Chinese authorities in an official statement released mentioned that Micron’s products have critical cybersecurity issues that pose an important security risk to national security and China’s critical information infrastructure supply chain.
China bans US chip maker Micron Technology’s chips in certain sectors on Sunday. The banning of Micron from selling to Chinese companies working on significant infrastructure could be seen as a major escalation of an ongoing battle between two of the world’s biggest economies over access to important technology. The decision to ban came a day after the Group of Seven (G7) nations agreed to “de-risk, nor decouple” from China.
Over the past year, China had banned US chipmakers like DRAM and NAND by levying a series of export controls to block certain chip manufacturing technologies and chips that are being used to enhance China’s military resources. Chinese authorities in an official statement released mentioned that Micron’s products have critical cybersecurity issues that pose an important security risk to national security and China’s critical information infrastructure supply chain.
The intention of this network security review of Micron’s products is to prevent product network security issues from endangering the security of the country’s key information infrastructure, which is a mandatory measure to maintain national security. China firmly encourages high-level opening up to the outside world. As long as it abides by Chinese laws and regulations, companies from all countries and various platforms are welcome to enter the Chinese market, read the statement.
Micron announced its plans to invest up to $3.7 billion, days before the ban, in extreme ultraviolet technology. This made them the first chipmaker to bring sophisticated chipmaking technology to Japan. The United States is urging its allies in order to work together to neutralize China’s chips and sophisticated technology enhancement. Tokyo, on the other hand, is trying to strengthen its chip sector. Micron generated around 11% of revenues from chip sales in China and stated that it expects to continue talks with the Chinese authorities.
“It takes huge amounts of pre-emptive investment to be a chipmaker, and it takes five years, 10 years to break even on those investments, so putting predictability into jeopardy makes investments difficult,” said Changhan Lee, vice chair of the Korea Semiconductor Industry Association.
A Good Deal for South Korea
The move by China to ban US chips is a hard blow to Micron but South Korea might benefit from it after all. Micron’s key rivals like South Korea’s Samsung Electronics and SK Hynix in the near term. Seoul had already indicated that it will not intervene to stop SK Hynix and Samsung from filling in the market gap as the tech battle between the superpowers escalated. The White House had recently asked South Korea to persuade its chipmakers to hold back from boosting sales to China if a ban on Micron was being imposed.
But South Korea had taken a stand and stated that they were unwilling to paddle into the disagreements between the countries and would comply with the companies. Jang Young-jin, South Korea’s vice minister of trade and commerce stated that both Samsung and SK Hynix could make a judgment on the issue with global operations regardless of “what the US tells us to do or not to do”.
Both companies, however, declined to give further statements regarding their decisions. Last year, the US brought in measures that control chip export measures on China, which affected Huawei and several other companies. Samsung and SK Hynix are also working to increase their business in the United States and required one-year contracts from the country to be extended. The contracts must be renewed later this year which could also give Washington potential leverage that they could use against the companies.
“There are not many Chinese companies that get chips only from Micron. Even if we increase our supply to Chinese customers, how can they examine all these deals individually and judge that the increased volume comes from us, replacing Micron’s?” said a senior industry executive in Seoul, reports FT. South Korea’s stand makes it difficult to unify US allies in responding to China’s economic force, which was an important topic of discussion at the G7 Hiroshima summit that ended on Sunday.
Analyst weighs their opinions about U.S-China relations and states that it might get worse. Lee Min-hee an analyst at BNK Investment and Securities states that the US-China domination war is here to stay, and the ban will move slowly to other raw materials.