Boston, MA 12/19/2013 (wallstreetpr) – Micron Technology, Inc. (NASDAQ:MU)’s shares fell by almost 5% to close at $21.81 on rumors that Hynix, one of the competitors would be expanding its capacity.
Hynix and its effect on Micron:
Micron has been riding a wave for the last some time following a fire in one of Hynix’s production unit. The fire has ensured that oversupply in DRAM chips was reduced and prices rose on back of higher demand. The oversupply conditions have already resulted in several companies in this field to close down and the industry consolidation has benefitted Micron very well. There are now only three major players in the memory chips segment. Reports recently emerged that SK Hynix would be investing in a new factory for DRAM memory chips. Hynix is reportedly investing almost $4 billion in building this facility and the company expects mass production to begin from 2015 onwards. Hynix is said to have denied these rumors and instead said that the CAPEX of 3.8 billion in 2014 will be used for upgrading its facility, plans for a totally new facility are yet to be finalized. The company will be building a new cleanroom in an effort to modernize its facilities and keep up with the competition.
The markets seem to have overreacted to this news item. As such, some profit booking was expected in Micron Technology, Inc. (NASDAQ:MU)’s shares, considering the recent bull run.
Micron to collaborate with Broadcom
The news item that Micron would collaborate with Broadcom Corporation (NASDAQ:BRCM) in developing new chips failed to attract the attention it should have. Both the companies have announced plans to develop DRAM chips that overcome a serious flaw called ‘FAW’ in the current chips. Clients have to tackle the problems of an ever-increasing variety, velocity and volume of data. Such a flaw decreases the throughput. Even the news about the development of new computing architecture, Automata Processor (AP) by Micron Technology, Inc. (NASDAQ:MU) failed to grab attention. This new architecture will enable high-speed execution and reduce the complexities of unstructured data.
Investors need to watch the trends in the coming days before divesting their stocks.