E2241 - Micron - October 12, 2022

Special guest: Dylan Patel of SemiAnalysis joins us to discuss the recent China export controls, memory markets, and Micron

Oct 12, 2022

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This week we had a special guest - Dylan Patel, semiconductor analyst and producer of SemiAnalysis. Dylan kindly gifted us three 1 month subscriptions to his newsletter that I will send to the first three people that respond to this newsletter requesting it. I highly recommend checking out his article on the recent export restrictions (linked below). Thanks, and enjoy this week’s episode on Chips, China Export Restrictions, and Micron.

SemiAnalysis

China and USA Are Officially At Economic War – Technology Restriction Overview

Today the US government levied new export regulations and restrictions against China that amount to a full-scale bilateral economic cold war. We will break down the impact and affected companies, but the actions were a long time coming. China intensified its covert economic warfare in the last decades through state-sponsored corporate espionage, state-s…

2 years ago · 52 likes · 13 comments · Dylan Patel

Micron

Micron Technology said on September 30th it was cutting its investment plans by 30% amid a fall in demand for PCs and smartphones and reducing investment in fabrication by 50% in the new fiscal year.

Vitaliy Katsenelson 🇺🇦 @vitaliyk

Micron published this slide not for $MU investors but for Samsung and SK Hynix teams to telegraph that they need to slowdown their capex:

The memory markets are becoming more sophisticated - which means that the competitors may make more optimal decisions that improve profits for the whole group. As Vitaly pointed out above, Micron fairly explicitly stated that it expects the industry to curtail supply. It seemed to work. Kioxia cut NAND wafer production by 30% on September 30th (The Memory Guy). And Samsung is “maintaining consistent supplies rather than lowering output” (Mobile World Live).

Is Micron Cheap?

This is a tough question to answer because CAPEX currently eats all cashflow and we are moving into a period of declining volumes. That being said, there are some tailwinds with respect to removing YTMC as a would competitor (discussed in the podcast). One bit of information I will point out is that Tangible book value is $43.60 / share, about $10 below where the stock trades today.

Check out the attached sheet to see how Micron compares to the other chip stocks we’ve looked at recently…

Nvda Amd Intc Mu

96.6KB ∙ PDF file

Download

Supplemental Data

1 SuperCompounders

2 Macro

Meeting minutes show Fed is committed to taming ‘unacceptably high’ inflation, no mention of ‘transient’ (WSJ, FT). US Jobs Report - 263,000 adds, unemployment rate 3.5% (FT, WSJ).

Joseph Wang @FedGuy12

Consumer credit continues to grow at much higher rates than pre pandemic. Strong credit and wage growth suggest consumers can continue to afford higher prices, thus supporting elevated inflation

Federal Reserve @federalreserve

August consumer credit up 8.3%; revolving credit up 18.1%; nonrevolving credit up 5.1% (SAAR): https://t.co/Zujt3BBoaT

Mike Zaccardi, CFA, CMT @MikeZaccardi

Small cap forward P/E 10.8. Lowest since 1990.

3 Energy

Germany considers Fracking (WSJ). U.S. Takes Aim at OPEC for Oil Production Cuts (WSJ). OPEC, Saudi says it’s cut is not about US (FT), rather OPEC is predicting significantly reduced oil demand (WSJ).

Volvo (Geely) expects to have 600kW charging tech by next year - 186 miles charge in 5 minutes (Medium).

4 Tech

FT interview with Elon Musk (FT)
Tesla semi deliveries start in December, 500 mile range, PepsiCo first customer (WSJ)
Robotics experts view on Tesla’s Optimus Robot (IEEE)
A former Facebook engineer wants to help you make your own cell network (the Verge)

Sawyer Merritt @SawyerMerritt

NEWS: @Tesla Giga Press maker, IDRA, have announced they have completed building and testing of the 9,000 ton Cybertruck Giga Press.

Cloud Multiples

Check out the most recent edition of Clouded Judgement for the latest SaaS multiples.

Semiconductors

Crypto

MU 0.00%↑ AAPL 0.00%↑

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