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Micron to Boost Chip-Making Capabilities With $3B Investment

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Micron Technology, Inc., (MU - Free Report) recently announced that it intends to invest $3 billion in memory production by 2030. The Manassas, VA production unit, which is to receive the amount, is expected to create about 1,100 new employment opportunities over the next decade, as a result of this plan.

With the investment, the company expects to meet the growing consumer demand for its long-life products. This plan is in line with Micron’s long-term business model to invest not more than 30-35% of revenues in capital expenditure.

The invested money will be used to set up 100,000 square feet of "clean room" space to manufacture semiconductors and memory storage units that primarily will be used in automotive and industrial environment. This clean room will predominantly support transitions of DRAM and NAND technology.

Growing DRAM and NAND Chip Market

Per various sources, DRAM prices have improved primarily due to a better product mix optimization and stronger-than-expected demand from PC, server and smartphone makers. Any shortage in supply will push prices up, thereby boosting Micron’s top-line and bottom-line.

Furthermore, the company is expected to benefit from strong demand for NAND flash memory chips, which are used in smartphones and tablets. Driven by new tablet products and greater adoption of solid state drive (SSD), total demand in the NAND flash memory industry is likely to remain strong in the near term.

SSD: A Key Growth Driver in the Memory Chip Market

SSDs are faster and more energy efficient than traditional hard drives, occupying less space, thus making them more suitable for mobile computing devices.
 

Furthermore, secular growth of digital data, modest growth in TAM and higher demand for storage will drive growth in general, especially for SSDs. This has led TechNavio to project a CAGR of 17% for enterprise SSD market for the 2016–2020 period.

The statistics seem to bode well for Micron, which is expanding its foothold in the SSD storage market.

However, Micron faces competition from Samsung Electronics, SK Hynix, Spansion and Toshiba in the semiconductor memory market. Wafer capacity increases from its competitors could disrupt DRAM and NAND supply dynamics, affecting prices and the company’s results.

Nonetheless, with its focused steps in the DRAM chip and NAND chip markets, Micron is well positioned to withstand competition and lead the memory storage market as a whole.

Zacks Rank & Stocks to Consider

Micron currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader Computer and Technology sector are Qualys, Inc. (QLYS - Free Report) and Fortinet, Inc. (FTNT - Free Report) , each sporting a Zacks Rank #1 (Strong Buy), and Virtusa Corporation (VRTU - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Qualys, Fortinet and Virtusa is projected to be 8%, 16.8% and 20% respectively.

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