What’s in my book
In the 3-1 third industry section of my book “The Rules of Super Growth Stocks Investing“, I take Micron as an example. Readers have been reminded that memory chips are a typical bulk commodity in the modern technology industry and are highly cyclical. Investors should pay special attention to this.
Company Profile
Founded
Micron Technology (ticker: MU) was founded in the basement of a dental clinic in Boise, Idaho, in 1978, and is headquartered in Boise, Idaho. Founded by Ward Parkinson, Joe Parkinson, Dennis Wilson and Doug Pitman, the original employees were only these four founders. The first contract signed by Micron was to design 64K memory chips for Mostek Corporation.
Main business
After years of development, Micron can provide the market with HBM, DRAM, DRAM modules, GDDR5, GDDR5X and GDDR6 video memory, NAND, multi-chip package MCP, NAND flash memory and NOR flash memory, CMOS image sensors, other semiconductor components and memories. Modules etc.
Global market share
In the global DRAM market in the fourth quarter of 2022, Samsung Electronics, SK Hynix and Micron Technology ranked among the top three.
The market shares are 45.1%, 27.7% and 23.0% respectively. In the global NAND market, Samsung Electronics and SK Hynix ranked first and third respectively, with market shares of 31.4% and 18.5% respectively, and Micron ranked fifth with 12.3%.
The importance to US
Micron Technology is currently the only major manufacturer in the United States in the main semiconductor field of memory chips. It is extremely important to the United States.
Mergers and acquisitions
Micron has made 11 acquisitions since 1998, including Texas Instruments’ (TXN) memory unit, Numonyx, Elpida and Inotera.
The following are some of the more critical mergers and acquisitions:
- In 1998, Micron also acquired Rendition to manufacture 3D acceleration chips.
- In February 2010, it agreed to acquire flash memory chip maker Numonyx for $1.27 billion in stock.
- On May 8, 2012, Elpida, which had filed for bankruptcy protection, announced that it would integrate with Micron. On July 2, Micron Technology signed an acquisition agreement with Elpida.
- On January 23, 2013, “Taiwan Micron Wafer Memory” was established. On July 31, Micron Technology acquired Elpida for US$2 billion.
- On November 9, 2016, Micron Technology acquired a 67% stake in Taiwanese DRAM manufacturer Huaya Technology for US$4.1 billion and merged with it. Taiwan’s Formosa Plastics Group also acquired a 5.02% stake in Micron Technology through this transaction. .
Main competitors
Samsung, Hynix
Micron’s main competitors in memory chips are Samsung Electronics and Hynix. These two old rivals have long occupied the first and second places in the global memory chip market. Micron can only be ranked third.
Kioxia, Western Digital
In the field of non-volatile memory chips (mainly flash memory NAND), in addition to Samsung Electronics and Hynix, Micron’s opponents include Kioxia, Western Digital (ticker: WDC), etc. But especially volatile memory chips (mainly dynamic memory DRAM), it is still the largest in the global memory chip market in terms of shipments and sales. Therefore, Micron, Samsung Electronics and Hynix also focus on volatile memory chips. Memory chip (mainly dynamic memory DRAM) field.
YMTC, CXMT
However, in recent years, the flash memory NAND of China’s peers Yangtze River Memory (YMTC) and the dynamic memory of Changxin Memory (CXMT) have begun to threaten Micron, Samsung Electronics and Hainan in terms of technology, price, and shipments. Lux. Not long after, given time, there will be a major reshuffle in the global memory chip market share rankings.
International sites
U.S.
In October 2022, Micron committed to investing US$100 billion to build a wafer factory near Syracuse, New York. It said it would be “the largest semiconductor manufacturing plant in U.S. history” and would be put into production in 2025.
Taiwan
Micron is the largest foreign investor in Taiwan. Taiwan is also Micron’s largest site outside the United States, shouldering the important responsibility of connecting, integrating, supplying, shipping, and customers between Micron and the Asia-Pacific region, the world’s most semiconductor production region. In the Taichung Science Park alone, a fourth new factory will be built by 2023.
In June 2022, Micron’s new Taiwan Chairman Lu Donghui stated that he would continue to invest more in Taiwan and expect to add 2,000 employees in the next 2 to 3 years. According to Micron’s technology advancement blueprint, EUV equipment will begin to be introduced in the second half of 2022. Increase production capacity, mass production of 1 beta before the end of the year, and mass production of 1 Gamma in 2024. A research and development corridor will also be set up.
China
On March 21, 2007, Micron established a factory in Xi’an, China for the first time, mainly producing DRAM and NAND flash memory; but please note that these are only factories for packaging and testing, and do not produce wafers. On the other hand, Samsung, SK Hynix, and even Intel (ticker: INTC) Dalian factory (later sold to SK Hynix) have huge chip manufacturing bases in China. Among them, Samsung’s memory factory in Xi’an in 2012 is one of the largest single foreign investment projects introduced since China’s reform and opening up. SK Hynix’s investment in the DRAM factory in Wuxi, Jiangsu Province is as high as 2.394 trillion won.
On July 3, 2018, Micron’s DRAM and NAND products were banned from being sold in mainland China due to infringement of the patent rights of UMC (ticker: UMC). In 2023, the two parties reached a settlement on the case with Fujian Jinhua.
In order to counter the U.S. embargo on China’s semiconductors, China announced that Micron’s products sold in China will be subject to cybersecurity reviews, which is equivalent to blocking Micron’s market in China. In order to show goodwill to China, Micron simply announced in 2023 that it would directly acquire Micron’s long-term partner in China, Xi’an’s Licheng Packaging Factory, hoping to show Micron’s sincerity in investing in China.
In May 2023, Micron’s Chief Financial Officer Mark Murphy publicly stated at a meeting that Micron’s direct and indirect sales to China accounted for about a quarter of Micron’s revenue.
India
Micron announced in April 2023 that it would invest US$1 billion in India to establish a packaging factory in India in the future.
Japan
In May 2023, Micron plans to invest 500 billion yen (approximately US$3.7 billion) in the next few years to introduce extreme ultraviolet (EUV) lithography technology in Japanese factories.
What you should know
As I said at the beginning of this article, and in Chapter 3-1 of my book “Super Growth Stock Investment Rules”, here are two Micron financial report figures for your reference.
Profit margin rate is not high
In the first quarter of 2021, Micron’s latest financial report’s operating profit margin reached 20%, surpassing Samsung’s 18%. In the past five years, Samsung Electronics’ market share in DRAM and NAND flash memory products has declined, while Micron’s has increased by 3% and 1% respectively.
The fact is before us that the profit margin of the memory chip industry is not high. The memory chip industry mainly relies on huge shipments and astonishing sales figures in good times to make up for losses at the bottom of the business and survive the cold winter of the business.
Sensitive to business cycle
On March 29, 2023, memory chip manufacturer Micron announced its second quarter report for fiscal year 2023. Revenue for the quarter was US$3.69 billion, compared with US$4.09 billion in the previous quarter, and US$7.79 billion in the same period last year, an annual decrease of US$3.69 billion. About 53%. The loss was US$2.31 billion, which included an inventory loss of more than US$1.4 billion, with a loss of US$2.12 per share. This is Micron’s worst quarterly loss in the past two decades. The last quarterly loss of this magnitude was in the second quarter of fiscal 2003, when Micron’s net loss reached $1.94 billion.
Inventory reduction is still a problem that memory chip manufacturers must face during the recession.
Geopolitics
The U.S. embargo on semiconductors against China, coupled with China’s own ability to produce most memory chips, have obviously affected Micron’s future sales in the Chinese market.
Bet too much on Taiwan
In addition, Micron has invested heavily in Taiwan, which is the company’s largest overseas focus. Today, Micron is the largest foreign investor in Taiwan. The rivalry between the United States and China, coupled with the poor relations between Taiwan and China, as well as corporate concerns about earthquakes and power shortages in Taiwan, will be negative factors in the long term.
Micron said that the earthquake that occurred in Taiwan on April 3, 2024 will cause its dynamic random access memory (DRAM) supply loss to be as high as mid-single digit percentage. The company has four factories in Taiwan, which plays an important role in the global chip supply chain and the earthquake raised concerns about potential disruptions.
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