China bans Micron chips due to "severe cybersecurity risks"

In an uptick in the technology conflict between the two greatest economies in the world, China on Sunday barred the sale of Micron Technology goods, claiming the US memory chip maker constituted a "national security risk." The US Commerce Department rejected this accusation as having "no basis in fact."

In a move perceived as retaliation for Washington's tighter limits on chip exports to China, the Chinese government declared on Sunday that chips created by Micron presented a national security risk and would be prohibited from sale to China's major information infrastructure operators.

In a statement, the US Commerce Department said that it "firmly opposes restrictions that have no basis in fact" and criticized recent "raids and targeting of other American firms" as being at odds with Beijing's pledge to an open market and transparent regulatory structure.

Using the acronym for the People's Republic of China, the department stated, "We will engage directly with PRC authorities to detail our position and clarify their action. 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."

Beijing's decision was known to Micron, which said it was evaluating its next moves in an email on Monday. "We look forward to continuing to engage in discussions with Chinese authorities," the business said.

In late March, the Cyber Security Review Office of the Cyberspace Administration of China (CAC) revealed that it was looking into Micron goods, but it didn't say which products or how it was looking into them.

It said that the American memory chip industry behemoth had failed a cybersecurity assessment, which barred the sale of its equipment to China's critical information infrastructure operators (CIIOs), which comprise a wide spectrum of businesses from telecom providers to banks and water utilities. China's CIIO rules are extensive, including a wide range of industries that are deemed essential to both national security and the welfare of the populace, including public interest industries like communications and information services, energy, transport, water resources, and finance.

The decision was made 50 days after the CAC opened an investigation of Micron's goods on the grounds of national security in late March. In accordance with the most recent statement, it was discovered that Micron's goods pose "severe cybersecurity risks, posing significant security risks to China’s critical information infrastructure supply chain and to our national security."

The decision will effectively outlaw the sale of Micron products in China, wiping a market that represented 11% of the company's projected US$30.8 billion in total revenue in 2022 and included chip products like DRAM, NAND flash memory, and solid state storage.

According to a check of Bloomberg data, Lenovo, Xiaomi, Inspur Electronics Information, ZTE, Coolpad, China Electronics Corp., and Oppo were Micron's top Chinese clients in order of their contributions to the company's income.

Beijing-based cybersecurity lawyer: "The text [of the CAC statement] did not show if the ruling has recourse."

An inquiry for comment made on Sunday after business hours did not immediately receive a response from Micron.

Some observers of the industry believed Beijing's action against Micron, the first involving a significant US semiconductor firm, was reprisal against the US chip maker after it pressed Washington to take steps to limit China's access to cutting-edge chip technologies.

The Biden administration restricted the transfer of sophisticated US semiconductor technologies to China in October of last year, including chip manufacturing machinery and design software, citing the possible danger of US core technology falling into the hands of the Chinese military.

According to analysts, Beijing's cybersecurity investigation into Micron, the fourth-largest semiconductor company in the world, could upend China's memory chip supply chain and benefit South Korean memory chip manufacturers Samsung Electronics and SK Hynix as well as the embattled Yangtze Memory Technologies Corp.

To "embody the company's unwavering commitment to the local technology ecosystem, business operations, and various stakeholders in China", the company said in a statement at the time, Betty Wu Mingxia was hired earlier this month as the new general manager of Micron China.

In a statement, Wu, who joined Micron in 2018 and will stay on as vice president of the company's DRAM packaging and test operations in the northwest city of Xian, stated that Micron China "plays a critical role in enhancing the company's global footprint and DRAM technology leadership." By fLEXI tEAM