Micron Slips as It Warns of Chinese City Covid Curbs Hurting Chip Output

Micron stock (NASDAQ:MU) traded 0.6% lower in Thursday’s premarket after the chipmaker warned a day earlier that strict Covid-19 curbs in the Chinese city of Xi’an could disrupt its chip manufacturing unit in the area.

Micron said while it is meeting most of its customer demand, there may be some near-term delays. But it warned that new or more stringent Covid-19 restrictions could be increasingly difficult to mitigate.

Authorities in Xi’an, which is around 600 miles southwest of Beijing, ordered a strict lockdown last week with residents barred from leaving home as Covid cases in the country touched levels last seen in 2020.

Micron said the city’s closure has reduced Micron’s team member and contractor workforce at its Xi’an site, resulting in some impact to output levels of its DRAM assembly and test operations there.

The company said it is working with suppliers in the region that also face similar challenges.

Dynamic random access memory chips or DRAM, which go into both personal computers and servers, accounted for 72% of the company’s FY21 revenue.

Samsung (LON:0593xq) Electronics (KS:005930) was another company issuing a similar warning Wednesday. Its shares closed 0.6% lower in Seoul today.

The warnings couldn’t come have come at a worse time for the broader supply chain. Shortage of chips, fueled by the pandemic-driven demand for gadgets and the general pivot of the automobile industry to smarter cars, has meant longer wait for consumers for their mobiles and laptops which are also only more expensive than they were a year ago. At the same time, consistent demand has helped drive Micron to near all-time highs.