Good afternoon. My name is Latif and I will be your conference facilitator today. At this time, I would like to welcome everyone to Micron's Second Quarter 2021 Financial Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question-and-answer period. [Operator Instructions] Thank you. It is now my pleasure to turn the floor over to your host, Farhan Ahmad, Vice President of Investor Relations. You may begin your conference.

Thank you, and welcome to Micron Technology's fiscal second quarter 2021 financial conference call. On the call with me today are Sanjay Mehrotra, President and CEO and Dave Zinsner, Chief Financial Officer. Today's call will be approximately 60 minutes in length. This call including the audio and slides is also being webcast from our Investor Relations website at investors.micron.com. In addition, our website contains the earnings press release and the prepared remarks filed a short while ago. Today's discussion of financial results will be presented on a non-GAAP financial basis unless otherwise specified. A reconciliation of the GAAP to non-GAAP financial measures can be found on our website. As a reminder, a webcast replay will be available on our website later today. We encourage you to monitor our website at micron.com throughout the quarter for the most current information on the company, including information on the various financial conferences that we will be attending. You can follow us on Twitter at MicronTech. As a reminder, the matters we will be discussing today include forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from the statements made today. We refer you to the documents we file with the SEC, specifically our most recent Form 10-K and 10-Q for a discussion of risks that may affect our future results. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We are under no duty to update any of the forward-looking statements after today's date to conform these statements to actual results. I'll now turn the call over to Sanjay.

Thank you, Farhan. Micron delivered strong FQ2 results above our original projections, driven by solid execution and higher than expected demand across multiple end markets. The DRAM market is in severe shortage and the NAND market is showing signs of stabilization in the near-term. The execution from the Micron team and these strengthened conditions enabled us to set revenue records for mobile MCPs and automotive products and to reach normal levels of inventory ahead of schedule. Following last quarter's introduction of 176-layer NAND into volume production, in FQ2, we began volume production on our 1-alpha DRAM node, solidifying our technology leadership in both DRAM and NAND. We are in an excellent position to capitalize on the strong demand for memory and storage, driven by artificial intelligence and 5G across the data center, the intelligent edge, and user devices. I will start with an update on our operations. The Micron team is doing everything we can to meet customer demand despite the challenges of the pandemic, non-memory component shortages in the electronics industry, and disruptions that occurred in our Taiwan fabs in December. We are confident that our COVID19 safety protocols will allow us to continue at full production levels, and we are encouraged to see vaccines become increasingly available around the world. Micron has been able to mitigate the impact of broad electronics industry shortages to our production output through our proactive supply chain and inventory management strategies. Investments made over the last several years in facilities infrastructure allowed us to minimize lost output caused by the power outage and earthquake at our Taiwan operations in December. Recently, due to the drought in central Taiwan, there has been a reduction in the water supply for one of our DRAM fab sites. To mitigate the water shortage, we are accelerating our…

Thanks Sanjay. Micron delivered very strong fiscal second quarter results, with solid revenue growth, margin expansion, and positive free cash flow. Market conditions improved throughout the quarter, and DRAM and NAND volumes, as well as DRAM pricing, were above our original expectations. Before discussing the details of our fiscal second quarter results, I want to discuss the financial impact of our decision to cease 3D XPoint development and manufacturing. As a result of this decision, we wrote-off $49 million of 3D XPoint inventory in our FQ2 GAAP financial results. This inventory exceeded our needs to fulfill customer commitments. We remain committed to fulfilling our customer commitments to manufacture 3D XPoint wafers and currently expect modest revenues, consistent with recent history until the end of calendar 2021. Our Lehi fab was re-categorized at the end of FQ2 as held for sale on our balance sheet, and beginning in FQ3, depreciation expense for the building and related equipment will stop. As a result, FQ3 gross margins will benefit from approximately $75 million of lower depreciation expense. The remaining costs will continue until the closing of the sale of our 3D XPoint fab in Lehi, Utah. As we discussed on our 3D XPoint update call, Micron will continue to maintain our current R&D investment level and redeploy the 3D XPoint R&D teams to work on technologies and products that align with our vision for memory and storage. We have already made progress on this front since our update call. Now, moving on to our results for the fiscal second quarter. Total FQ2 revenue was approximately $6.24 billion, up 8% quarter-over quarter and up 30% year-over-year. We saw solid growth in most of our end markets, notably in the data center, mobile, PC, auto, and industrial markets. FQ2 DRAM revenue was $4.4 billion, representing…

Thank you, Dave. None of our achievements are possible without the great work of our world-class Micron team. We seek to recognize and reward team member performance and to do so fairly. Last week, we announced that we achieved comprehensive global pay equity in total employee compensation across base pay, bonuses, and stock rewards for women and all underrepresented groups at Micron. Pay equity is a key pillar of our diversity, equality, and inclusion strategy and core to creating an environment that attracts and retains the best talent. We continue to strengthen Micron's inclusive, values-driven culture, which is an integral part of our broader transformation. We have come a long way since Micron's founding as a startup in Boise, Idaho more than 40 years ago, and today we are a global technology and product leader. As the United States' only remaining memory and storage manufacturer, we welcome the U.S. government's commitments to enhance America's long-term technology leadership and competitiveness in semiconductor manufacturing. This emphasis on our industry, which is reflected by governments globally, is a recognition of the critical role we play in today's digital economy. Memory and storage represent approximately 30% of semiconductor industry revenue today, up from 10% in the early 2000s, and DRAM and NAND are growing in importance as a critical enabler of the most advanced technologies driving economic growth and well-being. Micron's innovation over the decades has created a strong foundation, and we look forward to delivering value for all our stakeholders as the data economy accelerates. Thank you for joining and for your support of Micron. We will now move to Q&A.

Thank you. [Operator Instructions] Our first question comes from the line of C.J. Muse of Evercore. Your line is open.

Yes, good afternoon. Sanjay, thank you for taking the question. I guess I was hoping you could compare and contrast what you're seeing this cycle versus previous cycles on the DRAM side? You're talking severe shortages yet, we're really not seeing anyone up-ticking on CapEx. And if you ordered a tool today, you wouldn't get it until Q1 next year at the earliest. So I guess, how are you thinking about things as well as what kind of changes are you seeing in terms of customer behavior and how might that effect your business going forward? Thank you.

Thank you, C.J. And in terms of how we see the demand environment today versus what you refer to a few years ago, no question that at that time, the demand was driven with the increases in cloud primarily and today the demand drivers are much more diverse. We are seeing shortages across all end markets. The demand is strong across all end markets. When you look at cloud, while cloud may have gone through some digestion over the course of last couple of quarters. When we look ahead, cloud demand is expected to be healthy, given the refresh with the new CPUs that are driving greater content in the servers. Similarly, mobile with 5G is driving much greater content, a first 5G phone and on a year-over-year basis, the number of smartphones being sold are expected to increase on a double-digit basis as well. So, a strong driver of growth on mobile phones as well. Automotive experienced, of course, big decline last year. But on a year-over-year basis, a mid-double-digit range growth in automotive number of units sold. So, automotive is also driving greater content increase as well as unit increases. So, overall, the industry is experiencing strong demand virtually across all end market segments. The CapEx has been disciplined, particularly in DRAM over the course of last couple of years and the environment is one of severe under supply. So, we are very excited about the opportunities ahead. And we absolutely believe that Micron in this environment in terms of demand and supply considerations and our own execution from a technology point of view, having industry's leading edge, 1-alpha node industries first as well as having industries first 176-layer node, we are well-positioned to drive our growth ahead and really well-positioned to deliver stellar financial results over the course of next several quarters. And in terms of our customers, a question that you asked as well. I mean, customers across the board are seeing that memory DRAM is in short supply and that does affect some of the lead-times that we expect from those customers and by and large, those customers are supportive of those lead-time considerations. And in this environment of extremely tight supply, the flexibility that is available for customers to switch between products is also becoming more limited. And this then does require customers to have longer lead-times as well.

Thank you. Our next question comes from John Pitzer of Credit Suisse. Your line is open.

Yes. Sanjay, Dave, thanks to let me ask questions. Congratulations on strong results. Sanjay, just sticking on the CapEx side, you're characterizing the DRAM market as a severe shortage, the NAND market is stabilizing, which is sort of an uptick of how you've been characterized in the market over the last couple of quarters. You're under growing industry bids and you've got sort of an industry-leading cost position, especially in DRAM with 1-alpha. And yet when I look at your full-year CapEx versus what you've spent fiscal year-to-date, you're going to be down over 40% in the second-half of the year. Why not get a little bit more aggressive on CapEx? What would you need to see? And at these levels, can you maintain your goal of being in line with industry bit share at these CapEx levels?

So, I think it is important to understand that we do remain disciplined with respect to CapEx. We want to make sure we manage it prudently. Our goal is that over longer-term in terms of supply growth CAGR to be aligned with the industry demand growth CAGR. And we have made prudent decisions over the course of last few years in terms of CapEx investment. If you look at our fiscal year 2021 CapEx of approximately $9 billion, this is really almost the highest CapEx that the company has spent in its history and we are putting that into positioning us well for the future in terms of, of course, creating more cleanroom expansion, but also investing in leading edge technologies, which is what as we look ahead will drive our supply growth with our 1-alpha node in DRAM as well as with our 176-layer NAND node. So, even last year, while the industry was going through a trough period, Micron actually took the steps to invest for building for the future strength of the company. So, all in all, we believe that our bit share in the industry would stay stable. And overall, it is a good environment for us to operate in, where our demand growth and our supply growth are on a CAGR base is aligned, yes, from quarter-to-quarter there can be variations, but most important thing is that long-term supply growth CAGR is managed in a disciplined fashion. And this is what is Micron's focus and we believe we are well-positioned. As I said before, well-positioned to deliver stellar results over the course of next several quarters.

Thank you. Our next question comes from Timothy Arcuri of UBS. Your line is open.

Thanks a lot. I guess I also had a question on CapEx. Dave, given what you're guiding the back half of the year to, you're going to basically be exiting the year like annualizing roughly $6 billion in CapEx, something like that. So, it requires a pretty big ramp, just to get to that like 30% capital intensity number for next year that you've been kind of talking about. So, is that still the right number to think about that you can get to like low 30s capital intensity for fiscal 2022? Because there's just not a lot of slots that you can get right now, even if you decide that you want to spend more money, those tool shipments slots aren't even really free until start of next year or so? Thanks.

All right. Yes, I mean, keep in mind that CapEx can be a little lumpy. There are times where we need to make the investments ahead of our node transitions and though sometimes can get more consolidated into a couple of quarters. And I think that's essentially what you're seeing in fiscal 2021. We're not ready to talk to numbers of our fiscal 2022 yet. We haven't finished fiscal 2021 and we need to do that before we kind of formulate the plan. But I would tell you, over the long-term, we feel very comfortable with our target CapEx spend of low 30s or 30% to 35% of our revenue in terms of CapEx. As Sanjay talked about, we take a very long-term view of CapEx and align that CapEx investment to make sure that supply and demand are in balance for us and we'll continue to do – to approach it that way.

Thank you. Our next question comes from Joe Moore of Morgan Stanley. Your question please.

Great. Thank you. If I look at the sort of quarter-on-quarter bit growth for DRAM, you've given the last four quarters, I get to 40% plus type growth in February versus supply that you're sort of talking about less than 20% I think. So, obviously, there is some deceleration implied there that you unwound inventory a little bit in February. I know you talked about that a little bit after the pre-announcement, but maybe just give us a little bit of color on how you got to that bit growth and how that affects the next couple of quarters?

So, of course, if you look at last year, we had said that our supply growth was somewhat greater last year compared to the industry supply growth and the industry demand growth as well. So that positioned us well in terms of using our power inventory this year. And our supply growth this year is expected to be less than the industry demand growth. Industry demand growth we have just raised our estimations to approximately 20% in calendar year 2021. So, our supply growth to be somewhat less than the industry and of course, we have used up in DRAM our inventory to supply -- to meet the growing customer requirements. As we look ahead, it will be -- our supply growth will be driven by our 1-alpha technology in DRAM. We will be ramping it over the course of next few quarters. It will be the workhorse of technology for us in terms of bit growth in fiscal 2022 as well. And, of course, as we bring out our products in this technology node, we have to get them qualified with our customers and that's what we are focused on in terms of getting the ramp up of this technology, 1-alpha technology getting products qualified in time for it to position us to drive our supply bit growth to meet the ultimate customer demand growth requirements during the rest of the calendar year.

Okay that makes sense, but I am I right in thinking that there is an implied kind of decline in kind of sequential bits as you moved a lot of inventory in February, you don't have that inventory to move in May?

So, again, our inventory in DRAM is really very lean at this point, and going forward, the growth will come from our 1-alpha node. And I think what's again important is that there can be fluctuations from quarter-to-quarter, but long-term, it is really about having a stable market share driven by technology transitions, which is our focus and which we have delivered successfully, whether you look at our 1z node in DRAM, that was the first 1z node in the industry, now 1-alpha node is the first -- 1-alpha node in the industry as well. So, technology transitions is what we are focused in terms of driving our long-term demand -- supply bit growth CAGR to be in line with the demand growth CAGR. And from quarter-to-quarter depending upon the timing of the technology transitions, there can be fluctuations. Second-half in terms of our year-over-year growth will be lower than the first-half. Yes.

Great. Thank you.

Thank you. Our next question comes from Chris Danely of Citi. Your line is open.

Hey. Thanks guys. Just a bit of a longer-term question. So, Sanjay/Dave, if things continue to be strong for hopefully several quarters like you guys are talking about your cash pile is going to go fairly substantially. So, theoretically speaking for sitting here a year, year and a half out, what are you thinking about as far as the usage of that cash going forward? And could we see a dividend potentially in the future?

Yes, well, so our current obviously approach towards returning cash to shareholders is through the buyback. We mentioned in the second fiscal quarter, we didn't buy back stock nor did we buy back stock in the first quarter and that was really a function of the fact that cash flow was negative and we were protecting our cash -- our net cash position. But as you say -- suggest and as we talked about we do expect to have good cash flow in the back half of the fiscal year and we do expect this business to generate good free cash flow over time. So, I think primarily, you can look to us to buy back stock. We're going to return at least 50% of our free cash flow in the form of buybacks and we have in the past returned more than that. So, potentially, we could do that in the future. There is a few things on the balance sheet as it relates to converts and debt that might use some of that cash as well. As far as the dividend, we haven't talked with the Board about that. Certainly, a possibility, but I think we need to get through this year and discuss with the Board if that makes sense.

Great. Thanks guys.

Sure.

Thank you. Our next question comes from Toshiya Hari of Goldman Sachs. Your line is open.

Great. Thank you for taking the question. Dave you're guiding gross margin up about 900 basis points sequentially for the May quarter. You talked about the exit from 3D XPoint driving lower depreciation. I think it was $75 million. You also talked about DRAM costs potentially being up due to FX and the drought in Taiwan. But outside of those two items, how are you thinking about costs in your NAND business given the transition to second gen replacement gate and what are your thoughts on pricing for both DRAM and NAND? I think for DRAM, most of us are expecting 10%, 15% pricing increases. On the NAND side perhaps up low single-digits, but how are you guys thinking about pricing and how are you thinking about sustainability of pricing into the second-half? Thank you.

Okay. Thanks. So, as you point out, we do get the $75 million tailwind in the third fiscal quarter due to the stoppage of the depreciation expense in Lehi that certainly will be beneficial and will help the following quarter. It actually may be a little bit better than that. And so that will be a tailwind again for the fourth fiscal quarter. We talked about DRAM costs. We are affected by a few things. I mentioned the drought mitigation that is causing a little bit of a headwind on our costs on DRAM. We are -- because of the significant tightness in our supply chain, we are seeing some increased spending as it relates to the back end. So, that's certainly a factor as well. And also as I mentioned in the prepared remarks FX has been a bit of a headwind for us in particular to Taiwan dollar which was ahead about a 5% appreciation this year. So, those things are driving a little bit of a cost increase. I would say that's probably kind of a one or two quarter type effect. We're pretty excited about the 1-alpha node. It does have a great cost structure. It will be a workhorse node for us in fiscal 2022 and so we would expect that to certainly help on the cost side on DRAM. On the NAND front, we are expecting cost to improve next quarter, aligned with our kind of annual cost reduction assumptions, which suggests it will be in the low double-digits year-over-year. So, that will certainly be a little bit of a benefit on the gross margins as well. The rest of the gross margin guidance is obviously a function of assumptions around pricing and mix and we avoid specifics around that. Suffice it to say that we feel very good about the pricing environment in DRAM, given the very tight supply situation we're in, in DRAM. And we're cautiously optimistic on the NAND front given the stabilization we've seen more recently. But outside of that, I prefer not to comment more on the pricing side.

Thank you.

Thank you. Our next question comes from Harlan Sur of JPMorgan. Your line is open.

Good afternoon. And great job on the quarter's execution. Just given the DRAM tightness and what appears to be tightness in literally all of your end markets, is the team you allocating your production mix, let's say from mobile towards more higher growth, higher margin segments of the market like enterprise and cloud and gaming as you move towards the second-half of the year, especially on your view of strong cloud demand in the second-half, improving enterprise trends, improving gaming trends in the second-half of the year. Is there any reallocation on the product mix in terms of wafers that you guys are starting today?

So, remember the lead-time, the cycle-time of wafers in the fab tends to be in the two to three months range and the wafers that you start today by the time they are shipping to the customers that time ends up being, including the time for assembly and test ends up being three to four months later. So, in this environment of really tightness across all end market segments, planning our wafer starts and dedicating them toward various end markets is really critically important. So, this is the kind of activity that our team is always engaged in, in terms of working closely with customers and understanding their demand mix. So, not just total bit demand, but the bit mix of that demand between various product types, because it's extremely important that we start our wafers in line with the expectation of our customers demand few months down the road, given again the cycle-time considerations. So, we are always managing this mix, but again, we would point out that we are seeing supply shortages for us across all end market segments and across all nodes of DRAM as well. And in this environment, we -- this is why, as I mentioned earlier, the lead-time that customers is important and it is an environment where flexibility in terms of, for customers to switch between one product type to another product type is more limited now. When we had more inventory in DRAM before, that was easier to manage, now that the inventory is running at these lean levels, managing our supply mix, keeping it in line with the customer mix, this is an ongoing activity here at Micron and our team has done I think a great job. Our supply chain team, our business units and our sales teams have done a great job working with our customers, understanding the market requirements, and managing our business well. And you see the result in terms of how well we have been able to bring inventory both in DRAM as well as in NAND. And of course, we are continuing to push for SSDs and multi-chip packages toward our higher density solutions as well, because again, all those considerations are important in this environment of tight supply and the tightness in terms of supply-only increasing as we go through the year. So, this is getting a lot of focus Harlan.

All right. Thanks for the insight Sanjay.

Thank you. Our next question comes from Aaron Rakers of Wells Fargo. Your line is open.

Yes, thanks for taking the question and also congratulations on the strong execution. I wanted to ask you a little bit about the longer term secular growth drivers in the server DRAM market. How do you see kind of content growth on a per server basis progressing? And I know you've talked about CXL, what's the thoughts on what CXL means to that equation and when that starts to matter? Thank you.

And so in terms of server content, as we mentioned in the prepared remarks with the new compute platform architectures and the processor that are being introduced, they are all leading toward more cores, more channels and greater usage of higher density modules. And of course, the end market applications when you look at, those workloads are becoming more and more data intensive, more AI-driven and ultimately driving for greater need for data and greater attach rate and greater content on a per server basis. So, enterprise and cloud combined, really when you look at CAGR in terms of demand growth, expected to be a stronger CAGR in terms of big demand growth versus the average of the market. So, this is definitely one of high growth areas. And the average content growth continues to be very strong and at a strong clip in terms of gigabytes per CPU, when you look at it for DRAM that is more like in -- on a CAGR base is more like 20% average capacity growing on a per server basis, growing from something like 200-gigabyte per CPU to growing to 300-gigabyte per CPU over the course of next two to three years. So, DRAM has strong growth and of course, same for SSD as well in terms of cost of ownership benefits that SSDs provide as well. And CXL is a new emerging trend. And this will create a greater opportunity for differentiated solutions. And as we mentioned earlier, that these are opportunities that we believe we'll be very well-positioned to capture with our emerging technology solutions that we are working on which we believe will provide higher ROI as well as high-performance solutions for our customers. So, CXL is again a development where Micron will be well-positioned to really address the memory hierarchy needs of our customers as they evolve over the course of next few years.

Thank you.

Thank you. Our next question comes from Mehdi Hosseini of SIG. Your question, please.

Yes. Just couple of follow-ups for me. I'm going to go back to inventory. Obviously, your commentary about the supply and demand environment suggest that prices are on the rise, but perhaps you want to lean your inventory or you want to continue to reduce because that inventory is now really fungible for new application that you're going to be shipping to in the second-half. Is that the right way to think about this?

As it relates to our inventory, it's pretty lean at this point. I mean all the inventory that you're seeing is either WIP or raw materials. There is a bit of finished goods, but it's just the amount of finished goods we need to stage to meet the customer demand. So, I think we're not in a position to lean it out anymore. We are quite lean at this point.

Okay, got it. So, there is no fungibility question. And then just moving on to NAND and Sanjay, I see the same demand dynamics that are making you very bullish on DRAM also applied to NAND as matter of fact CXL could be a material catalyst for NAND. What is it with your underlying assumption that is still keeping your long-term NAND bit growth to 30%. There is a ton of data created and some of these architectural changes could actually be good for storage especially SSD. And I'm just curious why you're not as upbeat as end market data point would suggest?

So, the long-term CAGR for DRAM we have said is approximately 30% and of course, this is something that we constantly evaluate with working with our customers and we do analyze this and as and when needed we update these, but at this point our estimation for long-term DRAM CAGR is approximately 30%. I would like to point out that overall when you look at the price elasticity trends in DRAM and certainly when you look at post pandemic growth and as I mentioned earlier, the cost of ownership benefit for DRAM -- for NAND in the data center market and of course, 5G driving greater content growth with respect to future rich -- increasingly feature rich smartphones as well. So, the demand trends for NAND are robust and I think the important thing to really monitor is the supply to be managed in alignment with the demand expectations and this is where, as we have said before, that industry CapEx can be managed better in terms of supply growth aligned with longer term demand considerations. And I may have misspoken here; I may have said that approximately 30% in terms of the CAGR for demand growth. I may have said DRAM in that context, of course, I was speaking about NAND. So, I just want to correct myself that the 30% demand growth CAGR that I referred to is for NAND. Of course, as we have said for DRAM, the long-term demand growth CAGR we see in high-teens, mid to high teens.

Thank you. Clear. Thanks.

Thank you. Our next question comes from Tom O'Malley of Barclays. Your line is open.

Good afternoon Sanjay and Dave. And thanks for taking my question. This one is more related to Dave. You talked about DRAM costs in the May quarter potentially being up because of a couple of factors, but you also took the full year guide for costs and so that there could be a bit better. Is that a comment on August cost accelerating and being better there? Or can you just walk me through the dynamics of how you're seeing cost up in May and then the full year a little bit better in terms of overall costs?

First of all, good question Tom. So, really we saw much better cost in the second fiscal quarter for DRAM. And that really was the trigger to get the overall full-year cost to be higher. Now, that was more a function of mix than you think, but that is what drove kind of the upside on the cost side. Did I say higher, yes, sorry, I meant lower, yes, costs look to be lower -- I meant the higher number, that's what I meant. The May quarter -- or the August quarter then is, we're not yet ready to provide some expectation, but I think the likelihood is that it wouldn't be -- it certainly shouldn't be a step up in terms of sequential cost and likely will be slightly down.

Thank you.

Thank you. Our next question comes from Ambrish Srivastava of BMO. Your line is open.

Hi, thank you for squeezing me in. Sanjay, I had a question on the shortages and then how are you reacting to -- and you talked a little bit about the difficulty in planning and allocating wafers. So, some of the semi companies -- we are hearing companies, they've talked about changing the order cancellation policy from 45 days to 90 days and some companies talking about absolutely no cancellations out. So, how are -- are your long-term -- are your arrangements changing with some of the key customers as a result of this, so that it enables Micron to plan better. Can you just help us provide your perspective on how Micron is dealing with that?

Certainly working very closely with our customers and customers across all our end markets. As I mentioned earlier, certainly lead-times with our customers in terms of supply. Commitments are increasing. The flexibility, I think our customers by and large understand that the flexibility in terms of mixing of their bit demand is getting more limited as well given that not only our supply is in very tight situation, but overall the industry -- the semiconductor industry with respect to materials and capacity is also in a tight position. And our supply chain team has done an excellent job over the course of last year in terms of really procuring materials and capacity early on, so that even though we are running tight, we are able to meet our customer requirements, but yes, with less flexibility than before. And as Dave mentioned earlier that some of this procurement of capacity does put some cost pressures in terms of our second-half outlook as well and so of course, for FQ3, that's baked into our guidance. So, our customers understand that this is an environment where we need to work closely with them and overall our teams are doing a very good job in managing this environment of tight supply. And we see this close collaboration that is going to be needed as we go through this year and as we go into 2022 as well, because really we are confident in 2022 demand as well. As the world recovers from this pandemic, technology -- the economies across the globe are expected to be in a strong growth mode and of course technology demand will increase and vaccinations are happening here in the U.S. first, rest of the globe coming in during the latter part of the year. So, the growth will be in 2021 as well as 2022 and we feel good about our outlook in terms of demand drivers even in 2022 timeframe. So, this working closely with customers to help manage the mix of their products and their supply requirements is going to be an important consideration, not just for next quarter or two, I believe well into 2022 timeframe as well.

Thank you.

And this is a great position for us to be in, in terms of, particularly when you look at how we remain focused on our technology and product leadership execution. First with 1-alpha node in DRAM as well as first with 176-layer NAND and remaining focus on bringing those technology nodes into production and customer qualifications over the course of next several quarters.

Thank you, Sanjay.

Thank you. And ladies and gentlemen that does conclude today's conference call. Thank you for participating. You may now disconnect.