The growing trade conflict with China has, at least for a time, made a big tech stock cheaper than Ford (NYSE:F). The price-to-earnings multiple of Micron (NASDAQ:MU), the Boise-based maker of memory chips, fell to 5.16 on July 3 after a Chinese court, playing jiu-jitsu on intellectual property, ruled that it stole designs from a Chinese rival seen as a conduit into China for its own patents.

Investors in the pre-market were snapping up that bargain, but the tech sector remains under pressure as semiconductor investors wonder where the Trump trade war may take them next.

If peace breaks out, today’s price will be one of the great bargains of the year. If it’s war, that’s another story.

MU Stock: What We Know

Even before the latest news hit, Micron stock was super-cheap. The company earned $3.8 billion, $3.13-per-share, on revenue of $7.8 billion during its most recent quarter. These are huge margins, on sales growing at nearly 40% year-over-year.

But investors have always been wary about chip earnings, as these are commodities whose price can plummet as new supplies come on stream.

Then, on July 3, a much smaller Taiwan company, United Microelectronics (NYSE:UMC), said a Chinese patent court had blocked Micron’s sales in China, ruling in effect that Micron had stolen trade secrets it accused UMC of stealing from it.

The ruling sent Micron shares down over 5% in one day, while sending shares of UMC up 3%.

Micron has yet to comment on the ruling as this was written, but it’s seen as a shot across the bow of the Trump Administration in its continuing trade dispute with China over technology.

The two countries have had a symbiotic relationship for decades, China using its cheap labor and lax environmental regulation to support American innovation. But now, under its “Made in China 2025” plan, China wants to control intellectual property, and Trump sees this as theft.

Even before the Chinese court news hit the markets, Micron shares were falling in price, but this one sent other chip stocks down, as well as Micron. Even mighty Nvidia (NASDAQ:NVDA) was down over 2%.

What Comes Next

China has been moving toward controlling technology markets for years, trying to become more like the U.S., an exporter of intellectual property, as well as a manufacturer.

The American view is that China is trying to do this on the cheap, through theft, and the Micron case is a perfect example. Micron rejected a $23 billion takeover effort from China a few years ago, and the company is now worth $60 billion.

Micron said in its own lawsuit against UMC, filed in December, that UMC hired away some of its Taiwan engineers with raises and bonuses, then had them pocket 900 files with specifications on its latest designs on their way out the door. This was supposedly done in the name of Fujian Jinhua Integrated Circuit, a state-backed chipmaker in China that is building its own $5.7 billion memory chip factory.

The Bottom Line

The U.S. and China need each other, but the Trump Administration is going about a nasty divorce that could lead to America being the loser.

China’s manufacturing capacity gives it the whip hand in any trade dispute. It would take hundreds of billions of dollars to replicate its manufacturing elsewhere, and that capital isn’t coming because of China’s cost advantages.

The betting is that cooler heads will prevail, and that Micron is a buy. But betting on sanity from the present government isn’t always a winning bet.

Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he owned shares in F.

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