Japan is placing a bet on U.S. chipmaker Micron Technology. Japan’s trade ministry announced its government would provide Micron Tech with a subsidy of as much as $320 million to produce advanced memory chips at the company’s Hiroshima facility. The partnership comes on the heels of a visit to the Asian nation by U.S. Vice President Kamala Harris.
It is a competitive move, considering that Micron is otherwise cutting its capital investments in other regions. The deal sends a message to China, whose relationship with Washington, D.C. remains strained. Micron plans to use its Hiroshima plant to build its upcoming dynamic random-access memory (DRAM) chips using 1-beta technology.
Japan’s Economy and Trade Minister Yasutoshi Nishimura stated:
“I hope the deal will contribute to further expansion of cooperation between Japan and the United States in the area of semiconductors.”
The Japanese government greenlighted the deal last week based on a policy tied to economic security. The country has a fund dedicated to semiconductor development from which the latest deal, the third of its kind, will be funded.
During VP Harris’ visit to Japan, she met with political leaders and corporate executives in the semiconductor industry. Micron was among the companies represented, in addition to Fujitsu, Hitachi High-Tech Group, Nikon, and Tokyo Electron.
The timing couldn’t be better for Micron, which said in its latest quarterly earnings report that it is experiencing weakened demand. In response, Micron plans to slash its capital investments by 30% due to weakening demand for smartphones and computers, which is much lower than predictions from earlier this year. According to the company’s most recent outlook,
“An unprecedented confluence of macro events and customer inventory adjustments are depressing
demand for DRAM and NAND to well below end consumption; extremely aggressive pricing environment.”
The stock has been in the doldrums in 2022, falling 45% year-to-date, a sign of the times as investors have fled growth sectors like technology in the face of high inflation and rising interest rates.
However, Micron CEO Sanjay Mehrotra has a more upbeat forecast for the long term and expects chip demand to rebound by the second half of the company’s fiscal 2023. He points to China, saying that in a post-COVID world, demand for PCs and smartphones in the country should open up once again.
Sanjay admits there is uncertainty in the current macro environment, and any further weakening could trigger a change in his outlook.
.@MicronCEO Sanjay Mehrotra shares his outlook for @MicronTech with @davidfaber after the chip-maker issued forecast signaling weak demand. $MU pic.twitter.com/cyRZ4ApEQf
— Squawk on the Street (@SquawkStreet) September 30, 2022
In addition to Micron, Japan’s Ministry of Economy Trade and Industry has also committed funds to Western Digital Corp to increase its production of flash memory chips in the country.