Western Digital shares traded bullish on Wednesday amid a generally less tech sector on news that Samsung has cut production at its NAND memory chip plants in Xi’an, China, as new restrictions in the region Related to the spike in Covid-19 cases.
According to CNN, the city of 13 million people is under strict lockdown except for essential services.
Samsung (ticker: 005930.korea) controls about one-third of the global NAND market, while Western Digital (WDC) and its Japan-based joint venture partner Kioxia simultaneously hold a comparable share, SK Hynix and Micron Technology (MU) are the other primary producers.
NAND memory accounted for about one-quarter of Micron’s revenue in the most recent quarter.
Wedbush analyst Matt Bryson wrote in a research note that about 40% of Samsung’s NAND production is in Xi’an, and Micron has some testing and packaging facilities in the city. He notes that the exact impact on memory production is not clear to date, but suggests it could lead to more favorable NAND pricing as buyers enter first-quarter contract negotiations.
“While the supply position from Xi’an remains opaque, we also see potential disruptions that could result in favorable near-term effects for the memory industry,” wrote the analyst. “While we like [Western Digital]All names including Micron, Samsung should benefit from any rising tide [and] Hynix.”
City analyst Peter Lee said he thinks the Xi’an facilities could be closed for more than three weeks — and he also sees some implications for the production of another type of chip called DRAM.
Lee reports that Samsung’s Xi’an Fabs account for about 12% of global NAND production, and he says the facilities there account for about 7% of DRAM capacity. City remains bullish on Samsung, Western and Micron.
Samsung released a statement on the situation.
“Due to the ongoing COVID-19 situation, we have decided to temporarily adjust operations at our manufacturing facilities in Xi’an, China,” Samsung said. “This decision was made in line with our commitment to protecting the health and safety of our employees and partners, which remains our top priority. We will also take all necessary measures, including leveraging our global manufacturing network, to ensure that our customers are not affected. ,
Western Digital and Micron could not be immediately reached for comment.
Western Digital shares are up 5.7% to $66.43, while Micron is up 2.8% to $95.53. The S&P 500 was flat in late-night trading, while the Nasdaq fell 0.3%.
Eric J. Write Savitz to [email protected]