Micron Technology to Acquire $1.8B PSMC Tongluo Fab, Boosting DRAM Output
Micron Technology has signed a $1.8B letter of intent to acquire PSMC’s 300,000 sq ft P5 fab in Tongluo, Taiwan, with closing slated for Q2 2026. The agreement includes a long-term post-wafer assembly partnership and supports phased DRAM production ramp beginning in H2 2027.
1. AI-Driven Demand Propels Growth
Over the past year, Micron Technology has experienced a remarkable surge fueled by artificial‐intelligence workloads that rely on high‐bandwidth memory (HBM). The company’s share count has returned more than 230% since January, outpacing major indices and reflecting unprecedented market demand for advanced DRAM solutions. Sales of HBM modules, used in data center GPUs and AI clusters, rose by 150% year‐over‐year in the fourth quarter, as Micron’s order backlog achieved a record $12 billion—up from $4.5 billion the prior year. Management forecasts that AI memory sales will represent over 40% of total revenue by the end of 2026.
2. Operating Margin Expansion
Micron’s operating margins have expanded from 25% to 45% within twelve months, driven by tight global memory supplies and aggressive pricing power. Average selling prices for server DRAM climbed 35% in calendar 2025, while HBM ASPs jumped 60%. The resulting margin uplift translated into a seven‐fold increase in free cash flow, with the company generating $8 billion in cash flow over the last four quarters versus $1.1 billion in the same period a year earlier. Capex remains elevated at roughly $15 billion annually as Micron scales capacity to capture further market share.
3. Strategic Acquisition of Tongluo Fab
Micron has signed an exclusive Letter of Intent to acquire Powerchip Semiconductor’s P5 fabrication site in Tongluo, Taiwan, for $1.8 billion in cash. The deal, covering a 300,000 sq. ft. cleanroom, is set to close by Q2 2026, pending regulatory approvals. Post‐close, Micron plans a phased ramp of DRAM wafer starts, targeting initial meaningful output in H2 2027. The Tongluo facility sits adjacent to Micron’s existing Taichung operations, enabling operational synergies and supporting a projected 20% incremental capacity increase in Asia Pacific.
4. Valuation and Analyst Projections
Analysts covering Micron anticipate that the company’s earnings per share will reach $41.40 within the next 18 months, reflecting sustained pricing power and volume growth in AI memory. Consensus estimates for fiscal 2027 revenue stand at $75 billion, up from $47 billion in fiscal 2025. Based on a 14x forward operating‐cash‐flow multiple applied to management’s long‐term free cash flow guidance of $10 billion, fair value for the equity is estimated near $600 per share, implying more than 40% upside from current consensus levels.