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Is Espionage Victimhood Bad for Micron Technology, Inc. (NASDAQ:MU)? We Think Not

Micron Technology, Inc. (NASDAQ:MU) shares are benefitting from a surge in beaten-down technology names. The stock also has an interesting technical setup that we covered here in a recent piece. However, today, we also saw a new issue emerge that could work in favor of the company as well: It could become a central player on the China trade war stage as a “victim”.

While this seems like a negative at this point, shares are acting well as further reports emerge that a Chinese state-owned company has been charged with “conspiring to steal trade secrets of U.S. chipmaker Micron Technology Inc.” as the US Justice Department continues to step up actions against China in cases of suspected economic espionage.

Micron Technology, Inc. (NASDAQ:MU) is, as the reader is likely no doubt aware, probably the most important DRAM play. Dynamic random-access memory (DRAM) is a foundational semiconductor memory form that stores each bit of data in a separate tiny capacitor within an integrated circuit. This is a straight binary process.

The idea that it has been the victim of industrial espionage is probably not a negative factor for the future unless it were seen as a consistent threat (ie, that the company’s newest innovations would become part of future security compromises).

In this case, the actual technology in question is DRAM. (According to Bloomberg, Micron is the only U.S.-based company that manufactures dynamic random-access memory, or DRAM. China didn’t possess DRAM technology before the alleged theft, and the Chinese government publicly identified the development of DRAM and other microelectronics technology as a national economic priority.)

Hence, the price of MU shares already assumes the existence of competing DRAM solutions.

Given the current rhetoric defining the trade war, a status now of “a high-profile espionage victim” in a Justice Dept. spotlight is likely a halo of security going forward for the company, suggesting any discount in share prices related to IP protection could dissipate moving forward. After all, we have learned that Chinese command economy tactics are integrated into a structure that has Beijing at the top of the pyramid.

Whether or not the story about IP theft is balanced in interpretive elements is beside the point. Beijing hardly wants to cultivate the appearance that the White House is justified in how it has framed its motivations for the trade war to any extent. So, in our humble opinion, Micron may now be the most secure hub of technology IP on the planet.


The Bird’s Eye

The company also provides NAND products, which are electrically re-writeable, non-volatile semiconductor memory, and storage devices. Between the two (DRAM and NAND), the company is a central weather gauge for the memory cycles that underlie a lot of the technology sector business cycle. So, it’s an extremely important stock to understand and follow – probably more than most people really understand.

In addition, Micron and Intel have been collaborating in a JV project called IM Flash Technologies that is primarily centered around developing and operationalizing 3D XPoint technology.

According to company materials, “3D XPoint technology is an entirely new class of nonvolatile memory that can help turn immense amounts of data into valuable information in real time. With up to 1,000 times lower latency and exponentially greater endurance than NAND, 3D XPoint technology can deliver game-changing performance for big data applications and transactional workloads. Its ability to enable high-speed, high-capacity data storage close to the processor creates new possibilities for system architects and promises to enable entirely new applications.”

Micron recently bought out the partnership from INTC and plans to implement the tech in 2019.

Micron Technology, Inc. (NASDAQ:MU) pulled in sales of $8.4B in its last reported quarterly financials, representing top line growth of 37.5%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($6.8B against $5.8B).

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