MU Stock Prediction: Micron Has Nothing To Fear From Chinese DRAM Manufacturers

motek 1This MU stock prediction article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Summary:

  • In spite of the recent report that Innotron has started mass production of 10nm LPDDR4 DRAM in China, I Know First is still super bullish on Micron’s stock
  • Innotron or Hefei ChangXin is a state-owned company operating in China that aims to disrupt the DRAM market currently dominated by Samsung, SK Hynix, and Micron
  • A careful analysis convinced me that Micron and other current leaders in DRAM production has nothing to fear from Innotron
  • I am highly confident that Innotron or Hefei ChangXin will only sell its DRAM products inside China
  • Innotron will not dare sell outside China because Micron, SK Hynix, and Samsung can sue it for patent infringement. No Chinese company has original IP/patents on DRAM design.

Current MU Stock Prediction and Latest News

The super bullish one-year algorithmic prediction for Micron (MU) from I Know First convinced me that we should not worry about Innotron’s recent announcement. It was reported today that Innotron or Hefei ChangXin has started mass production of 8-Gigabyte LPPDR4 DRAM (Dynamic Random Access Memory). This latest development was processed and evaluated by the quantitative/market sentiment algorithm of I Know First’s stock-picking AI. Micron’s stock still received a super bullish one-year trend score of 350.08.

mu stock forecast

The bullish assessment of I Know First for MU convinced me that investors should not worry that Innotron could become a serious headwind. The threat to Micron is minimal since it only involves mobile DRAM for China. Micron’s quarterly revenue is $4.79 billion. Going forward, I do not think Innotron’s mobile DRAM will cause Micron to lose $200 million in quarterly sales. My takeaway is that Micron’s China mobile DRAM sales will get affected by Innotron-made LPDDR4 DRAM. However, the threat is only limited to China. Innotron can only sell its 10nm mobile DRAM products for use in smartphones/tablets that are meant for the China market.

My takeaway is that Innotron’s mobile DRAM chips will ultimate prove inferior because they are based on stolen intellectual property. Inferior products, no matter how cheaper they are, will find fewer buyers than original Micron-made mobile DRAM.

Micron’s International and U.S. Sales Are Safe

Innotron-produced DRAM modules cannot be used in products that are meant for the international market. Micron, SK Hynix, and Samsung (SSNLF) will sue any phone or tablet manufacturer that will use Innotron-made DRAM modules. Let us never forget that Innotron or any other Chinese company has no original intellectual property or patents involving DRAM manufacturing.

Chinese brands of smartphones like Huawei, Oppo, Vivo, and Xiaomi will only likely buy Innotron DRAM for products meant to be sold locally. No company will be dumb enough to start selling Innotron-related smartphones or computers outside China because Micron and other patent/IP owners of DRAM design/manufacturing can easily sue them and get a sales ban.

The U.S. government has already accused a Taiwanese and Chinese company of stealing Micron’s trade secrets/patents involving the production of DRAM products. The involvement of the U.S. government on this trade war-worthy issue means no PC or smartphone manufacturer will risk selling Innotron DRAM-equipped products outside of China. As a U.S. company, Micron can request the assistance of the U.S. government to help it win court orders in America, Europe, Asia, and in other countries. Micron, owner of the DRAM IP used by Innotron to make LPDDR4 DRAM.

Micron also has a decent amount of cash reserves and good cash flow. Micron has the financial resources and strong motivation to keep developing and improving DRAM modules. By doing this, Micron is assured that Chinese copycat DRAM products will remain inferior to its products.

As of June 2019, Micron’s total cash & short-term investments is $6.689 billion.

mu stock forecast
(Source: Seeking Alpha)

Why Chinese State-backed Firms Want To Build Their Own DRAM

Trump’s lingering trade war against China is why Chinese politicians are supporting local companies to steal the intellectual property of American and foreign companies. Those who are successful will be able to build advanced products like DRAM without the need to pay patent/licensing fees to Western companies.

It is also safer for China to have local builders of non-licensed technological products. Trump has already demonstrated last year that he can easily force American firms to quit sharing technological resources with Chinese companies. It is easier for Chinese companies to copy the intellectual property of advanced, patented foreign products if can collaborate with American companies. This way they can study the original assembly/programming/architecture of American-designed products (but manufactured in Chinese factories and made by Chinese labor force).

Conclusion

I am highly confident that Micron’s annual net income of $10.07 billion will not seriously from Chinese branded/manufactured DRAM modules. Going forward, we will only a minimal impact on the international sales of Micron DRAM. The Innotron headwind will only affect Micron’s DRAM sales inside China.

Mobile DRAM like LPPDR4 that Innotron is now mass producing for the Chinese market is not a major part of Micron’s annual revenue. The chart below MBU or the Mobile segment which covers mobile-related memory and storage chips is not the biggest revenue generator of Micron. MBU’s annual revenue is less than 2.5x that of Micron’s most important segment, CNBU and Networking.

mu stock forecast
(Source: Statista)

Lastly, there is zero chance that Chinese-owned or state-backed companies can produce decent server-centric DRAM and NAND storage facilities within the next five years. I therefore conclude that Chinese companies will not threaten Micron’s most important segment, CNBU until 2024/2025.

I agree with the bullish one-year algorithmic prediction for MU. One year from now, I expect Micron to trade at around $55 to $58 range. By next year, people will buying new computers and smartphones with 5G connectivity enabled. New generation of computers, servers, and smartphones means Micron will sell more DRAM memory chips and NAND storage modules.

In other words, my 12-month price target for MU is $58. This price target is higher than the average 12-month PT of $55.85 at TipRanks. My higher price target is because I trust the AI stock-picking service of I Know First more than the consensus prediction of professional Wall Street analysts.

mu stock forecast
(Source: TipRanks)

Analysis of monthly technical indicators and moving averages also call a buy action on Micron’s stock right now.

mu stock forecast
 (Source: Investing.com)

Past Success With MU Stock Prediction

I Know First has been bullish on MU’s stocks in past forecasts. On January 6, 2019, the I Know First algorithm issued a bullish 3 months MU stock prediction with signal of 66.1 and predictability indicator of 0.8. The algorithm successfully forecasted the movement of the Micron’s shares. As at April 6, 2019 MU’s shares have risen by 31.19% in line with the I Know First algorithm’s MU stock prediction and stay at this level. See chart below.

This bullish MU stock prediction was sent to the current I Know First subscribers on January 6, 2019.

premium badge

To subscribe today click here.

Please note-for trading decisions use the most recent forecast.