China is making a retaliatory move that will see the products of US memory chip company, Micron Technology, banned in the country.
Beijing on Sunday declared the products of Micron Technology a “national security” risk, escalating its tech war with Washington. The Cyberspace Administration of China (CAC) said during the announcement that Micron poses “serious network security risks”.
The development marks China’s major move against a US chip company in retaliation to the recent decision by Washington mandating US chip companies to cut supplies to China.
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“The review found that Micron’s products have serious network security risks, which pose significant security risks to China’s critical information infrastructure supply chain, affecting China’s national security,” the CAC said in a statement.
The CAC’s announcement means the firm’s products will be banned from key infrastructure projects in China. The agency did not give details of the risks it said it had found or in which Micron products it had found them.
The tech and economic supremacy contest going on between the US and China have put some companies in jeopardy. For instance, Huawei, a Chinese telecom vendor, was leading the global 5G roll out before Washington doled out a series of sanctions against the giant – forcing it off track.
Last year, President Joe Biden signed the CHIPS and Science Act of 2022 into law. The Act which empowers the US semiconductor industry with $52.7 billion in funding for five years was designed to help the US to maintain its lead over China in chip production.
China has also made arrangements to boost local chip production in the wake of US restrictions.
A spokesperson for Micron confirmed to the BBC that the company had “received the CAC’s notice following its review of Micron products sold in China”.
“We are evaluating the conclusion and assessing our next steps. We look forward to continuing to engage in discussions with Chinese authorities,” the spokesperson added.
Micron’s share price dropped by 5.3% in pre-market trading in the US, following the news.
In response to the development, the BBC quoted the US government as saying that it would work with allies to address “distortions of the memory chip market caused by China’s actions”.
“We firmly oppose restrictions that have no basis in fact,” a US Commerce Department spokesperson said.
“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.”
The tension between the US and China intensified in the wake of global chip shortage induced by covid-19 pandemic.
The decision by the CAC is likely going to impact Micron, who has seen China as a key market – where it generated around 10% of its full-year sales. Out of the $30.7bn total revenue the company generated in 2022, $3.3bn came from mainland China. Micron has manufacturing facilities in the country.
However, analysts at investment banking group Jefferies quoted by the BBC said “the ultimate impact [of the ban] on Micron will be quite limited” because it does not rely on the Chinese government or telecommunication for most of the sales it generates in the country.