MarketWatch reports Micron Stock Dives as China Blocks Sales, other chip stocks join in fall.

Fireworks came early for shares of Micron Technology Inc. on Tuesday, following a report that a Chinese court had blocked sales in China of memory chip products from the Boise, Idaho-based company.

Shares of Micron MU, dropped 5.5% to close at $51.48 in Tuesday’s abbreviated session ahead of the July Fourth holiday, after touching an intraday low of $50.10. Shares are still up 25% for the year, compared with a 3.6% rise in the PHLX Semiconductor Index SOX, and a 1.5% gain in the S&P 500 index SPX.

While China accounts for an estimated quarter of global memory chip sales, half of Micron’s revenue comes from China sales, according to FactSet data. Another 12.5% comes from sales to Taiwan, according to FactSet.

Micron Revenue by Country

Image placeholder title

Patent Issue?

Bloomberg reports Micron Chip Sales Banned in China on Patent Case, Rival UMC Says.

This is not a patent issue. This is further escalation of a trade war and it strikes smack at US giant Micron.

The headline may be correct, at least in terms of what China claims, but we know the real reason is an escalating trade war. The body of the article has some interesting details.

China’s Huawei Technologies Co. and ZTE Corp. are fighting U.S. government action that threatens to cut them off from U.S. suppliers and potential customers. On Monday, the U.S. moved to block China Mobile Ltd., the world’s largest mobile phone service provider, from entering the U.S. market, citing national security grounds. Meanwhile, Qualcomm Inc. is still waiting for permission from Chinese regulators to complete its acquisition of NXP Semiconductors NV. That delayed deal was scheduled to be closed at the end of last year and has been approved everywhere else in the world.

RECOMMENDED ARTICLES

While their governments fight, companies face potential disruption of a complex supply chain that produces most of the world’s smartphones, computers and their components. For example, Qualcomm designs its chips at its San Diego headquarters, then has them manufactured in Taiwan, Korea and China. The semiconductors then become the most important electronic parts in phones that are mostly made in China and then sold worldwide.

Global Supply Chain Mess

Trump blocked China so China blocked Micron. That's the complete story.

Global supply chains will now be a mess.

Trump calls this "winning".

Fourth Quarter Recession?

If there is a 4.0% GDP print for the second quarter, and I highly doubt that, don't expect much of anything in the second half.

These tit-for-tat trade disputes will take away 100% of any gain from tax cuts. And the tax cuts were heavily front-loaded.

I would not be surprised in the least by a recession starting in the fourth quarter. All it will take is further escalation of the trade war.

Whenever the recession starts, don't expect the usual one-year warning following an inversion. It's likely to be very sudden.

Mike "Mish" Shedlock

Trade War Stupidity: US Chip Makers to Pay Tariffs On Their Own Chips

Trump's trade war with the world shifted into a higher gear today. The US imposed tariffs on China. China retaliated.

Trump and China to Sign Trade War Ceasefire on Wednesday

On Wednesday, the US and China will sign a compromise deal that will calm but not end a two-year trade war.

Currency War or Trade War? Two-Edged Dilemma for US and China

Does China (Trump) want to fight a trade war or a currency war?

China Attempts to Defuse Trade War

President Xi Jinping pledges reform including greater access to China's manufacturing and financial sectors.

Investigating Trump's Trade War Through the Eyes of China

Let's take a look at how China sees the escalation of the trade war as described by the Xinhua News Agency in Beijing.

Trump Unwisely Escalates Trade War: Expect a "Rare Earth" Response From China

Trump's imposed more tariffs on China. If China retaliates, Trump will respond with tariffs on all imports from China

NVDIA and CAT Hammered on Warnings, Soft Demand in China

NVDIA fell 12.82% and CAT fell 9.13% on revenue warnings and a slowdown in China.

Who Will Win the Trade War? Some Say China, Others Say Trump

Stories abound regarding who will win Trump's trade war with China. Trump? China? Neither? Both?

Tracking the Trade War: US Car Sales to China Down, Parts From China Up

A pair of charts by Brad Setser highlight's Trump's difficulty in winning the trade war with China.