Lockdown measures to combat a Covid-19 resurgence in the Chinese city of Xian have affected chip-making facilities owned by Samsung Electronics Co Ltd (OTC: SSNLF), SCMP reports.
- Samsung said it will "temporarily adjust operations" at its plants in the city and "take all necessary measures."
- Samsung's two memory wafer fabrication plants in the city comprise 15% of the global NAND flash production capacity.
- Other chip producers and users that could be affected by the news include Western Digital Corp (NASDAQ: WDC), Micron Technology Inc (NASDAQ: MU), and Seagate Technology Holdings PLC (NASDAQ: STX).
- While the scale and duration of any production loss are unknown, given disciplined NAND Flash vendor-held inventory levels, Wells Fargo analyst Aaron Rakers would view NAND production impacts as a positive for Western Digital and Micron.
- According to Trendfocus, Samsung's two Xi'an NAND Flash fabs totaled 245,000 wspm capacity during Q3, equaling 42% of Samsung's total NAND Flash manufacturing capacity and 15% of the full NAND Flash industry capacity.
- Benchmark analyst Mark Miller said he believes Samsung's report is driving up Western Digital's shares, noting that Samsung has two NAND plants in the city.
- Shares of Western Digital competitors Seagate and Micron have been up to over 40% since mid-October. The improving memory chip prices, expectations for continued strength in cloud demand, and Micron's expectations for a solid second half of 2022drove the momentum.
- Miller reiterated a Buy and $92 price target on Western Digital.
- Price Action: WDC shares traded higher by 6.03% at $66.62 on the last check Wednesday. MU shares traded higher by 3.58% at $96.26
