Key Points
Micron stock has dropped 13.5% this week as investors fear competition from CXMT.
CXMT competes directly with Micron, but more in the low end of the market than the more profitable HBM high end.
Micron (NASDAQ:MU) stock fell for a fourth straight day Thursday, continuing a rout that began with Monday's announcement that Chinese DRAM company ChangXin Memory Technologies, or CXMT, has invented "4F square" technology to increase DRAM storage density -- and may soon be coming for Micron's market share.
Micron stock is down 2.8% as of 10:35 a.m. ET, and down 13.5% so far this week.
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Image source: Micron.
What is CXMT and how scared should we be?
Global market intelligence company Trendforce says CXMT holds 9.5% of the global DRAM memory market, putting it in fourth place behind Samsung (39.4%), SK Hynix (24.9%), and Micron (23.3%).
DRAM is the biggest part of Micron's business, providing 73% of the company's revenue. (The other 26% comes from sales of NAND flash memory.)
A reason to buy Micron
Why is that important? KeyBanc analyst John Vinh predicts DRAM prices will rise 15% to 20% year over year in Q4 2026, while NAND prices rise 20%. That gives Micron two ways to profit from the global deficit in memory chips.
High-bandwidth memory -- the most lucrative segment of this market for Micron and the area where CXMT is weakest -- could see prices rise 80% to 100% in Q1 2027. But now here's the important point:
Memory companies that operate logically will emphasize production of HBM DRAM for artificial intelligence data centers -- because that's where the money is. Doing so, Vinh predicts they will cut DRAM production for cellphones and PCs by 20% to 30% next year. CXMT's DRAM, which is "two or three generations" behind Micron, will most likely go to fill this low-end gap -- leaving Micron free to reap better margins producing high-end HBM DRAM!
In this case, CXMT mayn't be as big a threat as investors fear. Micron's profit margins should be safe.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.