By Jane Lanhee Lee and Chavi Mehta
SAN FRANCISCO (Reuters) – Chipmaker Micron Engineering Inc on Thursday announced it was experimenting with a new pricing design for its chips called forward pricing agreements that would purpose to stabilize the steep rate fluctuations that plague the business.
“I’m tremendous psyched to announce that a top rated 10 purchaser has already signed up on this design with us, a far more than $500 million a yr of profits for a 3 year agreement,” explained Sumit Sadana, Micron’s main business enterprise officer at the company’s investor day occasion.
He declined to challenge how a great deal of the extensive-expression agreements with shoppers would migrate to this new product of pricing, and emphasised that this was an “experiment”. He stated the existing extended-term agreements are centered on volume and not on price ranges. The ahead pricing agreements have equally volume and pricing.
When requested about whether the contracts would be enforceable Sadana acknowledged that one party or the other would generally be on the completely wrong aspect of the rate.
Sadana also mentioned that Micron does not system to lessen its gross margins to thrust the forward pricing agreements ahead.
“There’ll be ups and downs, but the added benefits ultimately outweigh the risks of basically doing an settlement like this,” reported Sadana.
(Reporting By Jane Lanhee Lee in San Francisco, and Chavi Mehta in Bangalore Enhancing by Nick Zieminski)