There's change in the air everywhere. From President Obama's Change.gov campaign website, through the ever-shifting sands of the market, and across the seas to crashing banks in Iceland, you have to admit that we live in interesting times.
That includes big changes in specific industries. I've been searching for change in the computer memory sector for some time now, and it finally looks like something is happening. Micron (NYSE:MU) is playing the superhero of the memory market right now.
The Boise, Idaho-based memory giant has extended an olive branch of manufacturing expertise and capacity to its Taiwanese rivals. The idea is to bring a number of money-losing Taiwanese memory makers together under a holding company formed by the Taiwanese government. Micron would then take a stake in the venture, sharing patents that would be used in a joint-development model. Reuters reports that the Taiwanese government is willing to invest up to $2 billion in the new conglomeration, with Micron kicking in an as-yet-undetermined sum for its stake.
Japanese rival Elpida submitted its own version of that plan to the Taiwanese government, and we can't be certain who'll get the final nod here. But it is clear enough that the memory sector is going to consolidate, and fast. AMD (NYSE:AMD) spinoff Spansion and Infineon (NYSE:IFX) protege Qimonda have already filed for bankruptcy in recent weeks. The time is ripe for baking other failing memory experts into a couple of much bigger operations with more power to control the ebb and flow of chip supplies.
The faster, the better. The current global recession came at a time of chronic memory chip oversupply. Whether it's Micron or Elpida, Samsung or Intel (NASDAQ:INTC) that steps in and cleans this mess up with a couple of well-aimed billions of dollars, the entire sector will benefit when it happens.
Computer memory will still be a risky business until the global consumer renews its collective appetite for discretionary spending on computers and portable gadgets. The current pricing problems come from both oversupply and low demand, and consolidation can only fix the supply side of that equation. Rocky roads ahead, in other words.
But for the first time in ages, I now believe that the bleeding will stop before I'm old and gray. Bottom-feeders and bargain hunters might want to look at Micron or pure-play memory technologist Rambus (NASDAQ:RMBS) in the coming months. Those stocks may soon find a bottom to bounce off of. The rebound could be massive after a multi-year sector recession like this one.
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