Micron Stock Plunges on Forecast of ‘Worsening Decline’ If Huawei Ban Stays Intact

Q4 was down 42 percent from a year earlier, but up 2 percent sequentially, exceeding Micron’s previous guidance on better-than-expected demand in the quarter, said the company. “In recent months, we have seen increased demand from customers headquartered in mainland China,” said CEO Sanjay Mehrotra. Some customers “could be making strategic decisions to build higher levels of inventory in the face of increased trade tensions between the U.S. and China,” he said. The components Micron sells have heavy exposure in the first three rounds of Section 301 tariffs on Chinese goods. President Donald Trump announced in August he would hike those tariffs in October (see 1908230006). Micron, “with continued mitigation,” was able to limit the tariffs’ impact on Q4's consolidated gross margin to fewer than 20 basis points, said Chief Financial Officer David Zinsner. Micron resumed shipping “some products” to Huawei in Q3 that were “not subject” to the Trump administration’s export restrictions, said Mehrotra. Sales to Huawei in Q4 declined sequentially and “were down meaningfully from the levels we anticipated” before the Commerce Department put Huawei on the entity list, he said. Micron applied to Commerce for licenses “that would allow us to ship additional products, but there have been no decisions on licenses to date,” he said. “If the entity list restrictions against Huawei continue and we are unable to get licenses, we could see a worsening decline in our sales to Huawei over the coming quarters.” The stock plunged 11 percent Friday to $43.21.