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Micron (MU) Sells Utah Plant to Texas Instruments for $900M

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Micron Technology MU has finally found a buyer for its Lehi, Utah fabrication plant. The memory-chip maker recently announced that Texas Instruments TXN has agreed to buy the facility in cash.

Micron announced that the facility’s total economic value is $1.5 billion. Texas Instruments will pay $900 million for the fab, while the memory-chip maker will earn additional $600 million from sales of select tools and other assets. It also revealed that it has already sold some of the assets and intends to retain the remaining to be used at its other facilities.

Notably, Micron had put its Utah factory up for sale this March, as it wanted to quit from making 3D XPoint memory chips that it had developed in partnership with Intel Corporation INTC. The company had expected to find a suitable buyer and reach a sale agreement by the end of this calendar year.

Micron Technology, Inc. Price

Micron Technology, Inc. Price
Micron Technology, Inc. Price

Micron Technology, Inc. price | Micron Technology, Inc. Quote

Why is Micron Exiting the 3D XPoint Chip Space?

The 3D XPoint memory chips were developed with an aim to fill gaps in the storage market between the Dynamic Random Access Memory (“DRAM”) and NAND flash. However, Micron now believes there is insufficient market validation that would justify the continued investment toward developing and commercializing 3D XPoint chips.

Therefore, the memory chip maker intends to shift the resources used for 3D XPoint development toward facilitating market introduction of Compute Express Link (“CXL”)-enabled memory products. The technology maintains memory coherency between a host, such as the CPU memory space, and a device. This allows resource sharing for higher performance, while reducing software stack complexity and overall system costs.

The CXL technology is expected to be used in heterogeneous computing systems, including artificial intelligence (AI), machine learning and data analytics. The shift in the portfolio strategy is likely to further strengthen Micron’s focus on developing memory and storage products and solutions for the data center.

Pandemic Boosts Memory Chip Demand

Notably, the company has been one of the rare beneficiaries of the COVID-19 pandemic and saw sales soaring on higher demand for its memory chips across multiple end markets, including data center, PC and mobile businesses.

The work-and-learn-from-home necessity is stoking demand for cloud storage. Furthermore, the social-distancing trend has boosted the usage of online services globally. Therefore, data-center operators are enhancing their cloud-storage capacities in a bid to accommodate the skyrocketing demand for cloud services, which is fueling demand for memory chips.

Moreover, the pandemic-induced lockdown and social-distancing measures are spurring demand for PCs and notebooks as more workers and students are now working and learning from their homes.

Additionally, digitization across industries, increased adoption of cloud computing and services, and the integration of AI and machine learnings are likely to stoke demand for Micron’s chips.

The accelerated deployment of 5G technology — the next-generation wireless revolution — is likely to propel further growth. Apart from this, blockchain, IoT, autonomous vehicles, AR/VR and wearables are growth prospects.

Zacks Rank & A Key Pick

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

A better-ranked stock in the broader technology sector is Zoom Video Communications ZM, which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Zoom is currently pegged at 15.6%.

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