Micron Technology gets no respect on Wall Street. Investors tend to think of Micron, and memory chip makers generally, as providers of interchangeable commodity parts, tech’s version of wheat or frozen orange juice. The result is that Micron trades at low multiples of sales and earnings relative to other chip makers, the broad market, or any other comparable measure. And that seems shortsighted.
Before we get to the case for Micron (ticker: MU) shares, let’s address a few basics that often get lost in the semiconductor conversation. Micron makes two kinds of chips. There’s DRAM, an acronym for dynamic random access memory, which is important thanks to its “volatile” nature. Data sit in DRAM fleetingly on the way to somewhere else. It’s needed for most kinds of computing, including PCs, servers, smartphones, and various other devices. But turn off the power, and the data is gone.
And then there’s NAND, or flash memory. NAND isn’t an acronym; it’s digital logic-speak for “NOT AND.” What’s important is that NAND memory is “nonvolatile,” so storing data doesn’t require ongoing power. NAND is used in things like solid-state drives, memory cards, and USB memory sticks.
To make either DRAM or NAND, you need big, expensive chip factories. In DRAM, there are only three major players—
Samsung Electronics (005930.Korea),
SK Hynix (000660.Korea), and Micron. The NAND market includes those DRAM players plus a joint venture owned by
Western Digital (WDC) and Japan’s Kioxia.
The memory market has a small number of players dealing with tight supplies, growing demand, and geopolitical turmoil, so it’s vulnerable to short-term sentiment swings. In recent weeks, prices for NAND chips spiked after an outage at two factories run by the Kioxia/Western Digital venture. Prices for some commodities used in memory chip production—neon gas, in particular—have spiked following Russia’s invasion of Ukraine. And some investors are worried that a…