Micron Stock (NASDAQ:MU)
Micron, the largest memory chipmaker in the United States, was singled out for criticism by China’s cyberspace regulator at the end of last month. According to the regulator, the company had failed a network security review. In addition, the Chinese regulatory body stated that it would prevent operators of crucial infrastructure from purchasing from the company.
Despite a ban on the U.S. chip maker selling to some Chinese companies, Micron Technology (NASDAQ:MU) announced on Friday that it plans to invest 4.3 billion yuan ($605 million) in its plant in Xi’an. This investment serves as a demonstration of the company’s commitment to China.
In a post published on the Chinese social media platform WeChat, the company stated that it intends to put the investment toward the purchase of packaging equipment from Licheng Semiconductor, which is based in Xi’an, as well as the construction of a new facility within its factory. The stock price increased by almost three percent before the market opened on Friday.
The Chinese Cyberspace Administration issued a ban on less than a month ago, stating that companies involved in critical information systems are prohibited from purchasing chips from Micron because they are a “major security risk.”
When it made the announcement of the investment, Micron (NASDAQ:MU) did not make any direct referenceto the partial ban.
“This investment project demonstrates Micron’s unwavering commitment to its China business and its China team members,” CEO Sanjay Mehrotra said in a statement that was posted on WeChat and seen by Barron’s.
“It gives us great pleasure to announce that we will be able to move forward with this significant project. “Once the construction of the new plant is finished, we will gradually introduce new equipment and processes in Xi’an,” said Wu Mingxia, general manager of Micron’s China operations.
In the statement that it published on WeChat on Friday, Micron made no mention of the decision that the regulator had made.
According to the announcement made by the company, the investment will include the purchase of packaging equipment from a Xian-based subsidiary of Taiwan’s Powertech Technology Inc. This is the same equipment that Micron has been using in the factory since 2016.
Additionally, Micron plans to open a new production line at the site to produce mobile memory, storage, and solid-state drive products. This will improve the plant’s packaging and testing capabilities.
In addition to that, the company noted that this will make it possible for Micron to directly run its packaging and testing operations in Xi’an.
Powertech stated in a separate statement that the agreement between the companies in 2016 included the plan for Micron to purchase the equipment, which means that the financial impact on Powertech will be minimal.
Requests for comments were sent to Micron, the Chinese Ministry of Commerce, and the Cyberspace Administration of China, but none of them immediately responded.
Micron did not disclose the value of the deal that it had struck with Powertech; however, the company did say that it would offer contracts to 1,200 employees of the Taiwanese company’s Xian subsidiary and that the investment would create an additional 500 jobs.
According to the company, this would bring the total number of Micron employees working in China up to more than 4,500.
After the China ban, Micron predicted in May that the company would see a decrease in revenue ranging from low to high single-digit percentages. Reuters conducted an analysis of more than one hundred public government tenders and discovered that Chinese authorities had already begun reducing their purchases of Micron’s chips before the ban was implemented.
Featured Image: Megapixl
