Micron

J. R Simplot left home at fourteen after bucking the suffocating domestic regime of an authoritarian father. He worked as a farm hand, and later got into potatoes. And he got into potatoes big time. By World War II, his company had become the largest supplier of potatoes in the US, and in 1967 he shook hands in the car park with Ray Kroc, over a deal to supply Kroc’s restaurant chain with chips. Ray Kroc’s restaurant chain was called McDonald’s. Simplot made billions, and some of his billions he invested in a local semiconductor design consulting business. A business that went public in 1984 and is today, at the nexus of a digital world. The business is Micron, no longer a pay-by-the-hour Powerpoint consultant, but a global leader in the production of memory and data storage. Applications for Micron’s kit drive 5G innovation, automotive systems, industrial automation, data servers, mobile phones, virtual reality glasses, smart watches, smart TVs, smart speakers, smart everything; the list goes on. After printing better than expected numbers this week, a print that saw the shares pop, CEO Sanjay Mehrotra spoke of the rapid pace of change to existing trends as a result of the COVID pandemic. “Certain trends” he said, “that would have taken 2 to 4 years to develop have been accelerated into months”; he went to say how it was “easy to see how these changes will drive higher consumption of memory and storage in the long-term“. Analysts at Bernstein have long talked at large about a New Paradigm in the semi-conductor space, a stew of unprecedented structural changes: consolidation, higher barriers to entry, and reduced demand elasticity. It boils down to less cyclical revenues. Cyclicality remains, but with higher highs, and higher lows. Analysts pick through the numbers of each quarterly release, but the quarterly release, is just that; a quarter. As Mehrotra made clear, “the faster pace of digital transformation in the economy is here to stay” driven by long-term secular trends in AI, cloud computing, the Internet of Things and many others. An obsession with the here-and-now can distort the judgement, for the long-term trends are bullish. Quite what J.R Simplot would make of virtual reality we will never know. The great potato mogul passed away in 2008, at the grand old age of 99.