“No one should understand this decision by CAC as anything but retaliation for the US’ export controls on semiconductors,” said Holden Triplett, founder of Trenchcoat Advisers and a former FBI counterintelligence official in Beijing. “No foreign business operating in China should be deceived by this subterfuge. These are political actions pure and simple, and any business could be the next one to be made an example of.”
The move brings fresh uncertainty to the other US chipmakers that sell to China, the world’s biggest market for semiconductors. Companies such as Qualcomm, Broadcom and Intel deliver billions of chips to the country, which puts the components inside electronic products that are shipped all over the world.
Review being evaluated
While China welcomed products and services provided by companies of all countries as long as they complied with its laws and regulations, the investigation into Micron products was a “necessary measure” to safeguard national security, the cyber agency said in its statement on Sunday. It did not detail what the security risks were or identify specific Micron products that were now barred.
Micron, which has previously said it stood by the security of its products and commitments to customers, said in a statement on Sunday it was evaluating the conclusion of the review. The company was assessing its next steps, adding that it looked forward “to continuing to engage in discussions with Chinese authorities”.
In the meantime, the Idaho-based chipmaker has been tightening ties with Japan. It is poised to get about ¥200 billion ($2.2 billion) in financial incentives from the Japanese government to help it make next-generation memory chips in the country, Bloomberg has reported. Prime Minister Fumio Kishida met last week with a delegation of chip executives, including Micron chief executive Sanjay Mehrotra.
Memory chips were already a flashpoint for US-China tensions. In December, Washington blacklisted Yangtze Memory Technologies, a state-backed flash memory maker in Wuhan, effectively capping China’s capabilities in advanced 3D Nand-style chips. YMTC had been in talks to supply the components to Apple for the iPhone before that development.
Micron is the last remaining maker of computer memory based in the US, having survived brutal industry downturns that forced larger rivals such as Intel and Texas Instruments to bow out.
Most of Micron’s products are made to industry standards, meaning the chips can be easily swapped out with those of rival manufacturers, such as Samsung Electronics and SK Hynix. Those two South Korean chipmakers have plants in China.
Hit to customer relationships
Memory chips are not usually considered a cybersecurity risk because they do not require any specific software or run code. They are mostly basic grids of transistors used for storing data and, as such, have not typically been a vector of attack for hackers.
Micron derived nearly 11 per cent of its revenue from mainland China in its last fiscal year. While that is relatively low compared with other major tech firms, much of the world’s electronics production goes through Chinese factories in some way, and China’s move could have the potential to harm Micron’s customer relationships.
After a previous tussle, Taiwan’s United Microelectronics settled a suit in 2021 brought by Micron accusing it of stealing and leaking its intellectual property to a Chinese partner. The case concerned an allegedly illegal transfer of Micron’s memory designs in a chip manufacturing deal between UMC and Jinjiang-based Fujian Jinhua Integrated Circuit.
Beijing’s latest announcement has already drawn condemnation from some legislators.
Raja Krishnamoorthi, a Democrat and ranking member of the House Select Committee, said the ruling Communist Party made it harder each day to do business in the People’s Republic of China.
“Every business across America should be asking: Is it better right now to invest in the PRC,” he said, “or should it be investing more in the US and our allies and partners?”
China’s actions “are making this an increasingly easier choice for American businesses, and we in Congress need to make it even easier for them to come back home and reinvest in America”, Mr Krishnamoorthi said.
Bloomberg
