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Why Micron Technology Stock Was Up Strongly Today

By Billy Duberstein – Dec 1, 2021 at 11:43AM

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The memory-chip maker added another market-beating day to a solid month.

What happened

Shares of Micron Technology (MU -4.36%) were up as much as 6% Wednesday, although it finished the day up only about 1.4%, still well ahead of the market in a volatile trading session. 

Shares of the broader semiconductor sector performed relatively well Wednesday, bouncing back from Tuesday's down session, and benefiting from the fact the stock is largely cheaper than software peers that might get hurt by higher interest rates.

Still, there were also company-specific reasons for Micron's strong day.

Picture of a car on a square semiconductor with transistors coming out in all directions.

Image source: Getty Images.

So what

On Nov. 25, Micron and the Taiwanese semiconductor foundry United Microelectronics (UMC 0.81%) reached a settlement in a long-standing intellectual property dispute. To settle the claim by Micron that UMC stole secrets and leaked them to a Chinese customer, UMC agreed to make an undisclosed one-time payment to Micron.

Then on Wednesday, Micron and UMC announced an enhanced strategic partnership. According to the press release, Micron will expand its business relationship with UMC, especially for customers in the automotive and mobile markets.

Micron's head of global operations, Manish Bhatia, said: "Expanding our relationship with UMC helps us strengthen our customers' supply chains and is a great opportunity to increase collaboration across the semiconductor industry. ... This expanded relationship provides Micron continuing access to products that are critical to our automotive and mobile customers, and we look forward to working with UMC in the coming years to deliver our industry-leading memory and storage solutions to our customers globally."

It was unclear exactly what the agreement entails, but likely it means a closer collaboration between Micron, a provider of DRAM and NAND flash memory, and UMC, which produces logic chips for third parties for those sectors. A closer collaboration could help ease supply chain problems currently facing the industry

Now what

Micron started the year strongly, but this summer proved difficult, and investors began to worry that customers had been double-ordering amid booming chip demand. Still, it appears at least some of that is due to supply constraints of other chips. Therefore, some of the weakness predicted for this quarter is likely due to delayed demand, but not a lack of it.

In any case, investors now seem to be looking forward to 2022, as Micron's stock has rebounded a strong 22% over the past month alone. The settlement and enhanced strategic partnership with UMC should only help with sentiment through the rest of the year.

Billy Duberstein owns shares of Micron Technology and has the following options: short January 2022 $150 calls on Micron Technology, short January 2022 $170 calls on Micron Technology, short January 2022 $35 puts on Micron Technology, short March 2022 $40 puts on Micron Technology, and short March 2022 $45 puts on Micron Technology. His clients may own shares of the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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