shares are both trading sharply higher Thursday on news that flash-memory-chip production has been disrupted at two factories in Japan run by Western Digital and its flash-memory joint venture partner Kioxia.
In a short announcement Wednesday, Western Digital (ticker: WDC) said that the issue involves “contamination of certain material used in its manufacturing processes” is affecting operations in plants in both Yokkaichi and Kitakami. The company said that the current assessment is that flash supply will be reduced by at least 6.5 exabytes. Kioxia issued its own statement, but didn’t quantify the extent of the problem, and neither company offered a guess on when production would return to normal.
Western Digital stock is up 3.4% at $56.34, while Micron Tech stock has rallied 5.7% to $93.18. While the loss of capacity will have short-term negative consequences for supply, it is also expected to push up memory-chip prices—and that explains the rally in the shares prices of both Western Digital and rival Micron Tech.
Citi analyst Jim Suva writes in a research note that 6.5 exabytes would represent about 25% of Western’s flash production for the quarter—he estimates that the issue could chop Western Digital’s March quarter sales and profits by about 14%. He and other analysts note that Western Digital gets just under half of the output from the joint venture with Kioxia; Street estimates of overall lost production range between 14 and 16 exabytes, or a little under 10% of expected global flash-memory production for the March quarter.
Morgan Stanley analyst Joseph Moore said Western Digital told him that the company’s estimate of 6.5 exabytes is a minimum, and that the total could be higher. “In a market already framed by supply-chain anxiety, we could see this lost production tighten things up at the margin,” he writes in a research note.
Write to Eric J. Savitz at [email protected]