Investing

Thursday Premarket Newsmakers: Micron Takes Its Newest Chips to Japan, Not China

Paul Ausick

Published: May 18, 2023 7:36 am

Premarket action on Thursday had the three major U.S. indexes trading higher. The Dow Jones industrials were up 0.14%, the S&P 500 up 0.25% and the Nasdaq 0.22% higher.

Late Wednesday, Micron Technology Inc. (NASDAQ: MU) announced that it will invest up to $3.6 billion to bring the latest chipmaking technologies to Japan. The technology, known as extreme ultraviolet (EUV), is a chipmaking technique that has made Netherlands-based ASML Holding N.V. (NASDAQ: ASML) a household name. Well, at least in chipmaking circles. ASML is the only semiconductor equipment maker in the world that can build EUV machines.

But wait, there’s more. In its announcement, Micron also said its Hiroshima plant would play a “critical role in the company’s development of the 1-gamma node.” The 1-gamma (or 1γ) node will be the world’s smallest memory cell when it makes its way to market in 2025. According to Micron, the 1-gamma node increases memory density, improves power efficiency and will cost less than any other DRAM technology on the market, including Micron’s own 1-beta (1β) technology, the most advanced DRAM node currently available.

And the press announcement carries the now obligatory nod to AI:

Micron expects to invest up to 500 billion yen in 1-gamma process technology over the next few years, with close support from the Japanese government, to enable the next wave of end-to-end technology innovation such as rapidly emerging generative artificial intelligence (AI) applications.

In addition to Micron’s own investment, Bloomberg reported that the Japanese government will kick in $1.5 billion in incentives, in an effort to boost semiconductor production in Japan. Given the saber-rattling that China has been making around Taiwan (currently the source of 60% of the world’s chips and 90% of the world’s most advanced chips), Japan has decided to step in and encourage chipmakers to keep the industry in Asia but to move it about 900 miles further north.

Micron noted in the press release that Japan “has extended significant investment support and established long-term strategies aimed at laying a strong foundation for leading-edge semiconductor manufacturing, a resilient supply chain and a digital economy in the country.” That would indicate that a commitment is all-but delivered.

The deal with Japan delivers a message that the Chinese government cannot ignore. China has launched a review of Micron’s chips as a security threat to the country. Micron makes about 11% of its revenue from China, so the Boise, Idaho-based firm had to do something to show it was willing to push back.

Micron acquired the Hiroshima plant in 2012 when it bought Japan’s Elpida Memory out of bankruptcy for $2.5 billion.

Here is a look at how the markets fared on Wednesday.

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Nine of 11 market sectors closed higher Wednesday. Financials (2.09%) and energy (2.07%) had the day’s largest gains. Utilities (−0.36%) and consumer staples (−0.10%) lagged. The Dow closed up 1.24%, the S&P 500 up 1.19% and the Nasdaq Composite up 1.28%.

Two-year Treasuries added six basis points to end Wednesday at 4.12%, and 10-year notes rose by three basis points to close at 3.57%. In Thursday’s premarket, two-year notes were trading at around 4.17% and 10-year notes at about 3.59%.

The weekly report on new claims for unemployment benefits will be released before markets open on Thursday. Economists have forecast that new claims will decline from 264,000 reported last week to 259,000.

The National Association of Realtors will release its April report on sales of existing homes. The consensus forecast calls for a decline from a seasonally adjusted annual rate of 4.44 million in March to 4.3 million. If this estimate is borne out by the numbers, it is not particularly good news for home builders, mortgage lenders or home sellers.