) rallied 5.3% on Sep 4, after Hynix, the second largest dynamic
random access memory (DRAM) chip maker, suspended its operations
at the Wuxi plant in China due to a fire.
Hynix's share in the global DRAM market was 25.7% in the first
quarter, according to iSuppli. Although the company is expected
to resume operations in its plant shortly, no specific time has
been given. These uncertainties worked in favor of other DRAM
makers such as Micron and
) (increased 3.3%), which expect to gain from the supply
disruptions related to the fire.
Moreover, if Hynix is not able to resume operations shortly,
it would result in a supply crunch, favorably impacting DRAM
prices. As such, the DRAM market is already seeing supply
constraints due to the rising demand for the memory chip by
smartphone makers such as Samsung,
) and HTC.
The other positive factor for Micron is the Elpida
acquisition, which is expected to increase the wafer
manufacturing capacity by approximately 50%, helping it to
capitalize on any demand shortage. Micron is also optimistic
about supply/demand balance for DRAM and NAND memory chips in
2013 and 2014.
Moreover, Micron had swung to profit in the last reported
quarter (third quarter of 2013) after reporting losses for seven
consecutive quarters. The company reported solid operating
performance on the back of higher revenues and lower costs.
We believe tight expense control, manufacturing efficiency and
the secular shift toward mobile DRAM will benefit Micron's
fundamentals in the coming quarters.
Though Micron's prospects in the mobile DRAM market look
promising, it will not be easy to outpace Samsung. Samsung has
held the largest share of this market for years and there are
indications that it will continue to do so in the next few years
Currently, Micron has a Zacks Rank #1 (Strong Buy).
APPLE INC (AAPL): Free Stock Analysis Report
MICRON TECH (MU): Free Stock Analysis Report
NOKIA CP-ADR A (NOK): Free Stock Analysis
SANDISK CORP (SNDK): Free Stock Analysis
To read this article on Zacks.com click here.