China imposes chip sales restrictions against Micron

The Cyberspace Administration of China found that Micron "posed significant security risks to China's critical information infrastructure supply chain."
22 May 2023

China strikes back at the US by imposing the first chip sales restrictions against Micron Source: Shutterstock

On April 1, 2023, China announced a cybersecurity review on the biggest memory chipmaker in the US, Micron Technology. The move was China’s most significant retaliation against Washington since the US launched its campaign to sever China’s access to high-end chips

The Cyberspace Administration of China (CAC) reviewed Micron’s products sold in the country to “safeguard the security of the information infrastructure supply chain.” The review is similar to allegations made by the US against Chinese telecom equipment vendor Huawei Technologies Co.

Micron became the first foreign semiconductor company to be put under a cybersecurity review by China, and it came months after the American tech firm closed its DRAM design operations in Shanghai at the end of last year. The CAC investigated Micron’s products in China to “prevent cyberspace security risks due to problematic products.” 

In response, Micron said it was “in communication with the CAC and cooperating fully.” After all, the company has little to no choice but to be “committed to conducting all business with uncompromising integrity” and stand by its products’ security. 

The CAC’s move was enough to re-heat tensions between Beijing and Washington, following numerous US-led initiatives to tighten exports of advanced chips and semiconductor manufacturing equipment to China. When the Biden administration imposed sweeping restrictions on China and its semiconductor industry last October, Beijing did little to retaliate except initiate a dispute against the US at the World Trade Organization. 

On May 21, China declared that Micron Technology’s products posed “serious network security risks” and banned operators of critical infrastructure from buying them. The move follows the seven-week investigation, and the results are now widely seen as retaliation for US efforts to snuff out Chinese competition in the semiconductor and telecommunications space.

Why did China target Micron?

Before the cybersecurity review of Micron was announced, Beijing had not taken any significant steps to hit back at the US for implementing stringent restrictions on advanced chip exports to China on the grounds of national security. The Chinese government has also described Micron as “playing a negative role” in the country’s technology industry, according to Wang Lifu, an analyst at Shanghai-based semiconductor research firm ICwise in the South China Morning Post.

Micron is said to be among several US semiconductor firms that increased their lobbying spending since the Biden administration enacted the CHIPS and Science Act in August last year, offering US$52 billion in federal funding for chip production in the US. Months before that legislation became law, Micron announced the closing of its Shanghai chip design center at the end of 2022. It offered 150 Chinese engineers relocation packages to the US or India.

In a statement on its official social media site on Sunday, the CAC said the problems posed by Micron could “seriously endanger the supply chain of China’s critical information infrastructure” and threaten national security. However, experts view the move by CAC as a double-edged sword as it also deals with the risk of further sanctions by Washington that could eventually cut off important Chinese companies from Micron’s memory chips. 

It’s clear that Micron presented an obvious first target for Beijing as its tech would be more easily replaced with competitors’ chips from South Korean rivals Samsung and SK Hynix. Micron itself has previously warned of the risks of being excluded from the Chinese market. 

In its 2021 financial report, Micron said Beijing’s support for domestic DRAM makers could restrict its growth. Unlike semiconductor equipment from ASML or graphics chips from Nvidia, Micron’s products can be easily replaced in China by local suppliers such as Yangtze Memory Technologies Co and Korean firms Samsung and SK Hynix.

To put into context the role the country as a market plays for Micron, Mainland China and Hong Kong alone generated 25% of its US$30.8 billion in revenue last year, The Financial Times noted. We can expect South Korea to take notice of the CAC’s cybersecurity review of Micron, according to Wang. 

He told SCMP that for the Korean memory chip makers Samsung Electronics and SK Hynix, which still have manufacturing facilities in China, the investigation provided a cautionary sign not to follow US actions, he said.

“We have received the CAC’s notice of conclusion of its review of Micron products sold in China,” Micron said. “We are evaluating the conclusion and assessing our next steps. We look forward to continuing to engage in discussions with Chinese authorities.”