US chip maker Micron Technology has become the first Western firm sanctioned by China after G7 countries vowed to de-risk from the world’s manufacturing hub.
China’s key national infrastructure operators are now forbidden to purchase products from Micron because the company poses network security risk, said the Cybersecurity Review Office, a unit of the Cyberspace Administration of China.
Mao Ning, a spokesperson of the Chinese Foreign Ministry, said Monday that the investigation of Micron’s products is necessary as it is aimed at preventing China’s telecom infrastructure from facing cybersecurity risks.
The US Commerce Department said China’s accusations against Micron have no basis in fact. It said it will engage directly with China to resolve restrictions on Micron chip deliveries.
“We also will engage with key allies and partners to ensure we are closely coordinated to address distortions of the memory chip market caused by China’s actions,” the department said. “This action, along with recent raids and targeting of other American firms, is inconsistent with the People’s Republic of China (PRC)’s assertions that it is opening its markets and is committed to a transparent regulatory framework.”
The US had asked South Korea to urge its chipmakers not to fill any market gap in China if Micron products were banned in the Chinese markets, according to a Financial Times report published April 24.
Jang Young-jin, South Korea’s vice minister of trade, said Monday that Samsung and SK Hynix will make a judgment on whether they should do as the US requested.
Micron said it is evaluating the conclusion made by the Cyberspace Administration and assessing its next steps.
Re-invest or leave
An article titled “Micron has done all the bad things! Now it is finally sanctioned” was widely circulated on the Internet in China on Monday, explaining the logic behind Beijing’s curbs.
“In January 2022, when the US government pushed forward its plan to de-couple from China, Micron said it would stop cooperating with China, sack its staff and close its Shanghai-based DRAM design center,” the writer says. “It also provided skilled worker visas to more than 40 senior technicians and migrated its businesses from China to India and the US.”
The writer continues, “In the China-US chip war, Micron has always been actively playing the role of a vanguard of the US. The company makes money in the Chinese market while replying to the United States’ power to suppress Chinese chip firms. It has done all the bad things!”
He concludes, “Why do we only sanction Micron but not Samsung and SK Hynix? They all make money in China but Micron does not increase its investment in the country while Samsung and SK Hynix keep re-investing.”
Media reports said last month that US President Joe Biden was set to sign an executive order that would restrict US companies and private equity and venture capital funds from investing in China’s microchips, artificial intelligence, quantum computing, biotechnology and clean energy projects and firms.
Biden had planned to announce these investment curbs before the G7 Summit, which was held in Hiroshima between last Friday and Sunday, but he has not unveiled them so far.
De-risking from China
G7 leaders said in a joint statement on Saturday that they have a common interest in preventing a narrow set of technological advances from being used by some countries to enhance their military and intelligence capabilities to undermine international peace and security.
“A growing China that plays by international rules would be of global interest. We are not decoupling or turning inward,” they said. “At the same time, we recognize that economic resilience requires de-risking and diversifying.”
“We will continue to ensure that the clearly defined, narrow set of sensitive technologies that are crucial for national security or could threaten international peace and security are appropriately controlled, without unduly impacting broader trade in technology,” said G7 leaders. “We will enhance resilient supply chains through partnerships around the world, especially for critical goods such as critical minerals, semiconductors and batteries.”
This statement also set off the Chinese punditocracy. “G7 has become an important tool for the US to contain and suppress China,” a Hebei-based writer says in an article. Washington “is now promoting deglobalization by using subsidies and coercion to attract semiconductor firms to set up factories in the US.”
He adds, “Now the US gets what it wants as China is saying ‘no’ to US memory chip makers. Micron tried to expand in China and benefit from the US sanctions against Chinese chip firms. But it has shot itself in the foot.”
Last year, Micron’s revenue from China amounted to $3.3 billion, about 11% of the company’s total revenue. The figure more than tripled from $5.3 billion in 2016 to $17.4 billion in 2018 but it started to decline after Micron had legal disputes with Chinese firms.
As early as March 31, the Cyberspace Admnistration had said it was looking into Micron’s products sold in China but it was not until Sunday evening that it announced the Micron ban.
An unnamed analyst was quoted by the National Business Daily as having said on Monday that Chinese memory chip makers, including GigaDevice, Yangtze Memory Technologies Corp (YMTC), ChangXin Memory Technologies (CXMT), Dongxin Co. Ltd and Ingenue Semiconductor, will benefit as they can grab Micron’s market share in China.
He said that during the transition, China will not face a memory chip shortage as there is enough inventory in the markets.
YMTC, the main Chinese competitor to Micron, is developing its own supply chain by using Chinese-only equipment, the South China Morning Post reported on April 23. The company has placed orders with domestic tool suppliers, including Beijing-based Naura Technology, after receiving new funding from its state-backed investors.
However, Liu Pei-chen, a researcher at the Taiwan Institute of Economic Research, warned that China may face a memory chip shortage if suppliers in South Korea, Japan and Taiwan limit their exports to the country upon the US’s request.
Liu said China still relies heavily on the import of foreign memory chips as YMTC and CXMT have limited production capacities. She said the US may have a say in whether suppliers in South Korea, Japan and Taiwan should take up Micron’s market share in China.
Read: Micron probe by China seen as chip war retaliation
Follow Jeff Pao on Twitter at @jeffpao3