The Chinese government's move to ban Micron Technology's memory chips from its network infrastructure could reduce the U.S. chipmaker's revenue by a low- to high-single-digit percentage, the company said Monday. MU stock fell on the news.
Chief Financial Officer Mark Murphy disclosed the impact of China's actions at the JPMorgan Technology, Media and Communications Conference in Boston.
On Sunday, the Cyberspace Administration of China said Micron's products had failed its network security review, Reuters reported. The regulator then barred operators of key infrastructure from buying from Micron.
The revenue impact would be in the low single digits if China's action is limited to networking companies, Needham analyst Rajvindra Gill said in a note to clients. Further, the impact would be high single digits if enterprise and data-center customers are included, Gill said.
MU Stock Drops After Report
"While this newest layer of geopolitical conflict adds near-term risk, we continue to believe the broader memory market is improving off the bottom," Gill said. He rates MU stock as buy with a price target of 71.
On the stock market today, MU stock dropped 2.9% to close at 66.23.
Micron makes DRAM and Nand memory chips and competes with South Korea's Samsung Electronics and SK Hynix as well as Japan's Kioxia.
Latest Salvo In Tech Trade War
The actions by CAC are the latest salvo in a tech trade war between the U.S. and China. The Biden administration has imposed a series of export controls on chipmaking technology to China and moved to prevent Micron rival Yangtze Memory Technologies from buying certain U.S. equipment.
"We believe the move is all political and a way for China to retaliate against recent moves by the U.S. (adding Yangtze Memory to entity list; restricting Nvidia's H100 for AI purposes)," CFRA Research analyst Angelo Zino said in a note to clients. Zino rates MU stock as buy.
"We expect the overall (revenue) impact to be less than 5% as tech device sales persist for now," Zino said.
Most of Micron's revenue in China is from smartphone and personal computer makers, not makers of servers and other tech infrastructure.
'Political Actions Pure And Simple'
"No one should understand this decision by CAC as anything but retaliation for the U.S.'s export controls on semiconductors," Holden Triplett, founder of Trenchcoat Advisors and a former FBI counterintelligence official in Beijing, told Bloomberg.
"No foreign business operating in China should be deceived by this subterfuge. These are political actions pure and simple, and any business could be the next one to be made an example of," Triplett said.
Micron ranks third out of 10 stocks in IBD's Computer-Data Storage industry group, according to IBD Stock Checkup. Further, MU stock has a middling IBD Composite Rating of 63 out of 99.
IBD's Composite Rating is a blend of key fundamental and technical metrics to help investors gauge a stock's strengths. The best growth stocks have a Composite Rating of 90 or better.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
