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Micron Vs. China: What Happened And Why BofA Says The Risk Is Manageable

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Micron Vs. China: What Happened And Why BofA Says The Risk Is Manageable
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Micron Technology, Inc. (NASDAQ: MU) confirmed Thursday that, at the request of local competitors alleging a violation of patent rights, a Chinese court blocked two of the company's subsidiaries in the country from selling specific products.

What Happened 

The ruling advances a back-and-forth between Micron and rivals United Microelectronics Corp (ADR) (NYSE: UMC) and Fujian Jinhua. Earlier this year, Micron filed a U.S. civil suit against the pair alleging misappropriation of trade secrets.

Why It’s Important

The affected lines — certain solid state drives and memory modules of Crucial and Ballistix — represent a little more than 1 percent of annual sales and are not expected to drive annual sales outside the guided range of $8 billion to $8.4 billion.

Bank of America Merrill Lynch said the “risk should be manageable.”

“China OEMs and internet/e-comm companies such as Huawei, Alibaba, Tencent, etc, need memory chips for their local and global businesses (smartphone production, in-house datacenters/cloud, etc) and domestic branded memory chip production (by Jinhua, Tsinghua and Innotron) has been minimal, not yet successful despite two or three years of effort,” BofA analyst Simon Woo said in a note. 

By BofA's assessment, Micron could work around the loss by relocating chip shipments outside China, pursuing indirect exports through third parties or accelerating domestic enterprise chip sales. (See the analyst's track record here.) 

What’s Next

Micron said it will request a reconsideration or stay of the court ruling. 

“Micron will continue to aggressively defend against these unfounded patent infringement claims while continuing to work closely with its customers and partners,” Joel Poppen, senior vice president of legal affairs and general counsel, said in a statement.

Micron shares were trading up 1.8 percent at $52.40 at the time of publication Thursday.

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Latest Ratings for MU

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Oct 2018BarclaysMaintainsOverweightOverweight
Oct 2018SusquehannaDowngradesPositiveNeutral
Sep 2018Morgan StanleyMaintainsEqual-WeightEqual-Weight

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