Sandisk (SNDK -7.08%) stock sank 7.5% through 11:40 a.m. ET Monday after tech website WCCTech reported the Trump Administration will permit Apple to purchase memory chips from Chinese suppliers ChangXin Memory Technologies (CXMT) and Yangtze Memory Technologies Corp (YMTC).
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What does this have to do with Sandisk?
Only one of the two Chinese companies -- YMTC -- competes directly with Sandisk in the manufacture of NAND memory chips. (CXMT focuses on making DRAM chips... for now.)
Nevertheless, because Sandisk has pioneered the use of stacked NAND chips to produce "high bandwidth flash" memory (HBF) as an alternative to DRAM-based "high-bandwidth memory" (HBM), it's basically correct to interpret both YMTC and CXMT as competitive threats to Sandisk because Sandisk's HBF will effectively compete with CXMT's HBM -- which that company plans to begin producing.
On the plus side (for Sandisk), according to WCCTech, the DRAM and NAND that Apple might source from China would only be used in Apple products sold in China -- so for now, the threat to Sandisk is more China-centered than global.
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What's next for Sandisk stock?
That's the situation today -- but it may not remain the situation for long. Neither YMTC nor CXMT pose serious threats to Sandisk yet, as Lynx Equity Research analyst KC Rajkumar argues, because Apple has not certified many of their products as of high enough quality for its devices -- nor do they have the production capacity to significantly challenge Sandisk.
CXMT, however, raised $8.6 billion in a Shanghai IPO -- and plans to put that money to work ramping up production. YMTC has not yet gone public, but has filed for an IPO and hopes to raise $4.9 billion -- money it will use to compete with Sandisk.
Cheap Chinese chips are coming. Sandisk investors should be nervous.
