D. Mark Durcan - President, Chief Operating Officer Ronald C.

Foster - Chief Financial Officer, Vice President - Finance Michael W. Sadler - Vice President - Worldwide Sales Kipp A.

Bedard, Investor Relations

Tim Luke - Lehman Brothers Shawn Webster - J.P. Morgan Daniel Berenbaum - Cowen and Company John Pitzer - Credit Suisse [Derrick Tarzars] - Citigroup Daniel Amir - Lazard Capital Markets Vijay Rakesh - Thinkpanmure LLC James Covello - Goldman Sachs Hans Mosesmann - Raymond James Krishna Shankar - JMP Securities Analyst John Lau - Jefferies & Co.

Bob Gujavarty - Deutsche Bank Securities Kevin Cassidy - Thomas Weisel Partners [Edis Mellick] Bill Wade Kevin Vassily - Pacific Crest Securities Daniel Morris - Oppenheimer & Co.

I’d like to welcome everyone to Micron Technology’s third quarter 2008 financial release conference call. On the call today is Steve Appleton, Chairman and CEO, Mark Durcan, President and Chief Operating Officer and Ron Foster, Chief Financial Officer and Vice President of Finance and Mike Sadler, Vice President of Worldwide Sales.

Today’s conference call including audio and slides is also available on Micron’s website at www.Micron.com. If you have not had an opportunity to review the third quarter 2008 financial press release, it is also available on our website again at www.Micron.com.

Our call will be approximately 60 minutes in length. There will be an audio replay of this call, you may reach that by dialing 706-645-9291, with the confirmation code is 50696269.

This replay will run through Thursday July 3, 2008 at 5:30 pm Mountain time. A webcast replay will be available on the company’s website until June 26, 20098.

We encourage you to monitor our website at www.Micron.com throughout the quarter for the most current information including information on the various conferences that we will be attending. Please note the following Safe Harbor statement.

During the course of this meeting we may make projections or other forward-looking statements regarding future events or the future financial performance of the company and the industry. We wish to caution you that such statements are predictions and that actual events or results may differ materially.

We refer you to the documents the company files on the consolidated basis from time-to-time with the Securities & Exchange Commission specifically the company’s most recent Form 10K and Form 10Q. These documents contain and identify important factors that could cause the actual results for the company on a consolidated basis to differ materially from those contained in our projections or forward-looking statements.

These certain factors can be found in the Investor Relations section of Micron's web site. Although we believe that 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 the date of the presentation to conform these statements to actual results. I'll now turn the call over to Mr.

Ron Foster.

For those listeners who haven't seen our press release which is available on our web site and includes a reconciliation of the non-GAAP numbers discussed on this call, I will review the summary of financial results for the third quarter which ended May 29. For the third quarter, revenue increased 10% and gross margins moved into positive territory as megabit sales and cost reductions outpaced the ASP declines.

DRAM and NAND ASPs declined approximately 5% and 20% on a sequential quarter basis. Megabit sales volume increased approximately 10% and 40% per DRAM and NAND flash memory products respectively from second to third quarter.

The company continued to make progress in driving down production costs as costs of goods sold per megabit declined about 15% and 25% for DRAM and NAND respectively over the same period. Weight per output yield increases and node transitions all contributed to the margin improvement.

The company recorded a net loss of $236 million or $0.36 per diluted share for the quarter compared to a non-GAAP loss of $314 million or $0.41 in the prior quarter. The GAAP reported loss for the second quarter included a goodwill impairment charge of $463 million.

We are pleased with our progress in reducing the operating cost structure as we continue to focus on driving down SG&A and R&D expenses. R&D expenses improved in the third quarter due to cost management efforts and progress moving key development products into production.

We expect to maintain the lower run rate of operating expenses with SG&A and R&D expenses estimated to be flat to slightly down from the third quarter to the fourth quarter. Operating cash flow was $217 million for the third quarter and $775 million for fiscal year to date.

We ended the quarter with $1.6 billion in cash and short-term investments. During the third quarter TECH semiconductor entered into a $600 million credit facility to refinance $240 million of outstanding debt and to finance future capital expenditures.

Capital expenditures totaled $577 million in the third quarter. Capital expenditures for fiscal 2008 will be at the upper end of our previously projected range of $2.5 billion to $3 billion as we continue our investments in NAND and IMF and DRAM at MTV and TECH.

Partners will provide net capital contributions of about $230 million to fund our 2008 expenditures. In fiscal 2009 capital expenditures of approximately $1.5 billion to $2 billion are anticipated.

We expect about $300 million of this amount in net capital contributions from partners. These capital expenditures do not reflect the previously communicated $550 million capital contribution for Maya which has committed over the 2009 calendar year.

Depreciation and amortization expense was $513 million in fiscal Q3 and will total approximately $2 billion for the year. In fiscal 2009 depreciation and amortization expense of about $2.25 billion is expected.

I'll close there and turn the commentary over to Mike.

In 2007 and early 2008 we experienced a supply driven semiconductor memory pricing downturn in the face of a relatively strong demand environment. From our perspective, exiting fiscal Q3 of this year we are seeing an improved supply-demand balance.

This has generally resulted in relative memory price stabilization with an encouraging upward pricing trend across the commodity DRAM product portfolio in particular. The computing industry continues to be the largest revenue driver for Micron's memory products and we are seeing demand in line with normal seasonal expectations.

Although we don't have perfect visibility on the specific demand drivers within the computing space, I would characterize memory content for system growth as being particularly strong relative to absolute PC unit growth. We are starting to see some traction for DDR3 memory in select platforms and would expect penetration as we move through 2008 and into next year.

We're well positioned in this face with our industry leading DDR2 and DDR3 chip sizes on 78 nanometer 300 millimeter wafers. We've begun a transition to 68 nanometer in our Singapore facility with initial production shipments and revenue generation occurring in the current quarter ultimately contributing to aggressive cost of goods sold productions.

All in all we are pleased with our position in the computing space and given the recent trends encouraged about prospects for the second half of the calendar year. Our specialty DRAM product portfolio continues to enable solid performance for the company in a variety of non-computing segments such as networking, mobile handsets, and automotive.

We're utilizing installed 200 millimeter capacity to manufacture both image sensors and the vast majority of our specialty DRAM products. We are selective moving high volume and high growth specialty DRAM products into 3 millimeter facilities to achieve further cost reductions and create headroom for supply growth.

From a market segment viewpoint we did see particularly strong unit shipment and revenue growth in both our image sensors and low-power DRAM products for the mobile handset market in the third quarter. This speaks both to the health of the market as well as to the strength of Micron's product portfolio for this particular market segment.

The NAND market still dominated by consumer applications with a strong seasonal component of demand continues to be challenged by excess supply. Our technology and scale advancements now moving to an industry leading 34 nanometer process are having a positive effect on cost of goods sold reductions but the oversupplied market environment has continued to drive prices down further.

We are working diligently on strengthening the NAND product portfolio much as we have already demonstrated in the DRAM space to improve our selling prices and relative profitability independent of the market environment. To this end we are ramping up our NAND based multi-chip package efforts for the mobile [MOAL] phone arena.

We have a micro-SD compatible 1 gigabyte chip in the market today and have recently begun shipments of the micro-SD cards with Micron manufactured silica. We have initial single-level cell solid state drives in the evaluation stage with various customers in the enterprise space and will introduce lower cost MLC based solid state drives for the client markets later this year.

We are achieving higher average selling prices in margins via leveraging the Lexar brand and retail channel presence and are continuing down the path of moving more of our NAND output through the Lexar operations. We're proud of our operational performance and the recent trends on key metrics such as cost of goods sold reduction and bit market share growth particularly relative to other players in our competitive states.

Looking to the second half of the calendar year we are enthusiastic about an improving market environment. I'll turn it over to Mark.

Micron had a strong quarter operationally. Our bit cost reductions ran substantially ahead of projections led by solid yields and cost cutting in the operations.

The ongoing transition of Micron's NAND and core DRAM products to leading edge capacity continue to pace with 90% of that silica now being built on 300 millimeter wafers. Technology transitions also progressed as well.

Tech Semiconductor continued its ramp of the industry's leading die size 1 gigabit product on our 68 nanometer technology while making substantial progress on its conversion to 300 millimeter. During the quarter they completed the fabrication of their last 200 millimeter wafers and expect to complete the transition during the second half of the year.

We're well positioned with optimized products for the DDR3 transition coming. Recently Micron and Intel announced sample availability of our industry leading 34 nanometer 32 gigabit product.

That product and process node is now being deployed in our IMFT joint venture and will ramp throughout the second half of the calendar year. We believe this positions us well for continued NAND cost reductions moving into the calendar 2009.

Recently we closed on the creation of our DRAM joint venture Maya. The relationship with Nanya brings many advantages to Micron including joint technology development and licensing of technology as well as the capital efficient capacity associated with the joint venture.

Maya will start up its initial manufacturing facility beginning early in the calendar 2009 and ramp throughout the year to an initial target of 10,000 wafers per week. We anticipate this to be a cost-effective way for Micron to add wafers and support a growing customer demand.

Licensing revenue and cost benefits will grow throughout time as Maya grows capacity, Nanya adds or transitions wholly-owned capacity, and as the scope of our R&D cooperation grows. Looking to the current quarter we expect bit production growth as mid to high single digits for DRAMS and mid-teens for NANDs.

Cost for bit production should mimic that and be in the mid-single digits for DRAM and mid-teens for NAND. I'll turn it back over to Kipp.

We'd like to begin the questions.

Kipp, could you just clarify how you would perceive bit growth in both DRAM and NAND and if you were to see stable pricing from here how you would expect the [AFP] direction to turn through the coming quarter?

I'll speak to the AFP topic and I'll let Kipp address the bit growth question. Rather than answer the question directly I'll just tell you that quarter to date we're three and a half weeks into the current quarter, our DRAM AFPs on shipments are tracking right about flat with respect to what we achieved in fiscal Q3 and our NAND flash average selling price to date in the quarter is about 20% below what we saw in fiscal Q3.

And on the production side, Tim, we're looking at NAND being in the mid-teens sequentially Q4 fiscal over Q3 fiscal and DRAM to be up mid to high single digits.

Could you also comment, Kipp, just on your expectations with respect to cost reduction with respect to the two core businesses?

Yes, sure. As Mark mentioned they'll be similar respectively in each one of those as the bit growth is so mid-teens on NAND and mid to high single digits on DRAM.

Could you perhaps, also a more strategic question, just update us on your perception of the Intel JV and how you might view that degree of commitment around that and what other options there might be for you should Intel decide to pursue other options with respect to that venture?

There's a lot you had in that question. First of all, our perspective is the joint venture's running well.

I haven't had any dialogue with Intel executives that they feel any differently. So a lot of I think what is out there in the market, whether it's speculation or somebody else is making comments other than what we're involved with, I can't really comment on because we continue to move forward with the joint venture as we always have.

I will just point out that as we announced originally to the joint venture with Intel, it's a 10-year agreement and so we're still in the first couple of years of that.

If I may, Steve, just as a follow up, could you give a comment on industry consolidation and opportunities for Micron therein?

With respect to which -

With respect to obviously [inaudible] in Tessera and other possible opportunities?

Yes, I see. Well you know I've been commenting on this for I don't know 20 years now or so and always what I thought would happen doesn't happen and what I don't think will happen sometimes happens.

So we have said many times that as opportunities present themselves we'll consider them and today is no different than it was a year ago or five years ago or 10 years ago. But it obviously requires more than just Micron and to the extent that there are opportunities when there are other willing partners, whether it be joint ventures like we just did with Nanya or something else in a different form, we're certainly willing to consider it.

Can you talk about how you expect your operating expenses to evolve for the rest of this year?

As I commented, the SG&A and R&D costs have come down in Q3. We're on a good trend line on the absolute basis and we expect as we go into the fourth quarter that they will be flat to slightly down both in SG&A and R&D in the fourth quarter as well.

And then on your wafer production, what did it grow sequentially in Q3 and what do you expect it to grow in Q4?

Shawn, we were up a couple percent in Q3 and we're expecting another couple percent in Q4.

Okay. And then finally, in terms of channel inventories can you talk to us a little bit about what you're seeing out there in any quantitative way you can for both your, well, all of your DRAM and NAND and sensor markets?

Sure, I'd be happy to. On the DRAM side my view of things is very little inventory on our shelves.

As a matter of fact we're bumping up against the minimum that we think we can carry and still do an accurate job of servicing our customers, so the demand [miron] is quite strong on the DRAM side. In the, With respect to the inventory levels that our customers have, as I've said many times there's very little incentive for our customers to carry inventory unless they want to do some price hedging and those questions would probably be better addressed to our customers.

But just based on my view of things, I wouldn't imagine there's much inventory in the hands of our customers. In terms of the channel, the minimal value adders and the traders and so forth, my view is that the market's being fairly thinly traded right now and there's probably little inventory in place at least in the DRAM arena with respect to the speculators.

The NAND side is a little bit different. I do believe that the spot market traders, if you will, will have probably accumulated a fair amount of inventory.

My view of things is there's probably a fair amount of inventory in the spot market with respect to NAND flash. We're pretty flush with respect to our own inventories.

We've got one to two weeks worth of finished goods in the NAND area and I don't believe our customers are carrying much inventory either. In terms of image sensors, we're a little heavier on finished goods inventory.

We've got about, if I remember correctly, somewhere between six and seven weeks of finished goods inventory on image sensors. That's relatively flat with where we exited the prior quarter.

We are expecting a pretty strong seasonal demand uptake as we move through the second half of the calendar year. I don't believe our customers are sitting on any inventory with respect to image sensors.

So that's kind of my color on the inventory situation.

Okay. And then finally, and I'm sorry if you said this already, I had to leave for a fire alarm, what do you expect pricing to do if it stays flat for NAND and DRAM in your fiscal Q4?

I answered the question already. Just real briefly -

Yes, sorry.

You can probably pick it up on the transcript.

Can you talk about what percentage of your mix was DRAM and NAND in the quarter? And also it seems from the numbers that DRAM was profitable.

Can you comment on that? And then also can you talk a little bit about your NAND bit growth guidance.

It sounds like you guided for kind of mid-teen percent bit growth. I thought the comment on your Q1 call was to think about 30% to 40% sequential bit growth over the next few quarters, so I'm wondering if something has changed there other than the Singapore push-out?

Sure. Let me start with a revenue breakdown for you, Daniel.

We had core DRAM in the high 20% range, specialty DRAM in the low 20% range, imaging as we noted on the press release was around 11%, and we had NAND in the mid- to high 30% range. And on the profitability we did note last quarter that we felt we were probably one of two if not the only DRAM manufacturer to keep positive gross margins and of course with the data we provided about our cost reductions relative to our AFPs we certainly improved on that.

And I might let Mark talk more to maybe the NAND bit growth.

Dan, on the NAND bit growth, it's going to be in the mid- to high teens on a quarter-over-quarter basis going forward but it will be a little lumpy. We may exceed that in certain quarters.

As you'll recall a couple of, a quarter ago I think we outran our estimates substantially pulling some bits forward. That actually happened a little bit this quarter as well, so I think the sort of running mid- to high teens numbers is a good one to think about but think about it exceeding that on a quarter-over-quarter basis depending on exactly where we're at related to the technology transitions.

So, mid- to high teens, not 30%? Did I just misunderstand that from previous quarters as a good run rate going forward?

Well, you've got both references correct. In the past we've used the term averaging around 30% over the next several quarters and as Mark's pointing out, sometimes we'll get that pulled in as the manufacturing folks execute better and that makes the next quarters comp a little bit more difficult.

But we'll still have a pretty tall year-over-year bit growth as we go into 09.

And then can you just help me understand how much of your NAND production goes to Lexar Products now?

Yes, about 20% for the quarter.

That's 20% of, in that 50% goes to Intel and then another 20% to Lexar and 30% elsewhere?

That's correct.

A couple of questions here first, when you look at your FY09 cap ex budget of $1.5 billion to $2 billion, what kind of market assumptions are you making around that number and what kind of growth can you see in both the DRAM and NAND output relative to that cap ex number?

Well first of all, the cap ex number, I mean the reason we have these ranges is because we constantly look at this quarterly and it could go up or it could go down. I think what we look at in the long-term basis on our cap ex number frankly isn't so much based on what we think the market's going to do next year because obviously we'll adjust to that if we need to, it's really around either planned expansion or planned technology conversions that we have that are obviously in need to be executed upon in terms of planning much before we ever get there.

So that's why we have the ranges that we do.

Is there a larger portion going to DRAM or to NAND, or how does that break out?

Well it, again it's a little hard right off the top of my head to break that out, because remember we essentially have two projects in 09 in addition to what we would be doing on a normal basis among the wafer fabs, there's the IMFT and there's Maya and those will both be in 09, at least calendar 09, and so the timing of those are obviously independent of each other and it's just a little hard for us to know exactly when one hits versus the other.

And then, guys, on the NAND side can you talk a little bit about the solid state drive market especially going into enterprise and I guess help me understand at what point will solid state drives be a big enough percentage of your NAND business and start kind of breaking it out and at least telling us 10% to 15% or 15% to 20% range?

Well it's critical to us from a strategic standpoint certainly and we've got product both in the enterprise space as you noted as well as from the client space primarily the notebook computer market. There's no, as a matter of fact there's no revenue generation whatsoever today for us from either of those markets.

In terms of it being meaningful, that's a little bit subjective but we're probably looking at well into next year before we feel like it's meaningful in terms of a revenue standpoint. I don't know that we're ever at a point where we're going to break it out publicly but we're looking at it being meaningful for us sometime in the 2009 timeframe.

And then, guys, just my last question. DDR3, what percent of the calendar second half capacity on DRAM do you think will be dedicated to DDR3 and if you could help me understand the die-size penalty that might exist as you migrate to DDR3, that'd be helpful?

Sure. In terms of our output in the second half of the calendar year, we've got, by the way, plenty of flexibility to dial it up or down because it utilizes essentially the same tool set in the fab, but we're currently targeting high single digits of our DRAM output as being DDR3 in the second half of the year.

And the penalty that we pay on the same density DDR3 chip versus DDR2 at 78 nanometers is about 3% or 4%, something like that.

Earlier you were asked about potential consolidation specifically around Qimonda and Tessera. I realize that you get this question quite often and you've looked at it before.

I guess if you could lay out for us some of the pros and cons as far as taking on Qimonda and then maybe separately just taking on Qimonda taking on Tessera instead?

You know, it's almost impossible for us to do that because we frankly don't have any kind of inside knowledge on what exists at Qimonda, in Tessera, etc., so we'll just have to look at that opportunity if it were to surface. But I couldn't lay anything out for you because I don't know what it would look like at the moment.

And then you talked about specialty memory. It sounded like demand for image sensors and demand for lower power DRAM was pretty healthy.

Could you give us any sense of what kind of participation you have in embedded NAND? I guess there've been some, I mean obviously there've been some new smart phones launching fairly high density, with a fairly large amount of NAND in them.

If you could just talk about how those are impacting overall market demand?

Yes. They're very important to us strategically particularly because we are one of just a couple of semiconductor makers that has the ability to package its own silicon in a NAND and lower-powered DRAM multi-chip package.

We've got quite a bit of activity with virtually every handset maker underway today in terms of designing and qualifying our products. In terms of revenue contribution today, the NAND based [MTD] which I believe you had referred to as embedded NAND are insignificant in terms of revenue generation.

And then lastly, can you give me a sense of, as you look at second half capacity for DRAM, what kind of assumptions are you taking for the market as far as what Samsung's capacity build would be going into calendar 3Q and 4Q?

Probably the best we can do is quote those industry experts that are out there, and largely what we've read is that Q2 marks the high-water mark for sequential bit growth in the DRAM industry for calendar 08. You would be looking at calendar Q3 and Q4 to be lower than what we just saw in calendar Q2.

And in general, most of those "experts" are ranging somewhere between 55% and 60% total bit growth production year-over-year for the industry.

And you don't have any thoughts one way or another on what Samsung or any of your discussions with equipment manufacturers, what you think Samsung might be doing in the back half?

No. And the obvious answer is it's probably best to just ask them.

First of all, in the 34 nanometer production of NAND, what percentage of your production in the second half of the year will be 34 nanometer and kind of what's the outlook there for the first half of next year?

We'll have to dial that as the ramp progresses and see how we're doing, but on a wafer basis we expect to be 50% transitioned end of the year, something like that.

50%? And then the second question, related to the Nanya opportunity and what you've discussed so far, when should we start being kind of kicking on the royalty or payment front that would really start impacting your model?

I mean, is it second half of calendar year 09? Is it before that?

I think that in two different terms you would see some of the up front payments upon close I believe it is and then royalties obviously would be associated with the ramp of either the Nanya converted capacity and/or the joint venture.

And in terms of time line?

I believe Nanya had quoted first half 09 for their conversion, their captive capacity, and second half 09 calendar for the joint venture.

And then third question related to the image sensor, can you give us kind of an update where we potentially stand in I guess the separation of the business and also follow up of the question to that is, your margins obviously increased nicely there this quarter, can you comment I guess a bit about the mix there and what were the factors?

Yes. First of all, we, you know for that business as you noted it did improve and that is I think largely reflective of the image business migrating more toward the higher-end pixel density and obviously was through May and I think as we move throughout this fall, the second half will probably be dominated by 3 meg.

And we were well positioned in that space and currently that business bottomed really a couple of quarters ago and if you notice our results compared to some others, we've continued on a pretty good path of recovering you know where I think we had lost for a couple of other reasons out of the marketplace historically. So that's actually going pretty well.

And we know what our targets are for that business and as we've noted before we're exploring with potential partners how we can achieve those targets. And I would just say that we hope to accomplish or I suppose another way of saying it is complete something sometime in this quarter in terms of separation.

Back to the licensing question with Nanya, apart from the JV RAM when would you seeing the upfront licensing from Nanya?

I think we answered that before. The first licensing piece comes in conjunction with the closing or technology transfer and then the royalty stream begins as they ramp production.

And so when do you expect that closing?

We haven't put any estimated date.

And on the DRAM side, this last question, you said pricing so far looks flat. Any stab on where you think for the quarter it runs sort of looking at demand and the channels?

Well a comment on the quarter to date pricing being flat, you know there are several components of that of course and the commodity DDR2 pricing for the PC industry is actually up quite nicely. It's actually been rising every two week negotiation periods since February.

As a matter of fact the commodity DDR2 contract pricing today is up about 35% relative to where it bottomed out in February. So that's moving up quite nicely.

The other part of our DRAM product portfolio is our specialty DRAM product and actually that's quite significant for us, so the logical conclusion is that that pricing has come down somewhat to effect an overall basically flat pricing quarter to date.

And just one last question on R&D and SG&A you said are coming down slightly, any quantification that it will be down 5% as we look here toward Q4 kind of quarter-to-quarter?

We couldn't quite hear your question.

You said R&D and SG&A should be coming down slightly as you look at Q4 quarter-to-quarter, any more quantifications kind of? Will it be down 5% quarter-to-quarter on the R&D and SG&A line?

Any more color on that? Was that your question?

Yes.

We are continuing to do cross-management efforts across all of our SG&A and R&D areas and also have got the benefits of some of our prior actions that are continuing to flow through, so in general we see that it will be as I mentioned flat to slightly down in the fourth quarter. And we'll keep managing that in a downward trajectory as a percent of revenue also as we do our planning process going forward.

Vijay, probably some other color around that is we think that we've probably run out, not all but a lot of what happened on the SG&A side and obviously we continue to go through these technology transitions and make them more efficient and we think that that's probably where we have some left to continue to wring out and I think it's probably worth noting that it is in that probably at least this quarter-over-quarter somewhere in that 5% range that we would expect to see.

And this mid-quarter separation on the imagining business side should also have, correct?

I think that's a good point that you made. Right now as you might imagine because it's a slightly different business that the imaging business actually had slightly higher R&D and SG&A as a part of that business than the memory business does.

So that also happens to be lifting the index if you will for our current operating expenses and as we expect to get that separate this quarter then that obviously would come out of the calculation as well.

Just a couple quick questions, first on content per box, I heard what you said has been sort of going on up until now with good increase in content per box. Question kind of short term is are you concerned at all because of some of the price increases that the OEMs are feeling from other components or some of the commodity costs that are getting passed through to them that the content per box could slow a little bit?

And then longer term, any concerns around the issues with 32 bit operating systems and you know only recognizing 3 gigs or so of DRAM and what work-arounds we might see for that?

Sure. On the pricing issue with respect to its impact on content, absolutely there's, whenever we see increasing PC component prices and in this case an increasing price on the component that we provide, certainly we get concerned about that applying margin pressure to the PC makers and potentially resulting in them slowing down content.

I can only say to date, Jim, that we haven't seen that be the case and right up through the last couple of weeks as I mentioned we've seen roughly 35% price increases in the DDR2 area. We haven't seen a slowdown in content yet but it's something we need to watch very carefully because there's no question that rising prices may have some impact in terms of content per system.

The second question on the memory limitation of a 32 bit operating system, is it a longer term concern? Certainly it would be a longer term concern if we weren't going to see the industry move to 64 bit operating systems.

That obviously lifts the headroom or the cap tremendously above the 4 gigabyte limitation of 32 bit operating systems. But it's probably worth noting that today the average content per box is 2 gigabytes roughly and we've still got plenty of room to get to that 4 gigabyte per system limitation on 32 bit systems.

And it seems like there's a little bit of confusion amongst the industry folks whether it's a little over 3 gigs or 4 gigs is the limitation. You're clear view is that 4 gigs is sort of the max, you know, you can go up to 4 gigs.

Well I think it's a mathematical calculation as opposed to speculation, so 4 gigabytes would be the limitation and we've got pretty clear sailing with 4 gigabytes I believe.

Maybe if I could ask a final question of Ron. Ron, how are you feeling about the balance sheet and what potentially might be out there, what would be the pressure points that cause you to go out and raise some additional capital to kind of get you through the current period?

Yes, Jim. As I mentioned I gave the perspective on 09 cap ex and our plans and commitments going forward.

We're continuing to monitor a couple of things. One is the memory market trends and pricing, and secondly obviously taking a look at business growth opportunities that we might foresee in the future and evaluation our cash position and cash requirements.

We're going through our planning process now and we're obviously mapping out our cash requirements and plans as I mentioned them in terms of the cap ex structure.

Question on CMOS sensors, what is the market environment? Is it something you would characterize as seasonal going into this quarter?

Sure. I think we're starting to head into what should be a strong seasonal period.

Actually the results that we delivered in fiscal Q3 were in what would typically be regarded as a slack seasonal period in terms of the demand and I think the growth in Q3 can be attributed to our strong position in high pixel density area. That would be in the 3 and 5 megapixel density area.

We're probably about a month away from seeing what should be a good seasonal up pick in terms of mobile phone and PC demand and so forth. So the real strong tailwind that we expect to get from the market seasonally is still just a little bit in front of us.

And then one follow up on that subject but on DRAMs, have you seen any indication of back-to-school or are we just a little too early for that?

I believe that we're a little bit too early for it. My hopes are that the pricing trends that we've carried forward since February in the commodity area will get us through what I would call the slack seasonal period which extends now about another month.

And if that is the case I feel really good about the strong seasonal demand kind of carrying through the rest of the year.

Yes, the 55% to 65% bit number that you mentioned for DRAM, is that industry DRAM production this year and is that despite the cap ex cuts of 40% to 50% in memory?

Yes, that's correct.

And what's your best assessment of NAND flash production this year, bit production this year and demand given factors such as SSD drives and things like the new iPhone and 3D phones?

I'll state more, my comment's more to the supply side. Again those same industry groups that track that are looking at about 130% to about 145% bit growth and I don't know if Mike would like to put any additional color around the demand side.

You know, demand in the NAND flash area the car demand is really a function of market price as well particularly the density of cars. So the demand is going to be sufficient to absorb that 130% to 150% supply growth that Kipp talked about.

The only question is at what price is it going to sell. So I hope that provides some clarity.

Just a note by the way, I'll answer a question before it's asked with respect to DRAM demand. Our best view is in the computing space because we've got some pretty tight connections with the various computer manufacturers.

And what we're looking at in terms of DRAM bit demand growth in calendar 2008 is about 65% to 70%, at least from a sampling of our customers, and in calendar Q3 relative to calendar Q2 on a sequential basis about a 25% growth.

And in NAND flash, I know that you've pushed out your Singapore fab but are you seeing other evidence of NAND flash capacity cuts? What do you see out there in terms of capacity additions or cutbacks in NAND flash?

Well we've seen a couple of competitor announcements but those are all public and I think you can pull those off the public web sites probably better than we can report them to you here.

A little bit of clarification on your 2009 cap ex budget. That $1.5 billion to $2 billion range you gave, does that include your joint venture in IMFT and Nanya, your contribution to those ventures?

The $1.5 billion and $2 billion is our gross cap ex expenditures we anticipate for our facilities in 2009. It does not include capital contribution that we've committed of $550 million for the Maya joint venture.

That is, for the 2009 calendar year.

And what about IMFD in flash?

Yes, that is included.

And my second question was regarding your image sensors business, could you give us a percentage of your sales coming from higher end or higher mexapixel image sensors with 3 megapixel and above?

Could you please repeat that question?

How much of your image sensor business is 3 megapixel and above?

We just reviewed that data before the call. It's more than 50%.

And to which end markets are you selling handsets versus digital cameras?

The majority of the revenue's going to handsets. That's correct.

So are you seeing any trend there in digital cameras, your image sensors are replacing CCDs or is that domain pretty much left to CCDs?

No, we have selectively won a couple of camera designs away from the CCD makers. That's the 8/9 megapixel area so I certainly would not suggest that today CMOS sensors are taking over CCDs in the DSC space, Digital Still Camera space, but we have I don't know between five and 10 active projects underway in the digital still camera area with our CMOS sensors.

One question, do you see any impact, I know it's hard to figure out the judged decisions, but Rambus ITC action are asking for an injunction against Hynix. Would that impact your business at all?

Just kind of curious, if they happen to get that injunction?

We haven't even considered that. We don't really have any comment on it because that's a legal proceeding between somebody else, but that hasn't gone into our thinking.

And also if you look at some of the data from DRAM exchange on the NAND contract prices, it seems like the 8 gigabit MLC is taking a particular pounding. Could you talk about maybe why that may be?

Is that the mainstream density now? Is that where everybody's production volumes are?

Just kind of curious if you have some insight there?

Well it's not our, Our mainstream volume of 2 gigabyte are 16 gigabit shifts. I have not seen a significant difference in the market prices for a 1 gigabyte versus a 2 gigabyte chip.

Certainly the sweet spot in the market today in terms of volume is MLC either 1 gigabyte or 2 gigabyte chip and yes, as I mentioned in my comments at the beginning of the call, the market today is clearly oversupplied and there is price pressure certainly across the sweet spot products and that would include the 8 gigabit chip you referenced.

And the final question, can you give us an update on Lehi and where you are in that ramp, whether it's the wafer starts, as a percentage of the peak capacity, whatever way you'd like to put it?

Sure. We hit our initial peak capacity about six months ago when we were in the process of adding roughly 15% additional and that will play out through the second calendar half of the year.

From a technology perspective the vast majority is on 50 nanometer today but we're into the 34 nanometer transition now.

And with the 15% additional capacity, what's the capacity of Lehi on wafer starts basically?

It'll be roughly 60,000 a month.

It looks like on the specialty DRAM you had pricing coming down tremendously. Can you talk more about that?

I wouldn't say pricing came down tremendously by any means. We had virtually all of our bit growth in the quarter came from the commodity DRAM area.

So think of our specialty DRAM product portfolio as being, I don't have the specifics at my fingertips, but relatively flat quarter-over-quarter. Virtually all of the bit growth came from the commodity DRAM area and just as a reference point, the average selling price per bit in the commodity DRAM area, think of it as being in the $3.00 to $4.00 range and the average selling price per bit in the specialty DRAM area, think of it being in the $10.00 to $12.00 range.

So the net effect of the growth in the commodity DRAM area, even though we're in a very strengthening pricing environment, was that 5% quarter-over-quarter DRAM AFP decline. I hope I explained that clearly.

How about going forward? Do you see the pricing still flat going into the next quarter?

Well as I mentioned, if you weren't on at the beginning of the call, I mentioned that our average DRAM pricing through the first three and a half weeks of fiscal Q4 is relatively flat, is flat relative to what we actually achieved in fiscal Q3. So as mix may change going through the balance of the quarter, who knows what impact that will have.

But with no speculation whatsoever, just actual results, the first three and a half weeks of the quarter, DRAM pricing is flat. I think you did ask where we may be seeing pricing pressure in the specialty DRAM area and in particular the low density synchronous DRAM area for a variety of consumer applications, hard disk drives, and so forth, we are seeing I'll say more severe price pressure in that area than we are in any other portion of the specialty DRAM product portfolio.

On NAND, if you look at the last two years, June is a typical month that you start seeing some seasonal strength and here June has been quite weak. Is there a scenario where NAND could be in oversupply for the rest of the year?

Is that a scenario that you guys have or are modeling or drafting your business conditions?

Of course we're modeling all different kinds of scenarios in our business conditions but we can't speculate on what the relative balance is going to be through the rest of the year. I think it’s -we're confident that demand is going to be stronger in the second half of the calendar year than it was in the first half of the year due to the consumer nature of the products that consume NAND flash.

Whether it's going to be strong enough to absorb the supply, that's your job as well as our job to try and sense that. But we're not going to make a prediction.

And in your fiscal year 09 cap ex, any comments on the loading of that cap ex or this still too early?

We haven't specifically broken it out by quarter. I've just given a view and we'll work through it during the year.

And one last question, some of your peers are struggling with their yields. We keep on hearing what defect they’re having on both the NAND and DRAM side.

Is your sense, I mean, what is the probability of you know some of your peers hitting defect challenges and migration issues in the second half 08? Is the probability higher as you move to 5x nanometer and DRAM and 4x below nanometer NAND?

It's hard to say exactly what our competitors are experiencing. I would say generally that yes, the technology's not getting any easier.

For Micron, however, I've got to tell you we're pretty comfortable with our technology from a defect and yield ability standpoint. We're particularly pleased with where our 34 nanometer's coming out and we think that we've done some things in a different way there that are going to give us potentially significant advantages in the DRAM.

A quick macro question for you, any commentary in general would be appreciated. You talk about the geographic breakout of revenue and whether you see the trends from the last couple of quarters and the last year or two continuing through the end of this year and then everything on out.

We had a tough time hearing your question, but I think I got it. Basically we split our geographic revenues out a couple different ways.

75% is outside of the US and 50% is in the outside of the US in Europe. Is that about right, Mike?

Yes.

Can you talk about going forward where you see the trend sort of continuing and how that's, in talking to your customers, what they're seeing as well and the degree to which they communicated that to you?

Well revenue generation, wherever you recognize revenue can be somewhat misleading. Certainly the trend is that more and more of our shipments are going into what we call Greater China, which is Taiwan, Hong Kong and China itself, that has been the trend in not only at Micron but it's been the trend in the industry for at least the last 10 years, and I would certainly expect that trend is going to continue.

Can you put any, quantify that? Put any numbers on it with regard to you all specifically?

No, I cannot.

I want to go back to the demand dynamics in specialty versus commodity DRAM. Would flat bit growth or no bit growth in what's essentially calendar Q2 and your fiscal Q3 be a normal trend for you guys?

And as you look out into your fiscal Q4, do you see a resumption of growth in what's obviously a more profitable part of your business?

A flat quarter for us in the specialty DRAM area would not be normal, although it wouldn't be what, we're not particularly concerned. It's not alarming, let's put it that way.

We expect our specialty DRAM business to continue to grow. We do expect the components of that are going to be slightly different.

We believe that our business in the mobile handset area, our DRAM business in the mobile handset area, is going to grow rapidly. We believe our market share in that area is relatively low so there's plenty of room for us to take additional market share and exhibit some pretty strong growth in that area.

And that business in particular does have a seasonal component, the demand in that business does have a seasonal component to it.

Were you at all constrained in terms of some of your trailing edge lines in terms of being able to kind of grow that business? I think I heard you mention that you were transitioning some of that product over to 300 millimeter.

Yes, we were. I'm glad you asked the question.

We, as I mentioned in the comments I made earlier, most of the specialty DRAM portfolio is manufactured on 200 millimeter wafers and as you know we're not growing 200 millimeter capacity. In quarter three I can't quantify it but certainly that 200 millimeter capacity envelope limited our unit and revenue shipments in the specialty DRAM area in Q3.

We have selectively identified a few of what we believe are going to be high growth specialty DRAM products and we're porting them over to an advanced process technology as well as from 200 millimeter to 200 millimeter diameter wafers so we can grow the business faster.

Just one last question on this, you don't think that part of what might have happened here in Q3 had anything to do with a slowdown in the end markets for your specialty DRAM, particularly in the handset business which sounds like you're targeting as a growth opportunity?

No. In the handset piece in particular we achieved growth.

We'll leave it at that.

Before we take our last question, I'd like to just clarify one small point earlier. We had a question come in about when we expected to close the Nanya deal and as I recall now Mark actually mentioned it in his opening statements.

We actually closed it during the last fiscal quarter and recognized a small licensing fee already. So I just wanted to clarify that.

And with that, we'd like to take the last question.

Just looking at your cost declines, you did another good quarter there, you mentioned three factors: wafer output, low transition and yield improvements. Is there any way you could quantify how much of the cost declines are coming from those segments?

We don't normally break that out, so if you'd like to try a second last question, we'd be happy to entertain that.

When you look at the 68 nanometer, you mentioned that you're ramping there on DRAM. Could you talk about how much that might be as a percentage by the end of the year?

On 68 nanometer?

Yes.

Well it's really running in the Tech facility only today so by the end of the year on a wafer start basis, we would certainly expect that to be north of 50%, probably closer to 75% of the total output there. With that we'd like to thank everyone for participating on the call today.

If you will please bear with me, I need to repeat the Safe Harbor protection language. During the course of this call, we may have made forward-looking statements regarding the company and the industry.

These particular forward-looking statements and all other statements that may have been made on this call that are not historical facts are subject to a number of risks and uncertainties and actual results may differ materially. For information on the important factors that may cause actual results to differ materially, please refer to our filings with the SEC including the company's most recent 10Q and 10K.

Thank you again.