China's Micron ban revives US trade tensions, fuels Asian chip rally
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[May 22, 2023] By
Joyce Lee and Brenda Goh
SEOUL/SHANGHAI (Reuters) -A move by Beijing to bar U.S. firm Micron
Technology Inc from selling memory chips to key domestic industries has
ramped up tensions in an ongoing trade spat with Washington and lifted
shares of firms that could benefit from the move.
China's cyberspace regulator said late on Sunday that Micron, the
biggest U.S. memory chipmaker, had failed its network security review
and that it would block operators of key infrastructure from buying from
the company.
It did not provide details on what risks it had found or what products
from the company would be affected.
Analysts said they saw limited direct impact on Micron as most of its
key customers in China are consumer electronics players, but warned the
move could prompt some companies to rid their supply chains of Micron
products due to political risks.
Shares in Micron tumbled 5.5% in premarket trading on Monday, while
other U.S. chipmakers with big exposure to China such as Qualcomm, Intel
and Broadcom were down nearly 1%.
Beijing's decision was opposed by Washington but also helped stocks of
Micron's rivals in China and South Korea, which are seen benefiting as
mainland firms seek memory products from other sources.
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"We firmly oppose restrictions that have no basis in fact," a
spokesperson from the U.S. Commerce Department said in a statement on
Sunday.
"This action, along with recent raids and targeting of other American
firms, is inconsistent with (China's) assertions that it is opening its
markets and committed to a transparent regulatory framework."
Tensions between Washington and Beijing have grown in recent months
following raids and visits by Chinese authorities to U.S. corporate due
diligence firm Mintz Group and management consultancy Bain.
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Micron said on Sunday it had received the regulator's review and looked
"forward to continuing to engage in discussions with Chinese
authorities".
The company is the first U.S. chipmaker to be targeted by Beijing after
a series of export controls by Washington on certain American components
and chipmaking tools to block them being used to advance China's
military capabilities.
China launched the review in late March amid a dispute over chip
technology and worsening relations between Washington and Beijing.
The move also comes shortly after Group of Seven nations agreed to
"de-risk, not decouple" economic engagement with China and as U.S.
President Joe Biden called for an "open hotline" between Washington and
Beijing.
The U.S. Commerce Department said it would speak directly with
authorities in Beijing to clarify their actions.
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![](../images/052223PIX/busine42.jpg)
Memory chip parts of U.S. memory chip
maker MicronTechnology are pictured at their booth at an industrial
fair in Frankfurt, Germany, July 14, 2015. REUTERS/Kai Pfaffenbach
![](http://archives.lincolndailynews.com/2023/May/22/images/ads/current/graue_lda_preowned_Buickencore_011323.jpg)
"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.
While the Chinese statement and state media said the Micron decision
needed to be seen as an individual case in the context of national
security concerns, not geopolitics, prominent Chinese commentator Hu
Xijin struck a different note.
"Washington itself encourages US companies to do things that
endanger China’s national security, so it suspects that Chinese
companies are doing the same," the former editor-in-chief of
nationalist state tabloid Global Times tweeted. "The whole world
should be wary of the US."
LIMITED IMPACT
China's announcement on its Micron review helped boost shares in
some local chipmaking-related firms on Monday, as state media
reported that domestic players could benefit from the move.
Shares in companies including Gigadevice Semiconductors, Ingenic
Semiconductor and Shenzhen Kaifa technology opened up between 3% and
8% before paring gains.
Micron's major rivals also saw their shares gain, with South Korea's
Samsung Electronics and SK Hynix up 0.9% and 2.1% respectively. They
trimmed gains later and closed up 0.2% and 0.9%, as analysts expect
limited impact on Micron.
Both Samsung and SK Hynix had no comment.
"Since Micron's DRAM and NAND products are much less in servers, we
believe most of its revenue in China is not generated from telcos
and the government. Therefore, the ultimate impact on Micron will be
quite limited," Jefferies said in a note.
Micron generated $5 billion of revenue from China including $1.7
billion from Hong Kong last year, about 16% of its total revenue.
Bernstein said a 2% hit to sales was the most realistic estimate
given Micron's exposure to the enterprise and cloud server segment
is relatively small.
Beijing has broadly defined industries it considers "critical" as
ones such as public communication and transport but has not
specified just what type of business these apply to.
China, the world's biggest semiconductor buyer, has gradually
reduced its reliance on foreign-made chips in a multi-year campaign
to boost its self-sufficiency.
(Reporting by Joyce Lee in Seoul, Costas Pitas in Los Angeles, Jason
Xue and Brenda Goh in Shanghai, Josh Ye in Hong Kong, Liz Lee in
Beijing, Aditya Soni in Bengaluru; Editing by Miyoung Kim, Sam
Holmes and Jan Harvey)
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