China said products from US chipmaker Micron Technology posed “serious network security risks” as it barred key infrastructure operators from purchasing them, in its first major action against a US semiconductor group.
The Cyberspace Administration of China announced Sunday that the company, the largest US maker of memory chips, “poses significant security risks to China’s critical information infrastructure supply chain.” As a result, it ordered “important national infrastructure operators” to stop purchasing products from Idaho-based Micron.
The move follows a seven-week investigation into Micron by the CAC, an investigation that was widely seen as retaliation for US efforts to limit China’s access to the critical technology. Last October, Washington introduced expanded export controls on chips, and the Netherlands and Japan have followed suit.
The US Department of Commerce said it strongly opposes the action, which it said has “no basis in fact”.
“This action, along with recent raids and targeting of other US companies, runs counter to the People’s Republic of China’s assurances that it is opening its markets and abiding by a transparent regulatory framework,” the Commerce Department said.
She said she would contact the Chinese authorities for clarifications. “We will also engage with key allies and partners to ensure we coordinate closely to address distortions in the memory chip market caused by China’s actions,” she added.
Analysts said Micron presented a clear initial target for Beijing as its technology would be more easily replaced by competing chips from South Korean rivals Samsung and SK Hynix. Last month, the White House asked South Korea to urge chipmakers not to fill any market gap in China if sales of Micron products were restricted.
China is an important market for Micron. Mainland China and Hong Kong brought in 25 percent of its $30.8 billion in revenue last year, according to a person familiar with the matter.
“This could be a really bad thing for Micron,” said Paul Triolo, an expert on China technology at consultancy Albright Stonebridge. “It depends on how broad China defines critical information infrastructure, but this could include the financial sector, transportation, energy, data centers.” “.
He added that data centers were a particularly important customer for Micron’s memory chips.
Beijing’s edict comes a day after G7 leaders issued a scathing rebuke of China during the annual meeting of world leaders in Hiroshima, denouncing its human rights record, “non-market” economic policies, and increasing military assertiveness in the East and South China Seas.
Micron CEO Sanjay Mehrotra was part of a delegation of business leaders who attended the G7 summit. And he had dinner with US Ambassador to Japan Rahm Emanuel and Citi President Jane Fraser on Saturday night in the Japanese port city.
“We have received the CAC’s notification that it has completed its review of Micron products sold in China,” Micron said in a statement. “We are assessing the conclusion and evaluating our next steps. We look forward to continuing to engage in discussions with the Chinese authorities.”
China informed Micron of its decision at a meeting in Beijing on Sunday, according to a person familiar with the matter. The person said Micron had not received any communication from the CAC after answering questions from the regulator in March until it was called to a meeting this weekend.
“This is new for China,” Triolo said of the Micron ban, adding that Beijing did not take the US measures “lying down.”
“China welcomes global companies and various platform products into the Chinese market as long as they follow Chinese laws and regulations,” CAC said in its statement. The regulator’s statement did not provide any information about the “security risks” posed by Micron’s products.
Analysts have warned that the restrictions imposed by Beijing could prompt Chinese companies that have not provided “critical information infrastructure” to seek to remove Micron from their supply chains.
“The blast radius could be much larger,” Triolo said.
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