Probably China. About 11 or 12 percent of our revenue comes from China alone and it's growing. China has a middle class now of 300 million people, which is basically equivalent of the entire U.S. population. The other interesting part about it is they still haven't come up on the per capita GDP scale. They are still running at $2,500 now, but it was $2,000 last year. They still have a lot of growth ahead of them.
EE Times: We're seeing a new wave of private-equity buyouts in the semiconductor industry. Why?
Appleton: I think there are three factors you have to consider. Being a public company has an enormous burden today. In fact, you're challenged to make long-term decision and sacrifice the short-term profits. Add all that with SEC regulations, Sarbanes-Oxley, etc. Second factor: there is a lot money in the private markets. They have a tremendous number of resources at their call. The third piece of it is that the industry maturing.
EE Times: Is Micron interested in going the private-equity route?
Appleton: There are some models that work for private equities and some are not. When I look at it, I don't think Micron is a good model for it because of the volatility of the markets and the capital required. We're not in any discussion stage about it.
A lot of leverage comes from optimizing the company and its model. As an example, NXP came out of Philips. The entity, which is a very small part of a much bigger company, lended itself to having inefficiencies. You can go in and clean that up. I don't know if that is going make the particular deal worthwhile, because they paid a lot for it.
If you look at an example like Freescale, they were clearly a company that come out under Motorola. They had a lot of inefficiencies. But Freescale was on their way of cleaning that up before they were acquired.
EE Times: Many IDMs are moving towards a fab-lite model, such as Freescale, and, to some extent, TI. Any comments?
Appleton: If you don't have a business that drives volume, you won't be able to afford your own fab. That's not complicated. In TI's particular case, they rely so much on external foundry now. I don't think it was a volume issue as much as a duplication of R&D. Although their decision alarmed a lot of the semi world, they are so embedded with TSMC and UMC. They've got so much volume [with their foundry partners] and so it was a pretty rational decision for them.
EE Times: Any comments on the foundry model in general?
Appleton: The foundry guys? It's a model that allows an aggregation of those who couldn't do on their own. It also could be a dangerous model in terms of your IP. They are servicing a lot of different customers. They are trying to take their accumulative knowledge and make it better for everyone by attracting more customers. It's a fine line.
EE Times: Not long ago, Micron began its diversification strategy, jumping into CMOS image sensors, specialty memories and NAND. Is the company changing course given the soft environment?
Appleton: We're not changing course at all. We're driving forward. We are very, very optimistic about the market and about the applications that will consume our products over the longer period of time.
We're completely committed to the path we're on. We always knew that we would hit speed bumps in the road. We always knew that NAND would behave like DRAM at times and that the mobile market would have to flatten in penetration.
EE Times: Are you done with the diversification strategy?