Micron ramps up 'resiliency in the supply chain' amid COVID-19: EVP of Global Operations

The chip sector is in focus as global supply chains get hit by the COVID-19 crisis. Manish Bhatia, Micron's EVP of Global Operations, joins Yahoo Finance to discuss the current state of the company and what investors can expect in the future.

Video Transcript

ALEXIS CHRISTOFOROUS: Welcome back to Yahoo Finance live. Want to take a closer look now at the chip sector, at the health of the chip sector during this coronavirus pandemic. And to help us do that is Manish Bhatia. He is Micron's executive vice president of global operations.

Good to have you here, Manish. Thanks for making the time for us. You're joining us from Singapore, we'll add. I know Micron was out with its results a few weeks ago. Stronger-than-expected results for second quarter fiscal 2020. Nonetheless, though, top and bottom lines both declined on a year-over-year basis. We'd love to know what business conditions look like right now for Micron.

MANISH BHATIA: Yeah. So, like many others, you know, we're, you know, dealing with the uncertain macroeconomic environment. Right now, frankly, the-- you know, the COVID situation has spurred strong demand growth for us in certain areas that are associated with the-- you know, the way we're living and coping with the global pandemic around the world, where all of us are working from home, we are learning from home, we are shopping from home, video conferencing is, you know, the new norm for all of us. And so that's driving demand for our-- our memory and storage products, whether in the cloud, or in networking, or in personal computing. So these areas are certainly experiencing strong-- strength.

And then there are other areas that are more consumer-driven, such as mobile phones, smartphones, and you know, automobiles, where, you know, the demand is a little less certain right now.

BRIAN SOZZI: Manish, how are you thinking about redesigning your supply chain at Micron? To your point, we're all working from home now. There's 5G devices on the way that will help us work from home even smarter and faster. How does this situation send you guys back to the table and think about changing to speed up your supply chain even more?

MANISH BHATIA: Yeah, so I think, you know, the-- the first thing that we have to do, we look at the supply chain, is to think about having more resiliency in the supply chain. So what we've been doing is, you know, even from the very early days of this COVID-19 outbreak, back in, you know, kind of around the mid-- mid-January time frame, is making sure that we had the ability to build our products in multiple different geographies, and to be able to source our materials from our suppliers also in multiple different geographies, additional qualifications, bringing online additional suppliers, so that as the virus moved from one region to another, we were able to-- to move and maintain full production output at all of our factories because we could source materials from, you know, different regions, and then we were also able to-- to keep our factories running at-- at full output.

So you know, we think about the resiliency that we-- we have there. And then, you know, certainly as we think about potential acceleration of some of the remote capabilities that, you know, the-- the kind of industrial internet of things will bring for-- for really all manufacturing, but certainly semiconductor industry leading in that way. We have done things like having remote operating control centers, where we-- we move the center of operations outside of our clean rooms so that all of our equipment can be monitored, all of our production movements can be sent off via remote operating control centers, and so thereby our technicians and engineers are able to control our production without having to go into the clean room.

So a lot of these things are going to be, you know, spurring innovation and accelerating our path down the-- the kind of "smart manufacturing of the future" track.

ALEXIS CHRISTOFOROUS: Manish, what has Micron's response been on-- on a very local level in-- in the markets where it operates in terms of helping to supply relief to maybe local areas, local health care workers? What are the efforts like there?

MANISH BHATIA: Thanks, Alexis. I'm glad you asked. I mean, I think we've really tried to really take care of the communities in which we operate. We have designated a $35 million commitment across all the different communities where we are-- we have either manufacturing operations or development operations around the world. That consists of $10 million direct grants or matching of Micron team member contributions, it consists of donations in kind that we're making to local regions, whether it's personal protective equipment. But you know, we made that commitment right away. We are-- we made a commitment to small businesses throughout our supply chain where we're going to shorten the payment terms that we have, where we would-- whatever our normal payment terms would be, we-- we're going to shorten all of them, just to make sure that the small businesses that supply us have liquidity right now.

And then for our-- our employees globally, you know, we've made a-- we've done a number of things. We've made a commitment along with many other companies. Our CEO, Sanjay Mehrotra, made the commitment that, you know, the 90-day pledge, no-layoff pledge. We've also made a one-time assistance payment to almost 70% of our global workforce, of-- of a-- the equivalent of $1,000 US, and of course translated into their currencies, just to-- just to help them with any of the things that could come up during this time. [INAUDIBLE] can-- can manage through this with their families, whether they're medical needs, additional care needs, whatever they may need.

So we've really tried to take care at the community level, and the businesses in our local supply chains, and also, of course, our employees.

BRIAN SOZZI: Manish, you mentioned strong demand returning in some parts of the market. What are you seeing terms of smartphone demand in China? I think a lot of people invested in the tech space are looking to China to come back pretty strongly. Are you seeing it through Micron's business?

MANISH BHATIA: We are starting to see some demand coming back. Certainly it was-- it was a big reduction in our-- you know, last quarter. Because supply of smartphones weren't available, because obviously the so many of the smartphone factories were just shut down back in calendar Q1. We've seen those start to come back up. And we've seen some consumer spending happening. But I'd say that certainly the bigger trend that we're seeing in China and then globally is cloud and data center continues to be strong.

And that happened in China when they first started experiencing the quarantines, that they were put in place and then expanded globally. So that's really the-- the strongest part of our business is data center and cloud computing right now, whether it's-- and personal computing, all those things that it takes for us to-- all of us to be able to work from home and continue with our lives. And also, you know, what governments and scientists are using, you know, great computing environments to be able to come up with treatments for COVID.

You talked about-- on your previous segment about remdesivir. You know, treatments for the virus, or vaccines for the virus, or even just doing contact tracing requires a tremendous amount of big-data analytics which is driving demand for-- for our memory and storage products in the cloud.

ALEXIS CHRISTOFOROUS: Manish, just on a-- on a personal level, what are things like in Singapore right now during this pandemic for you? And what's the lockdown situation like there?

MANISH BHATIA: Yeah, so, you know, I think Singapore originally did a very good job. And we actually went for a good bit of time even post the initial outbreak in China where there were cases in Singapore, but we actually went a long time without having to have a shelter-in-place equivalent kind of order, I'd say, for February and March.

And then for the-- as April came, really, there were two things that happened in Singapore. One was there was an influx of Singaporean residents or citizens coming back from infected areas in North America or in Europe. And that led to more quarantines and more actions that had to be taken here, to what the government calls the circuit breaker had to get put in place in April-- at the beginning of April to try and reduce the-- the risk of community spread. And then they've had-- there have been some issues in foreign worker dormitories, where there has been a growth in cases, which has kept the government very focused on making sure that they're keeping control of the situation.

But right now I'd say we've been able to-- at Micron, have been able to continue our operations here in Singapore. We have three large factories here in Singapore, and we've been able to continue full production operations throughout this entire time, and really feel like we have good cooperation with the Singapore government, with all of our team members and our suppliers here in Singapore, to be able to accomplish that.

ALEXIS CHRISTOFOROUS: All right, we're going to have to leave it there. I'm glad to hear that. Manish Bhatia, executive vice president of global operations at Micron. Thanks for being with us.