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 Fourth Quarter 2021 financial release conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer period. If you would like to ask a question during this time [Instructor Instructions]. [Operator Instructions]. Thanks. 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 fourth-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 GAAP to non-GAAP financial measures may 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 @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 filed with the SEC. Specifically, our most recent Form 10-K and 10-Q, for a discussion of the risks that may affect our future results. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievement. 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 will now turn the call over to Sanjay.

Thank you, Farhan. Good afternoon, everyone. We delivered outstanding results in Fiscal Q4, achieving robust profitability and the second-highest quarterly revenue in Micron's history. Strong execution drove healthy results across segments, including record quarterly revenue in NAND, as well as in our embedded business. Fiscal 2021 was a year of many records for Micron. We achieved our highest ever mobile revenue driven by all-time high managed NAND revenue and MCP mix. Our embedded business had a tremendous record-breaking year, with auto and industrial businesses both had substantial new highs. Another crucial advantage is consumer business and overall QLC mix and NAND, all hit records in fiscal 2021. Through the year, we successfully navigated multiple obstacles brought on by the pandemic and reached several key milestones. For the first time in Micron's history, we established technology leadership concurrently in both DRAM and NAND. Micron's 1-alpha DRAM and 176-layer NAND are the industry's most advanced nodes in high-volume production. And we further strengthened our product leadership by becoming the first to introduce LP5x DRAM and uMCP5 managed NAND in mobile and the industry's first functional safety capable LP5 for automotive applications. The secular demand for memory and storage, combined with Micron's focused execution and have a rock-solid balance sheet, position us well to deliver strong financial performance and create significant shareholder value in fiscal 2022 and beyond. Demonstrating our confidence in our business trajectory, we initiated a quarterly dividend that we aim to grow over time. Memory is at the leading edge of semiconductor manufacturing, and Micron has leadership in both DRAM and NAND technology. This quarter released maturities in our ramp of 1-Alpha DRAM, 176-layer NAND, 20% to 30% faster than prior nodes, and delivered performance and featured improvements, that will help unleash customer innovation. We believe we are several quarters…

Thank you, Sanjay. Micron delivered excellent FQ4 results, highlighted by our second highest quarterly revenues, strong gross and operating margins, and our substantial positive free cash flow. Total FQ4 revenue was approximately $8.3 billion, up 11% quarter-over-quarter, and up 37% year-over-year. As a reminder, FQ4 last year was a 14-week quarter and impacts our year-over-year comparisons. FQ4 revenue growth was broad-based with solid demand and price increases in both DRAM and NAND. Our robust growth in FQ4 contributed to strong performance in FY-21, with revenue of $27.7 billion which was up 29% from the prior fiscal year. That Q4 DRAM revenue was $6.1 billion, representing 74% of total revenue. DRAM revenue increased 12% sequentially and was up 39% year-over-year. Bit shipments increased in the low-single-digit percentage sequentially, and ASP s increased in the high-single-digit percent range, quarter-to-quarter. For the fiscal year, DRAM revenue increased 38% year-over-year to $20 billion, representing 72% of total fiscal year revenue. FQ4 NAND revenue was approximately $2 billion, an all-time high, and representing 24% of the total revenue. NAND revenue increased 9% sequentially and was up 29% year-over-year. its shipments increased by low-single-digit percentage sequentially, while ASP s increased in the mid-single-digit percent range, quarter-over-quarter. For the fiscal year, we achieved a new Company record for NAND revenue of $7 billion, an increase of 14% year-over-year. NAND revenue represented 25% of our total fiscal year revenue. Now, turning to our FQ4 revenue trends by business unit. Revenue for the compute and networking business unit was $3.8 billion up 15% sequentially, and up 26% year-over-year. Growth was led by the data center and graphics markets. Revenue for the mobile business unit was $1.9 billion down 5% sequentially, and up 29% year-over-year. Mobile demand remained healthy in the quarter with continued momentum from the rollout of 5G.…

Thank you, Dave. I would like to share the recent accomplishments that make me especially proud of our Company. Our strong Micron culture has played a significant role in driving our results aligned to our broader vision to transform how the world uses the information to enrich life for all. Our Company culture, community leadership, and business performance have been recognized globally, earning multiple industry awards and recognitions this year. This month, we were ranked by Fortune as one of the top 20 best places to work in manufacturing and production. The only semiconductor Company to earn this recognition. Fiscal '21 was an excellent year for Micron. As our fourth-quarter results clearly demonstrate, we are delivering strong financial results. We are planning to deliver record revenues and solid profitability in fiscal year '22. Demand for memory and storage is solid across market segments. Industry trends like the broad integration of artificial intelligence into all computing, proliferation of the Intelligent Edge, continued data center growth, and deployments of 5G networks create new and expanding opportunities for Micron. The importance of semiconductors to these markets is underscored by government initiatives to invest in domestic semiconductor production, both here in the U.S. through the chipset and in other countries around the world. We're focused on building our technology leadership to deliver broad new solutions, that offer unique value to our customers. Our business is robust and we are energized to seize the opportunities ahead of us, as a truly exciting time in the semiconductor industry. We will now be open to questions.

Operator can you please open the line for questions?

At this time, [Operator Instructions] we have your first question from Harlan Sur with JP Morgan, your line is open.

Good afternoon. Thank you for taking my question. There are a lot of concerns on inventories in all of your end markets, especially PCs, just given the non-memory component shortages that are limiting notebook and desktop shipments in the second half of the year. Can you guys just qualitatively describe customer and channel inventories in the PC, server, and smartphones segments of your business? And also, as you normalize your inventories through the first half of this fiscal year, do you guys anticipate a normal level of inventories on your Balance Sheet as you entered the second half of the fiscal year?

I will have Dave comment on the second part of your question, and on the overall inventory question, I would say that by and large, inventory among our customers is in decent shape. Of course, we talked about the PC market, where due to semi-conductor component shortages, our PC customers, some of them are not able to fulfill all of their end demand, and therefore they have made some adjustments in their purchases, impacting some of our demand in the near-term into the PC market. And we think this is short-lived, and over the course of the next few months, this will work itself out. And on the smartphone side, of course, you know that new full-cycle, new full launches are coming up, and this tends to be a seasonally strong quarter for new smartphone shipments as well. While some customers may because of geopolitical considerations or through the lessons learned during the pandemic, or their own supply chain considerations of supply chain shortages, maybe having a strategy of carrying more inventory than some other customers. Overall, the smartphone market continues to be driven by 5G transition smartphones over the course of calendar year '22 with 5G increasing by 50% from the 2021 levels. And on the data center side, of course, the investment cycle is strong on the data center side, and of course, the pandemic has driven strong acceleration in digital transformation, and that certainty extending into the cloud, cloud services, video streaming, e-commerce, all of these trends, along with new architectures, new processors that are being introduced that actually enable greater AI capability into the workloads and greater usage of data attach of memory in the servers. All of these also are creating new demand, so overall data center inventory levels are also in decent shape. So, what -- inventory in our markets today is in much better shape than it was back in the 2018-time frame. Again, some customers may have higher levels due to their strategic considerations and they may choose to continue to do so in the longer term as well. Given the challenges faced by the supply chains during the pandemic, as well as given geopolitical considerations. This is what I would like to share with you on inventory and Dave; you can add a second part of the question.

So just as a reminder, we look at our optimal level of inventory, we like to see it be 100 plus in terms of days, we can operate slightly below that. We're definitely below the optimal level, it's at 94 days. I'd say the -- for us we never like to see it go is below 95 days. And so, we think we will make a little bit of improvement next quarter on -- in terms of days, it will probably be up a few days. But I think it's going to be still below that 100-day figure. As we look through the year its -- assuming we can make some progress on inventory. We think we can get it more into, what we would call the optimal stage, which is 100 to 105 days of inventory. Probably going to exit the year somewhere in the 100 days of inventory. As we already talked about, finished goods inventory is really where we're particularly lean. And we do have to make some progress in that space to get ourselves into a better position. But overall, I would say the back half of the year will probably be in the optimal range.

Thank you for the insights, Daron. And you mentioned in your prepared remarks, seeing constraints within your supply chain for certain IC components, which is going to limit some of your bit shipments also here in the near term. Can you just give us some examples of some of these IC components both in DRAM and NAND? I assume, for example, you have some NAND controller constraints, but what about in DRAM?

So, the Harlan -- you are right to note that some of the controller shortages are there with respect to FSD, and particularly impacting the data center FSD. We also have certain shortages of analog, ICs. And these shortages are impacting our ability to ship to the full demand level that we are seeing from the customers. And if you look at controllers, some of the analog ICs as well as in general, the overall supply chain is running tight. And we have done a great job by our supply chain team in addressing these needs in the past and they continue to work on securing the supply for the future. And we would expect that over time, this will get better.

Thank you, Sanjay.

Thank you. Our next question comes from the line of C.J. Muse of Evercore. Your question, please?

Yeah. Good afternoon. Thanks for taking the question. I was hoping to drill into your gross margin. Pretty impressive despite the topline guide. So, I guess a couple of parts here. First, in terms of the costs down within the November quarter, I'm assuming more DRAM than NAND. Can you speak to that? Can you also speak to mix shifts in the quarter? And then, for all of fiscal '22, how should we be thinking about the type of cost downs across both DRAM and NAND? Should we think 10 plus percent is sustainable year-over-year for DRAM and similar type number, if not higher, on NAND, or how should we think about that? Thank you.

Okay. Let me start with the near-term outlook. I would say the cost declines for the November quarter are going to be pretty minimal. We obviously are getting a benefit from both our 1-alpha node and our 176-layer node in NAND. But we are running into some cost headwinds as it relates to the back end mostly a function of the pandemic and the disruptions that are caused to the supply chain and so forth. And actually, both NAND and DRAM comment quite honestly. So, no specific direction either way on DRAM and NAND. As it relates to mixing, we have a range, it can go a couple of different ways obviously. But there could be a little bit of a mix shift between DRAM and NAND that could impact where the gross margins end up. Also, by business unit, we could see some mix shifts within the business units, which could impact our margins as well even down to the product level. So, it's hard to call within a couple of 100 basis points, so that's why we gave this range, as I've mentioned, in the prepared remarks. It's pretty similar to the range we gave back as the same that we gave in the prior quarter. So, we're roughly seeing things pretty similar to what we saw in the fourth fiscal quarter. And I agree with you, these are great gross margins, we're pretty happy with them. The operating margins that this generates are in the mid-to-high 30s, we're expecting something similar for the First Fiscal Quarter. So, I think we're executing very well on the profitability side of the business. In fiscal '22, we do expect really good cost declines on the front-end side for both DRAM and NAND. Again, a function of 1-alpha in DRAM and…

Thank you.

Thank you. Our next question comes from Shannon Cross of Cross Research. Your line is open.

Thank you very much. The first question I have is with regard to pricing. Can you talk about some of the pricing dynamics, especially with the pullback in demand from the PC vendors? Are you expecting to see any more aggressive moves from your competitors? Although given your comments on gross margin, I'm guessing the answer, maybe no. And then my second question is, just with regard to your PC OEM partners, how are you tracking confidence that they're going to actually see the demand come through in the second half of the year. Because I get a lot of questions from people about double ordering, even just from their end customers. So, I'm just wondering if you've changed any methodology in how you're tracking what your partners are seeing or how you're providing guidance as you lookout. Thank you.

With respect to pricing, we do not provide comments on pricing, but you look at our FQ4 of those and of course, we reported that both for DRAM and NAND in FQ4, pricing increased. And you are right to note that our gross margin guidance for FQ1 is strong. In fact, same, as Dave earlier pointed out, as our FQ4 guidance was at the time of our June call. And as you look at not only just FQ1 for fiscal year '22, we're projecting a record year for the Company, with solid profitability for the full year as well. And just remember the pricing is always a function of the mix overall as well. And with respect to your questions around PC, again, as I mentioned, the PC customers have been impacted by their own semiconductor shortages and their supply chain constraints. Their end demand -- their end-user demand is very strong. In fact, they have an unfulfilled backlog. Generally, among these customers, which is quite extensive. And you know that even in the PC industry, while prices have gone up if the customers are able to maintain a strong backlog that speaks to the end strong demand. It really is all driven by work from home, learn from home, that demand acceleration that has taken place through the pandemic will continue to support a healthy environment for PC in calendar year '22 as well. Of course, in 2020 and 2021, PC has gone through a double-digit unit growth on a calendar year basis. We expect that to moderate in calendar year '22 to perhaps from flat to low-single-digit year-over-year growth in terms of PC units sold, yet it will be a healthy market. Again, driven by the trends, such as the economy's opening, businesses opening, workers coming back, that drives a greater mix of enterprise PCs, commercial PCs. While some of the consumer PC, such as Chromebox, maybe -- compared to last year, maybe less than demand today. But the commercial PC demand is getting stronger as well. So overall basically -- continues to be a healthy market and we work closely with our customers and today they are really constrained by their supply chain shortages. And that's what is adjusting their purchases. And as I've said before, we believe this is going to be short-lived. And we look forward to continuing to support our customers with our products. And as we highlighted, our new technologies, new products, [Indiscernible] for transitions, PC customers are qualifying them fast and we are focused on delivering those in calendar year '22, as well as fiscal year '22-time frame.

Thank you.

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

Hi, good afternoon. Thanks so much for taking the question. I was hoping you could provide a little bit more context around your fiscal '22 CapEx guidance of 11 billion to 12 billion. If you can speak to WFE within that number for fiscal '22 and then differentiate between DRAM and NAND that would be super helpful. And then just to remind us what bit supply growth are you expecting purely from transitions in both DRAM and NAND as you think about calendar '22? Thank you.

[Indiscernible] I'll go through the CapEx for you. So as Sanjay mentioned, and as I reiterated, we expect CapEx to be in the 11 to $12 billion range. We were roughly a little bit less than 10 billion, $9.7 billion in fiscal '21. If you look at it by the element of CapEx, we are going to invest more in pilot enablement this year. Last year was a relatively low year for us in terms of pilot enablement. So that's going to be a reasonable step-up in our CapEx spending. We feel CapEx equipment in DRAM will be down year-over-year. We think we've made a good investment in fiscal '21 and we don't need to invest as much in fiscal '22, so that will be down. NAND will actually step up pretty meaningfully in fiscal '22 versus '21, if you remember, we took CapEx, way down in fiscal '20, boost it up a little bit in 21. Now we're up to kind of a full investment level in '22 to support 176-layer. And that was caused because of this transition from floating gate to replacement gate when we made a pause in terms of our CapEx investment to get the first line out at relatively minimal levels. Back-end, we should be up a bit in back-end spend as we make -- continue to make investments on the back-end to put that cost structure into better places I intimated before. We've been making investments to improve our cost structure there. The cleanroom will be down a little modestly. And, of course, we have EUV spending that also will impact our CapEx in fiscal '22 as well. One other thing just to remind you, so we will be 60% of our CapEx weighted to the first half, probably 40% to the second half. So, this was similar to what we saw in fiscal '21. We're likely to see in fiscal '22, which is our -- haven't --is been our typical pattern over the last couple of years.

Okay and Dave, the transitions, you guys talked about calendar 22, a bit strong mid to high teens on the DRAM side and approximately 30% of the NAND side in line with the industry. What portion of that growth? Are you guys expecting purely from transitions to 1-alpha --

Forget that again. It's all from no transitions, we're not adding wafers. We don't see, for the foreseeable future, adding wafers in either DRAM or NAND. In the next few years, we might be adding wafers in DRAM as Sanjay mentioned. But NAND, we think we can continue with no transitions to support the growth.

Thank you.

Thank you. Our next question comes from Aaron Rakers of Wells Fargo. Your question, please.

Yeah. Thanks for taking the question. I wanted to ask a little bit more about the end demand dynamics, particularly around the data center. I'm curious as we move forward, how you are thinking about the bit demand profile of the data center and the server market. And what are you seeing as far as kind of the progression of memory to compute ratio as we move forward to next-generation CPUs? I'm just curious about how you're rolling forward the expectations over the next year and that growth profile from a bit perspective.

Within the data center both for DRAM and NAND, demand trends would be strong. In fact, data center today has become the largest market for DRAM and NAND, and will continue to grow faster than the average of the industry, both for NAND and DRAM in the foreseeable future as well. So, it's really being driven at the trend of AI driving a greater need for memory in addressing data-intensive workloads. The BOM is going from about the memory and storage part of the BOM in the servers in data centers is going from about 30% a few years ago to around 40% now, and going to 50% in few years’ time frame as well. And new architectures, new processors, are enabling more cores, and then more cores mean more memory attached per core, therefore, greater gigabytes per server for DRAM, as well as for NAND. DDR5, is a transition that will be occurring towards the course of the next couple of years, as well as new CPUs, get launched into production. And DDR5 is a higher bandwidth solution. Of course, enable more value, higher performance in the applications. So that adoption will be going on, and over the course of the year is, of course, CXL and HBM, these ultra-bandwidth solutions. These will also be continuing to grow in the data center space. So average content per server for both DRAM and SSD will also be growing over 20% on a CAGR basis in each of these applications. So, a strong opportunity ahead, and Micron is very well placed with respect to our own product portfolio in terms of SSDs displacing HDDs, in terms of us providing higher density memory modules for server and data center applications. So as the cloud gets bigger, the data center market gets bigger for us, and we are very well-positioned. And this is an area we are focused on and continue to focus on expanding our product portfolio, particularly on the side of the data center SSDs. So, we look at this as a strong growth opportunity for the industry, as well as for Micron. The value that memory and storage solutions providing in this space, is really critical for the services that our cloud customers are providing, and just keep in mind that enterprise as well while it grows at a slower rate compared to the cloud, we are seeing a resurgence in enterprise applications as well driving for overall healthy demand trends in data centers in Calendar year '22, Fiscal year '22, as well as beyond.

And then as a quick follow-up, Dave, I'm just curious as you start the last quarter, implement some share repurchases. How do you think about the liquidity on the balance sheet or managing the Company from a cash-on-hand perspective versus continuing to learn more in on share repurchases? How much cash do you need operationally to comfortably run the Company?

We roughly are holding about did the 30s as a percent of revenue in terms of liquidity, but $2.5 billion of that liquidity is our unused revolver, so cash is obviously less than that. We obviously have more liquidity than we need, which of course is a good opportunity as it relates to the buyback. As I mentioned, we're also going to receive $900 million from the sale of our Lehi Fab that also can be utilized for returns to shareholders. And we are expecting healthy free cash flow in fiscal '22 as well. And so, we'll be able to leverage that. We've committed to return at least 50% of it in the form of dividends and buyback, mostly buyback. And we could obviously go higher than that. Our authorized plan, we still have $6 billion left in our authorized plan for repurchases. And if we see the stock be weak, which of course is how we viewed it in the Fourth Quarter, we'll be aggressive about buying back stock.

Perfect. Thank you.

Thank you. Our next question comes from Joe Moore of Morgan Stanley. Please go ahead.

Great. Thank you. I wonder if you could address what transitions going on in both DRAM and NAND to 1-alpha and our G2. Are there any issues that that creates from a mix standpoint in terms of it seems like it's quite a bit demand for the older products? Where are you in terms of getting qualified for the newer products? How is that affecting you guys?

Actually, we are doing very well with respect to ramping up these new nodes in production. Right on our plan in fact, in terms of yields ahead of our plans, I highlighted that the yields in these 176 layers NAND as well as 1-alpha DRAM, have ramped 20 to 30% faster than our prior 1Z generation node and the prior FG node, the last FG node. And customer qualifications actually are going very well that these nodes, as well as I, mentioned earlier, that we are already shipping our 1-alpha in the PC space, as well as broadening its shipments to other parts of the markets as well. In fact, customers are working closely with us in qualifying these projects. 176-layer NAND-based mobile product went are from just introduction to 1-million-unit shipments in a record time. Fastest RAM in the history of the Company. So, with all these norms in production, as well as in terms of deployment in the marketplace are doing very well for ourselves. And, of course, this is all baked into the guidance that we have provided in terms of our revenue, as well as our cost expectations.

Great. Thank you very much.

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

Thanks, guys. Thanks for letting me ask questions. Congratulations on the solid execution. Sanjay, you're characterizing the current environment as relatively short-lived, are we supposed to read into that as we go into the February quarter, your business might normally buck normal seasonal headwinds and I guess importantly upturn to date, this memory cycle has been very different than prior memory cycles. Typically, you have eight quarters at unabated ASP, growth, and margin expansion. The least plateaued in year three quarters into it. What's different about this cycle? And I guess what makes you confident this is just a pause and not something more?

So with respect to the comment on the short-lived just to be clear what I was mentioning was that with respect to the PC part of the market where our customers, some of our customers in the PC market, have experienced semiconductor shortages impacting their decisions on purchases of memory, that's what I was mentioning short-lived because their end-user demand on PCs is still very strong and lot of unmet demand that actually stretches the demand over time and make the demand longer, stronger for longer. But my comment regarding short-lived and adjusting it in the next few months was related to the PC part of the market and outside of that, in other markets, as we discussed earlier, we see strong demand trends, strong end-user demand trends. And of course, the supply chain shortages that are being experienced in PC, are also being experienced in other parts of our markets as well by our customers. Whereby, of course, different customers handing them an overall different fashion, but the underlying demand trends are driven by AI and 5G from the data center to the Intelligent Edge, to the user devices are strong, they are circular in nature. COVID, further accelerated it, semi-conductor supply chain shortages are only stretching the demand out as -- because some of the demand gets pushed out. So, as I said, making those demand growth drivers actually stronger for longer as well. So, you can call it pent-up demand, but that's what I'm referring to. So, on the demand side, things are here overall strong on the supply chain aspects. Of course, this is something that the lead time in the semiconductors is long, and this will take several quarters to continue to improve. Parts of the semiconductor supply chain have already seen improvements. Our expectation…

Sanjay, those inventory comments were very helpful. I'm just curious as a quick follow-on, your guidance for bids to be down in the November quarter. How much is that a conscious decision by you to hold bits off the market to help me be pushing pricing, and how much of that is just being driven by there's no demand for those bits and that's why bits are down?

Again, keep in mind that our inventory is very lean. It is at the leanest level and below our target levels, and that is impacting some of our ability to meet the demand as well. And overall, our projection of this, the respect to FQ1, is really a function of our own supply chain capabilities in terms of where our inventories and what we can ship at this point to the customers certainly impacted by some of the component shortages, non-memory components shortages that we are seeing in the marketplace as well, and our assessment of overall demand. And the main thing there is really is around the PC, where some of the demand is impacted. But overall, when you look at our guidance for FQ1, which takes into account any aspects of seasonality as well. But the guidance for FQ1 at this midpoint is about 32%, 33% higher than the same quarter last year. So, our inventory capability is also overall impacting some of the ability for our customers, in terms of what we can ship.

Perfect. Thank you.

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

Thanks a lot. I appreciate that. Dave, I guess I had a question on gross margin. I wanted to go back to a question asked earlier. It's down on the 100 basis points on your guidance; I would like a deep percent down revenue quarter NAND it sounds like you're only down modestly at both DRAM and NAND. So, it sounds like the delta is probably pricing. I would think more on the DRAM side. And then somebody asked you about costs and you said, well, costs aren't coming down very much. So, I guess I'm trying to figure out how gross margin is so good? Is this going back to some of the mixed comments that you made ASP quarter? It seems like a more sustainable trend that maybe people were missing. So, I'm wondering if you can flip that for us next.

Yes, sure Tim. So cost declines are going to be relatively muted. Remember that. There will be some mix changes that might impact gross margin to bring it down somewhere within the range that we gave. Obviously, the rest is a function of pricing, and you have to infer what you can't out of pricing. Obviously, if the mix is the predominant factor in driving gross margin, pricing and cost will not be major factors in driving gross margins. Maybe that's the best way to say it.

Got it. Okay. And then I guess just last thing. So just on the cost curve, so you reached -- you said you’re reached production crossover on 176 and on 1-alpha and 1Z. So how much -- like what's the lag effect in terms of when that really starts to bend the cost curve in a favorable direction, given that you've had production crossover on those things. Thanks.

Well, to be clear, 1-alpha and 1z, we've hit crossover 136, we hit at the end of the year. By the way, benefiting us from a cost perspective, it's hard to see it may be as much just because we're getting a little bit impacted obviously on the back end, which is impacting the cost declines. But next year, we do anticipate that both of them will drive good cost reductions for us on the front-end side. So, they will be good. Good notes for us in terms of cost structure and I think we'll see that from a front-end perspective every quarter. Again, I think the first couple of quarters, may not be as noticeable in our cost per bit calculations because of this, more of a headwind on the back-end side of the cost structure. But after we get behind that, I think you'll see that show up on the cost per bit basis as well. The only other factor will obviously be mix as well and we're going to drive like heck, to get our mix to be more -- to be a richer mix of higher-value products and -- which is always our goal. And of course, with higher-value products, you get higher costs, but higher profitability, higher gross margins. So that's a good strategy, but that also kind of distorts the picture and will distort the picture over the course of the year as well.

Perfect. Awesome. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.