Bloomberg News also reported that Micron, which is subject to a ‘security review’ by China’s Cyberspace Administration in retaliation for the Biden administration’s ban on the export of high-tech equipment and chips, will use around $1.5 billion in Japanese government incentive funding to make next-gen memory chips at its existing facility in Hiroshima.
The deal forms part of President Joe Biden’s broader Chips Act ambitions, which seeks to provide both an alternative to China’s current grip on the semiconductor supply chain while offering incentives for companies to build foundries and factories in the United States.
Reports last month, as well, suggested that U.S. officials have asked their counterparts in South Korea to urge chipmakers such as Samsung and SKY Hynix not to fill orders from China-based companies should a formal decision on Micron be handed down over the coming months.
Japan’s Prime Minister, Fumio Kishida, told reporters Thursday that creating stable and secure chip supply chains would be a key pillar of this week’s G-7 leaders’ summit in Hiroshima, adding that he would like to see “the government as a whole to work on further expanding direct investment to support the semiconductor industry.”
“Micron’s Hiroshima operations have been central to the development and production of several industry-leading technologies for memory over the past decade,” said CEO Sanjay Mehrotra said. “We are proud to be the first to use EUV in Japan and to be developing and manufacturing 1-gamma at our Hiroshima fab. Our plans reflect our continued commitment to Japan, strong relationship with the Japanese government and the exceptional talent of our Micron Hiroshima team.”
Micron Technology shares were marked 4.5% higher in early Thursday trading to change hands at $67.83 each. Rival chipmakers Nvidia (NVDA) – Get Free Report and Intel (INTC) – Get Free Report were also higher, rising 2.8% and 1.85% respectively.
The Philadelphia Semiconductor index, the chip sector benchmark, was last seen 1.88% higher on the session at 3,183.46 points, the highest in more than a month.
Micron has also been boosted by Samsung Electronics’ move to cut near-term memory chip production over the coming months to tackle what it described as a glut in global chip supplies and a pullback in customer demand.
The South Korean group posted weaker-than-expected first-quarter profits in late April, and said demand for memory chips has fallen sharply this year and noted that customers were winding down their current inventories instead of purchasing new chips.
KeyBanc Capital Markets analyst John Vinh said at the time that the news should be positive for Micron shares, noting it would remove any concern with respect to “irrational” supply behavior and “help regain confidence regarding disciplined [capital spending] investments in memory.”
AI chip demand is also expected to be a “secular driver” of near-term growth for Micron, the company said earlier this year. Current-quarter sales were likely to hold at around $3.7 billion, plus or minus $200 million, compared with the second quarter. But that tally would still be down more than 60% from last year’s levels.