartered in Boise, Idaho. It has now developed into a multinational manufacturer with R&D and production facilities in many parts of the world.