Good for ↑
Huawei's new memory chip plant in China will make high-bandwidth memory (HBM) for Huawei's own AI chips, not for the global market. That leaves Micron's fastest-growing, highest-margin business, HBM for the West, without a Chinese rival for years. Yet investors value Micron like a plain memory maker, not an AI supplier.
Source: hardware.slashdot.org ↗
Investors saw China's memory build-out as bad for Micron (MU), because more supply could end the few big makers' pricing power. That fear held down Micron's valuation. But the reported Huawei-SwaySure plant will make high-bandwidth memory (HBM) for Huawei's Ascend AI chips, not ordinary memory for the world. China is fixing its own AI chip supply, not the global shortage. HBM is far harder to make. Its chips are stacked in layers, and it took SK Hynix and Micron years to get good output. CXMT's 265,000 wafers a month of ordinary memory do not close that gap. US export controls also split the market. Chinese firms cannot buy HBM from Samsung or SK Hynix, while Nvidia (NVDA), AMD and US cloud companies buy only from Micron and the Korean makers. Each new AI data center adds orders for Micron.
China's fast memory build-out could end the pricing discipline of the few big memory makers. CXMT runs 265,000 wafer starts a month and is projected to reach 350,000 by year-end, nearly matching Micron at about 385,000. Investors value Micron as a cyclical commodity maker whose margins will fall for good as Chinese competition grows.
Why that may be wrong
Investors compare Micron with CXMT's ordinary memory output as if all memory chips were the same. HBM (high-bandwidth memory) cannot be swapped for DDR5. It needs different production steps, packaging plants and slow customer approvals. CXMT's wafer count has no bearing on Micron's power to set HBM prices. Analysts' models still use one blended memory price, so this difference spreads slowly. As a result, the extra margin on HBM is too low in their forecasts.
This view fails if CXMT or SwaySure can make advanced high-bandwidth memory (HBM3E) at scale, with good output, within 18 months. Watch for two things at once. One is Huawei Ascend AI chips shipping in volume with confirmed Chinese-made HBM. The other is Micron reporting HBM price pressure or cancelled orders in its next 2 earnings calls.
Even if China cannot make high-bandwidth memory (HBM) yet, ordinary DDR5 and LPDDR5 memory still brings most of Micron's revenue. CXMT's scale puts real pressure on those prices, and the share price ignores that margin loss. Timing is the weakest point. If CXMT reaches 350,000 wafer starts by end of 2026 and undercuts prices, Micron's average selling price falls even if HBM holds. The deciding sign would be Micron guiding ordinary memory prices down 15%+ in its next earnings call, with HBM the only bright spot. That would prove the HBM point but bring a painful near-term earnings miss the stock would not survive at its current valuation.
The nearest comparison is the 2000s LCD panel price war. Korean and Taiwanese makers built huge capacity, and panels became a commodity. But displays were standard, so Chinese makers entered easily. HBM (high-bandwidth memory) differs in design from ordinary memory. In leading-edge logic chips, a closer precedent, China built plants (SMIC) yet stayed 4-6 years behind TSMC for over a decade. Samsung and SK Hynix spent 5+ years getting good HBM2E and HBM3E output. In 2018-2019, as AMD gained share, investors treated Intel as a commodity CPU maker. They missed its dominant Xeon data center business, and the stock stayed cheap for 18 months before rising. Micron fits that pattern, as commodity talk hides its strong AI business.
Reports that Huawei and CXMT are building large memory chip plants in China raise fears that the few big memory makers will lose pricing power. That weighs on the valuation of Micron, the purest US memory chip company.
Analysts cut Micron's expected earnings on the idea that all memory prices will fall. They miss two things. China's new plants will serve its own AI chips, and they cannot make competitive high-bandwidth memory (HBM). US export controls also keep Nvidia, AMD and big US cloud companies tied to Western HBM makers such as Micron and SK Hynix, with no Chinese option for years.
The AI data center build-out is raising demand for high-bandwidth memory (HBM) faster than new plants can add supply. Each new AI chip needs HBM, and that order can go only to Micron or the Korean makers. Once analysts count Micron's HBM sales apart from ordinary memory, likely after Micron's own guidance, investors may value it like other AI suppliers. Micron, which is growing HBM3E output, gains most.
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