Effects of United Microelectronics (NYSE:UMC) Lawsuit on Micron Technology (NASDAQ:MU)

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Micron Technology (NASDAQ:MU) shares are climbing again after falling to the 51 USD level, down from its 61 USD high. There have been a number of recent developments that made investors skittish in recent months after Micron Technology (NASDAQ:MU) hit its March 2018 high. The most recent being a legal battle over patents in Chinese courts with United Microelectronics (NYSE:UMC), a Taiwanese manufacturer.

DRAM Halt

Last week the Chinese court sided with United Microelectronics (NYSE:UMC) and ordered Micron Technology(NASDAQ:MU) to halt the sales of some of its DRAM chips in mainland China. Of course, investors saw the ruling and feared that losing sales in one of the largest economies in the world would harm the company's revenue prospects, and they do, though not as much as investors initially feared.  

Micron Technology (NASDAQ:MU) leadership was quick to point out that although DRAM accounts for 30% of it's annual revenue, sales in this area will be affected less than 1% by the Chinese court rulings. Some believe that the court's ruling may have been in part a retaliation to U.S. tariffs and the looming trade war as Micron Technology (NASDAQ:MU) had previously filed suit against United Microelectronics (NYSE:UMC) in the United States.

Micron is a U.S. based company so there may be truth to this claim and many have already dismissed the case as temporary noise or a distraction. Based on all this we can fairly safely assume the result has been priced into the stock at this time. Micron Technology (NASDAQ:MU) CEO, Sanjay Mehrotra, has affirmed their commitment to fighting the court's decision.

But Wait, There's More

Adding to the Micron Technology (NASDAQ:MU) bull case, J.P. Morgan's (NYSE:JPM) Harlan Sur, released a note detailing his belief in the increasing importance of DRAM and the increased demand he believes it will see in the future. Sur cited the need for DRAM in servers due to memory growth and for implementing complicated programs such as artificial intelligence. He even claims that server DRAM is such a large part of the market it will overtake sales of personal computers.

The short-term outlook for Micron Technology (NASDAQ:MU) is good, The long-term outlook is even better. Micron Technology (NASDAQ:MU) retains a strong market position and has excellent growth prospects. Now that recent events have settled and projections are returning to their favor expect Micron Technology (NASDAQ:MU) to make a steady climb filling the current gap to around 60 USD. If Micron Technology (NASDAQ:MU) shares can break above this level it could retake its all-time high around 80 USD in the near future. With the recent announcement and development of NAND in a partnership with Intel Corp. (NASDAQ:INTC), and an increasing demand for DRAM, Micron Technology (NASDAQ:MU) becomes a very attractive buy at its current price.


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