China’s Micron: China has made a choice to stop U.S. memory chipmaker Micron Technology Inc from selling its products to important industries within the country. This decision has increased trade conflicts with Washington and has caused the stocks of Asian competitors to rise. It is anticipated that these competitors will gain advantages from this action.
What happened?
China’s cyberspace regulator said on Sunday that Micron, a major American memory chipmaker, did not pass its security check for network systems. As a result, the regulator will prevent operators of important infrastructure from purchasing products from Micron. The specific risks found and the affected products were not mentioned.
Micron is the largest memory chipmaker in the United States and a top supplier of DRAM and NAND flash chips worldwide. These chips are used in various devices like smartphones, computers, servers, and more.
This ban comes during a long-lasting trade dispute between the United States and China. Both countries have imposed tariffs on each other’s goods worth billions of dollars and have restricted access to certain technologies and markets.
The United States has accused China of intellectual property theft and unfair subsidies for its domestic industries. On the other hand, China has accused the United States of interfering in its internal matters and attempting to restrain its growth.
How did Micron react?
Micron stated that it had received the regulator’s evaluation and is eager to keep discussing with Chinese authorities.
During a conference on Monday, the company’s chief financial officer, Mark Murphy, mentioned that they were uncertain about the specific concerns raised by China. He estimated that the impact on their total revenue could range from low single digits to high single digits in percentage.
Murphy also mentioned that approximately one-fourth of Micron’s total revenue comes from direct and indirect sales to companies based in China.
As a result, Micron’s shares dropped by about 4% during premarket trading on Monday, although they recovered some of the losses later.
How did the U.S. government respond?
The U.S. Commerce Department strongly opposes restrictions that have no factual basis. They believe that the recent actions taken by China, including raids on American firms and targeting them, contradict China’s claims of opening its markets and having transparent regulations.
In a statement on Sunday, a spokesperson said, “These actions, along with the recent visits by Chinese authorities to Mintz Group and Bain, are not in line with China’s claims of opening its markets and having transparent regulations.” The visits to Mintz Group and Bain were part of investigations into their clients conducted by Chinese authorities.
How did Micron’s rivals benefit?
Micron’s main competitors, Samsung Electronics and SK Hynix from South Korea, also experienced increases in their stock prices. Samsung Electronics rose by 0.9% and SK Hynix by 2.1%. However, they later saw smaller gains and ended the day with a 0.2% increase for Samsung Electronics and a 0.9% increase for SK Hynix. Investors were considering the potential impact of the ban on the global supply and demand of computer chips.
Analysts mentioned that Samsung and SK Hynix might benefit from receiving more orders from Chinese customers. These customers might need to replace Micron products in their supply chains due to political risks. Nevertheless, analysts also warned that the ban could negatively affect the overall demand for computer chips in China, which is the largest market for semiconductors worldwide. Moreover, they cautioned that this ban could lead to further retaliatory actions from the United States, potentially causing disruptions in the global chip industry.
What are the implications for the global chip market?
The ban on Micron could have a big impact on the global chip market. There is already a shortage of chips, prices are going up, and there are uncertainties due to politics.
In the first quarter of 2023, Micron had 23% of the global market share for DRAM chips and 11% of the global market share for NAND flash chips, according to TrendForce, a research firm.
TrendForce estimates that the ban could cause Micron’s shipments of DRAM chips to go down by 5% to 10% and its shipments of NAND flash chips to go down by 10% to 15% in the second quarter.
This could make it even harder to find chips and could make the prices go up even more, especially for DRAM chips used in servers and data centers. These chips are in high demand because of cloud computing and artificial intelligence.
On the other hand, the ban could cause an oversupply of NAND flash chips for some products like smartphones and laptops. Micron might send its chips to other places. Which could lead to lower prices and less profit for NAND flash chip makers. Especially those that rely on China, like Micron.
The ban could also affect Micron and other American chipmakers in the long term. China is an important market for innovation and growth. The ban could make it harder for American chipmakers to compete with Chinese chipmakers.
China investing in chip industry
China has been investing a lot in its own chip industry to rely less on other countries. The ban on Micron could help China’s chipmakers. As Yangtze Memory Technologies and ChangXin Memory Technologies, which are making their own DRAM and NAND flash chips.
But analysts say that China still has a lot of challenges to overcome. If it wants to catch up with top chipmakers like Samsung, SK Hynix. Micron in terms of technology, quality, and scale.
The ban could also make Asian chipmakers work together more to deal with the trade problems between the US and China and to protect their market positions.
For example, Samsung and Japan’s Kioxia Corp have announced a partnership to develop better NAND flash technology together. SK Hynix has also said that it’s open to working with other chipmakers to adapt to the changing market.
China’s Ban on Micron
China’s ban on Micron is a big step up in the trade war between the U.S. and China. This trade war has already affected many parts of the world’s economy.
The ban could have a big impact on the global chip market. Right now, there is an imbalance between how many chips are available and how many are needed. This ban could make prices go up and create more uncertainty because of politics.
This ban could also change how the chip industry competes with each other. Some companies might find new opportunities, while others might have a hard time.
The ban could also have a long-term effect on how chips are made and used. It could change the plans and money that both countries and their chip companies put into making new things.
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