Micron and Intel have been partners for the last few years, collaborating on the development of products like Hybrid Memory Cube (now discontinued), and EDRAM for the company’s Crystal Well CPUs. But now, Intel’s ongoing 10nm problems are starting to impact the rest of the industry, and Wall Street is concerned about the impact on the rest of the memory market.
Micron’s stock price has fallen sharply from its year-to-date high of $64.66 and currently trades at $44.58. The stock took a beating this week after the company acknowledged that its quarterly profits would come in lower than Wall Street had previously estimated. Micron expects sales of $7.9 – $8.3 billion this quarter, compared to the $8.45B that Wall Street expected.
The company has said that the weakness could extend beyond its November quarter, suggesting an impact into next year. It’s not clear how much that will happen because we still don’t know exactly how large the shortage is or why Intel is being pushed into these steps. The company has already taken measures to reduce the load on its 14nm factories by moving the H310C chipset back to 22nm, but since we also don’t know how much of Intel’s total manufacturing volume is chipsets as opposed to CPUs, we don’t know how much of an impact this will have, either. Current projections are that Q4 PC sales could be down by as much as 7 percent across the industry, wiping out any gains the PC market over 2018 compared to the past seven years (PC sales have been slumping for nearly a decade at this point and are down more than 25 percent per year compared to their 2011 high).
These announcements have led some analysts to slash their expectations of Micron’s performance. Nomura Instinct slashed its stock target price to $65 from $100 due to concerns about the memory manufacturer. “We believe guidance (near- and medium-term) is likely to be perceived as optimistic in light of the current environment where competitors are seemingly planning for a protracted downturn,” analyst Romit Shah said in a note to clients Friday. “We expect Micron shares to remain volatile until we see the rate of price declines moderate.”
$65 still represents a substantial upside from the stock’s current price ($44.29), so this shouldn’t be read as a fundamental weakness in the company, but possibly the ongoing impact of Intel’s delays and the expected downturn next year in the memory market. Micron is not in some fundamental trouble here — it’s one of just three DRAM manufacturers left on the planet and has a substantial share of multiple memory markets. But it’s a very interesting example of how problems at Intel have caused ripple effects across the industry.
For most of the last 20 years, node transitions have been an orderly and predictable event in the PC industry. What we’re seeing now is what happens when that transition is unexpectedly disrupted.
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