Shares of Micron Technology (NASDAQ: MU) were rallying today, especially in comparison to the overall semiconductor sector. Micron shares rose as much as 5.2% before settling into a 2.8% gain as of 11:53 a.m. ET. That compared favorably to a 0.4% decline for the iShares Semiconductor ETF at that time.
Micron’s outperformance can likely be attributed to the surprise political news out of South Korea this morning.
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Late Tuesday night in South Korea, which is early in the morning in the U.S., South Korean President Yoon Suk Yeol declared martial law. The president, the leader of the Conservative party, accused the opposition in the country, which has a majority in parliament, of sympathizing with North Korea. But the measure appears to be a response to the opposition’s recent actions to impeach top prosecutors and reject the president’s budget proposal.
While the parliament voted strongly against the martial law measure, over which it apparently has power, the move stoked some fears of political instability in the country. South Korean stocks tumbled as much as 7% before recovering to a 2.6% loss.
Why is this a positive for Micron? Because it operates in a basic oligopoly with just two other companies — Samsung and SK Hynix — both of which are headquartered in South Korea.
Micron is the smallest of the three companies but has made substantial technological progress in recent years, especially in the all-important high-bandwidth memory (HBM) market. SK Hynix had an early lead in that product area, and Samsung has recently struggled with yields on HBM. However, Micron is catching up quickly and claims it now has the leading HBM product, with 20% lower power consumption and 50% greater capacity than rivals’ products.
For semiconductor investors, geopolitics cannot be ignored, for good or ill. Despite efforts on the part of the U.S. government to build more manufacturing in the U.S., most chipmaking still occurs in East Asia and will be affected by geopolitical developments there. Today, that was a positive for this U.S. company. However, if something were to befall Japan or Taiwan, where Micron has a large manufacturing base, there would be an opposite reaction.
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