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Tuesday, December 5, 2023

China bans major chip maker Micron from key infrastructure projects

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National security concerns have been raised by China regarding Micron Technology products.

According to the country’s cyberspace regulator, America’s largest memory chip maker poses “serious network security risks”.

The firm’s products will be banned from key infrastructure projects in the world’s second-biggest economy.

As Beijing and Washington’s tensions rise, this is China’s first major move against a US chip maker.

China and the US are at odds over technology vital to economies around the globe, with this announcement the latest development.

Beijing’s chip-making industry has been subjected to a series of Washington sanctions and billions of dollars have been invested in the United States semiconductor industry in response to the long-running dispute.

A statement from the Cyberspace Administration of China (CAC) said: “The review found that Micron’s products pose serious network security risks, which pose a significant security risk to China’s critical information infrastructure supply chain, affecting China’s national security.”

It did not specify which Micron products contained the risks it said it had found.

Micron has been notified by the CAC after it reviewed Micron products available in China, according to a spokesperson for the company. Micron has been investigating the matter and is taking steps to ensure its products meet the CAC’s safety standards. The company has apologized to consumers and promised to take all necessary measures to protect their interests. It also said it would further strengthen its internal controls to ensure its products meet the highest quality standards.

Our discussions with Chinese authorities will continue as we evaluate the conclusion,” they said.

China’s actions caused “distortions in the memory chip market”, according to the US government.

US Commerce Department spokesperson: “We strongly oppose restrictions with no basis in fact.”

In light of recent raids and targeting of American firms, this action is inconsistent with China’s assertions that it is opening its markets and committed to transparency.”

During pre-market trading in the US, Micron’s share price fell by 5.3%.

“The ultimate impact of the ban on Micron will be quite limited,” according to Jefferies analysts since it doesn’t rely on the Chinese government or telecommunications for most of its sales in China.

Smartphones and personal computers are the largest customers for Micron’s chips in China.

CJ Muse, an analyst at Evercore ISI, said Micron customers in China might switch to its South Korean rivals Samsung and SK Hynix.

South Korea, meanwhile, has been urged not to fill any China shortfalls by the US,” he said.

As the world’s largest semiconductor manufacturer, Micron reported revenues of $30.7 billion (£24.6 billion) in 2022, of which $3.3 billion came from mainland China.

A manufacturing facility is also located in the country.

A G7 leaders’ meeting in Japan issued a joint statement criticizing China, including its use of “economic coercion”.

Joe Biden, US president, said on Sunday that G7 nations wanted to “de-risk and diversify” their relationship with China.

He added, “That means diversifying our supply chains.”.

A group of business leaders, including Micron CEO Sanjay Mehrotra, attended the summit in Hiroshima.

The company announced last week that it would invest around 500 billion yen ($3.6 billion; £2.9 billion) in Japan.

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