Shares of Micron Technology Fall Following Reports Of Competitor Investing In New Factory
Shares of Micron Technology (NASDAQ: MU) were under extreme selling pressure following reports that a major competitor will build a new factory in South Korea.
South Korean based SK Hynix Inc, the world's second-largest memory chip maker will invest 4 trillion won (approximately $3.8 billion) next year to satisfy what it sees as growing demand for mobile devices.
Construction on the factory will begin in 2014 with mass production of dynamic random access memory, or DRAM chips to hit the production lines in 2015.
SK Hynix is estimated to maintain a 28.5 percent of the market for DRAM chips in the third quarter, below Samsung Electronics Co. market leading 37.1 percent, according to Bloomberg.
Idaho based Micron is the third largest chip manufacturer with an estimated 26.2 percent market share.
In mid-morning trading, shares of Micron were down more than nine percent as investors viewed the South Korean manufacturer's actions as a negative on Micron.
Several analysts didn't share the markets noticeably pessimistic view on the news announcement.
Analysts at Susquehanna felt that the news is “marginally negative” for the company. The analyst, Mehid Hosseini spoke with SK Hynix and noted the possibility that the South Korean company is considering building the factory because one of its current facilities is “outdated and inefficient.”
Analysts at Raymond James noted that the decline in share prices represents a buying opportunity. The analysts calculated that a reported $3.8 billion investment suggests the company is building a smaller plant, capable of only 60,000 to 80,000 wafers per month, which “wouldn't create a major move in total DRAM supply dynamics.”
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