Micron (MU) Commits to Spend $150 Billion on Memory and R&D Over the Next Decade, Will Build a $7 Billion Plant in Japan and Considers Building a New US Memory Factory

October 20, 2021 7:02 AM EDT
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Micron Technology (NASDAQ: MU) announced today plans to spend over $150 billion globally over the next decade on memory manufacturing and R&D.

The company committed to spending substantial funds given the transformative AI and 5G trends as the world races to secure chip and memory supplies.

“Memory is at the leading edge of semiconductor manufacturing and fuels everything from feature-rich 5G smartphones to the AI-enabled cloud,” said Micron President and Chief Executive Officer Sanjay Mehrotra. “Micron’s leadership in both DRAM and NAND technologies and the strength of our roadmap enable us to invest more than $150 billion with confidence to extend our industry-leading memory innovation into the next decade, and deliver differentiated products to our customers. We look forward to working with governments around the world, including in the U.S. where CHIPS funding and the FABS Act would open the door to new industry investments, as we consider sites to support future expansion.”

Japanese newspaper Nikkan Kogyo reported today that Micron intends to spend $7 billion on building a new factory at its Hiroshima factory. The new production facility will be used for DRAM chips with production due to begin in 2024.

Moreover, the company is considering investing in a new memory factory in the U.S. and is looking to secure state and federal subsidies to offset higher costs than building a factory in Asia.

"We certainly want to very seriously assess manufacturing in the U.S., because the U.S. ought to have more than 2% of memory manufacturing for the sake of national security and for the sake of supply chain resiliency," Sumit Sadana, Micron's chief business officer, told Reuters.

Shares of Micron are down 1% in pre-open Wednesday after closing at $67.57 yesterday. The MU stock was downgraded from Buy to Neutral at Mizuho, with a price target of $75.00 (from $90.00).

"While MU has been executing well, 4Q21-2Q22 could see DRAM pricing down 8%-10% q/q through consecutive quarters versus our prior expectations of flat to down 2% q/q. While the shares have underperformed, we see near-term pricing and demand headwinds limiting upside. Lowering FebQ from $8.0B/$2.19 to $7.3B/$1.84, F22E from $33.6B/$9.38 to $31.9B/$8.38 with GM at 44.9% (prior 47.2%) and F23E from $37.3B/$10.85 to $36.7B/$9.82. Downgrading to Neutral from Buy, PT to $75 (prior $90), ~8.9x our F22E EPS,” the analyst commented in a note.

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