Crucial 2011 Annual Report Download - page 33

DSG sales for 2010 increased 121% from 2009 primarily due to increases in gigabits sold and average selling prices per gigabit. The increase
in gigabits sold for 2010 was largely due to additional supply obtained from Inotera, which accounted for 23% of our DRAM gigabit production in
2010 as compared to 4% for 2009. The increase in average selling prices in 2010 for DSG products from improved market conditions was
partially offset by a shift in product mix resulting from increases in sales of Inotera trench DRAM products that had significantly lower average
selling prices per gigabit than our other DSG products.
NAND Solutions Group ("NSG")
NSG sales and operating results track closely with our average selling prices, gigabit sales volumes and cost per gigabit for our consolidated
sales of NAND Flash products. NSG sales for 2011 increased 4% from 2010 primarily due to increases in gigabits sold partially offset by declines
in average selling prices. We sell NSG products in three principal channels: (1) to Intel Corporation ("Intel") through our IM Flash consolidated
joint ventures at long
-term negotiated prices approximating cost, (2) to original equipment manufacturers ("OEMs") and other resellers and (3) to
retailers.
NSG sales through IM Flash to Intel were $884 million for 2011, $764 million for 2010 and $886 million for 2009. The ramp of production at
IM Flash's new wafer fabrication facility in Singapore began to increase our NAND Flash production in the second half of 2011 and we expect
that it will significantly increase our NAND Flash production in 2012. Our share of the operating costs and supply of NAND Flash from IMFS
adjusts in proportion to changes in our ownership share either 12 months or 8 months (depending on the status of IMFS' production ramp) from
the date of the applicable ownership change. Accordingly, we anticipate that our share of IMFS costs and supply will increase from 57% as of
September 1, 2011
to our current ownership interest in IMFS during the course of 2012. In September 2011, subsequent to the end of our 2011, we
contributed $103 million and Intel contributed $131 million to IMFS, decreasing our ownership interest in IMFS to 82%. The following table
presents the contributions and ownership percentages of IMFS:
NSG sales of NAND Flash products to our OEM, reseller and retail customers decreased 2% for 2011 as compared to 2010 primarily due to
declines in average selling prices partially offset by an an increase in gigabits sold. NSG operating income increased for 2011 as compared to
2010 despite declines in average selling prices due to (1) reductions in manufacturing costs per gigabit as a result of improved production
efficiencies and higher NAND Flash production and (2) other operating gains including a $57 million gain from the Samsung license arrangement.
NSG's costs of goods sold for 2011, 2010 and 2009 included $81 million, $60 million and $60 million, respectively of underutilized capacity costs
from the IMFS's wafer fabrication facility in Singapore. We expect that the underutilized capacity costs will decrease significantly in 2012 due to
the qualification of IMFS products for sale in the third quarter of 2011.
32
2011 2010 2009
Net sales
$
2,196
$
2,113
$
1,747
Operating income (loss)
269
240
(573
)
Contributions Ownership Percentage
Micron Intel Micron Intel
Prior to the second quarter of 2010
51
%
49
%
Second quarter of 2010
$
25
$
—
53
%
47
%
Third quarter of 2010
26
24
53
%
47
%
Fourth quarter of 2010
77
14
57
%
43
%
First quarter of 2011
392
—
71
%
29
%
Second quarter of 2011
343
—
78
%
22
%
Third quarter of 2011
409
—
83
%
17
%
Fourth quarter of 2011
421
—
86
%
14
%
Subsequent to fourth quarter of 2011 through October 2011
103
131
82
%
18
%