A stunt pilot, Appleton 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 ofin 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
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.
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, 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
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.
The PC market is substantially consolidated too, which affected DRAM. I can count the number of main customers on one hand. I used to sell to dozens. Now I can make five trips and cover the whole world.
But where will
Appleton: Actually USB drives are hot now, and then, of course, you have the MP3 players. Here's the way to think about it: Any time a solution for storage, permanent storage?can be addressed for $50 or $60 or less, the mechanical guys are out and the solid-state guys are in. (Hard drives are mechanical, flash memory is solid state.)
Why is that? It's because it's just basically impossible to get the cost below that $50 or $60 level for the mechanical guys, because it is mechanical--lots of moving parts. Certain things have to happen. So any time that happens, solid state is in, and mechanical's out.
Now it's only been up until recently that solid state has been able to provide any kind of high-density solution in that price range, and hence you had things like the (iPod) Shuffle.
We're dropping our cost at 35 percent to 40 percent per year. That means you get more--you get 40 percent more--memory for the same price every year.
The average notebook has 30 gigabytes (of hard drive storage). How long is it before the notebook has solid state memory? Five or six years.
So you're saying that in a few years, we could have notebooks with 30GB or 40GB of NAND, and that's it for storage?
Appleton: Yeah, of course. I'm not saying drives will go away. There will always be a need for storage, but when was the last time you tapped out a drive? There'll always be an application for high-density (drives).
Now let me throw this at you. How would like your battery life to be 15 to 20 hours?
On your notebook? Sure, why not?
Appleton: Solid state is huge for battery life. Also, by the way, you can get rid of the stupid log-on sequence. What if there was just instant access? What if the access time was, you know 50 nanoseconds instead of--I don't know how many milliseconds it takes to go out on a drive, but it's quite a while.
But who would buy this?
Appleton: Probably early adopters. You'll start seeing some of these things probably in the next year or two.
Are you all investing in the alternative memory structures, things like
Appleton: Well, again I'm not going to disclose exactly where, but we've done lots of work in and MRAM (magnetic RAM).
When will these alternatives come to market? The next decade?
Appleton: That's a good question. If you were going to say "within the next three to five (years)," I would say "I don't think so." When you say "decade," a lot can happen in 10 years.
One thing that strikes people as odd is that Micron is in the United States. How do you pull that off? Does the state of Idaho give you guys special tax breaks?
Appleton: Somebody asked me what I thought one of our biggest accomplishments was, and it's that we've not only been a survivor, but we've been an acquirer. (Editor's note: Micron has acquired memory factories from Toshiba and Texas Instruments, including plants in the U.S.)
I'm not going to say we don't have our structural disadvantages, because we do. We don't get any tax breaks or direct investment from the government. We have to record our stock options now as an expense.
Also, I think we've been pretty innovative. We've leveraged the skills that we've had. I think we take advantage of the things that we can offer our customer base that others can't.
Do you think you will have to expand the overseas?
Appleton: Oh sure, we don't have a choice. We will have to. Sixty percent of Micron's product is sold outside the United States.
What do you think of the job the federal government is doing funding research and development?
Appleton: Terrible. They've got to fix it. The government's investment in the physical sciences in the last 30 years in absolute dollars has been flat.
Don't you think there's a reason that these other countries are focused on this? We need a technology strategy as a country, and we've got to do something about it. A lot of these (other) countries get direct investment and subsidies. We aren't even asking for that. We're saying, "Would you please join us in investing in R&D in our future?"
Do they listen in Washington? You, Intel Chairman Craig Barrett and everyone has been going up to Capitol Hill for years.
Appleton: I think historically they haven't, but I think there are a lot of people waking up to the issue in Washington.
We've got really a couple of particular issues. One is our educational system is broken. It's kind of a circular discussion that you get into about education, because no one person is going to change it. You've got all these moving variables that make it tough to try to address. But hey, however it has to happen, our educational system is broken; we've got to fix it. We aren't creating any longer the kinds of minds, if you will, that are going to drive us forward in the sciences.
Maybe we have some great work being done in the medical arena or life sciences, but you know what, we've got the whole world out there that's very focused on the physical sciences. These countries recognize that if you want to have a leading economy, you have to have a solid technology base. And that also means making some stuff--you know, that dirty word, "manufacturing." We have to make some of that stuff. In fact, we need to make a lot of it, and it's because the linkage between R&D and manufacturing is critical.
This idea that somehow we're going to develop all our technology in the United States and send it over there to be produced is ridiculous. There has got to be proximity. The iterative learning process is critical, and we need more investment in the basic sciences.
By the way, how's your back doing? Has it healed from the plane accident?
Appleton: Oh, good. I'm totally normal now.
You have quite a few adventure hobbies, correct?
Appleton: I do triathlons. I like motocross. I like surfing.
How do you squeeze it all in?
Appleton: Well, you know, I have difficulties these days, honestly. I haven't been doing a lot of air shows, and I haven't done a whole lot of surfing lately. But I still like it, and when I get a chance I'll do it. It just has to be kind of in a concentrated period of time.