The outbreak of the coronavirus has cast a shadow over the semiconductor sector, and stocks have begun plunging. After beginning the year on a high note, chip stocks have taken a beating over the past few weeks, and it has impacted on tech companies such as Apple Inc. (NASDAQ:AAPL). Apple slashed its revenue guidance for the current quarter indicating that the anticipated 2020 chip recovery is likely to be delayed.
Coronavirus outbreak has led to sell-off of Micron
Micron Technology (NASDAQ:MU), which has strong exposure in China and depends on the likes of Apple, has, as a result, experienced massive sell-offs along with the whole industry. However, this pullback could be an opportunity because the sector appears on the brink of a turnaround.
In 2018 the company had a year to forget because of the downturn in the memory industry. However, indications of a turnaround in 2019 helped Micron to deliver massive gains in the market. Interestingly for Micron investors, the chip market is expected to continue improving this year.
The company’s NAND flash segment that accounts for 28% of its revenue is showing signs of a turnaround. In the first quarter, Micron experienced a low-single-digit sequential increase in the average selling prices in the segment. NAND flash shipments jumped 30% annual, and they are expected to jump 40% this year.
Micron to capitalize on the launch of 5G smartphones
The launch of 5G smartphones this year will boost the demand of NAND chips with the company, indicating that so far, the 5G phones launched carry a 500GB NAND storage. Similarly, the company anticipates an increase in DRAM capacity with affordable 5G phones expected to carry an average mobile DRAM of 6GB.
The growth of 5G smartphones is a tailwind the company will capitalize on in the coming quarters. According to Gartner, 5G smartphone sales could reach around 221 million units this year, which are a 3% increase in sales following last year’s dip. By 2021 5G smartphone sales could jump to 489 million according to the firm.
