How Intel's Unexpected Move Could Kill Micron Investors

• Micron Technology, Inc. MU shares have declined 51.72 percent year to date, hitting a low of $14.06 on September 28.
• Simon Dong-je Woo of Bank of America Merrill Lynch has downgraded the rating on the company from Neutral to Underperform, while lowering the price target from $17.00 to $12.50.
• Woo believes that the unexpected change in Intel Corporation’s INTC capex plan could adversely impact Micron Technology’s NAND business.

Analyst Simon Dong-je Woo reported that Intel now intends to spend $5.5 billion to “convert the existing CPU fab into NAND in Dalian, China.” This would account for 5-7 percent of the global NAND supply, once it is completed in the next few years.

Woo expressed concern, given that the NAND industry is already facing a glut, with sharp declines in the 2H ASPs.

“We also worry about Intel’s new move given the China fab (Intel) may pose a conflict with Micron’s NAND business which is based on a JV fab US (with Intel) and in-house chip production,” Woo stated.

On the other hand, SanDisk Corporation SNDK might raise its capex spend, following any M&A, “at a potential bidder’s request, to catch up with Samsung,” the Bank of America report said.

Woo believes that Samsung’s recently expanded 3D NAND fab could be a risk for Micron Technology, since the latter’s DRAM business would be affected in the event of a NAND downturn, given that NAND capacity could be used for DRAM.