China bans chipmaker Micron, says it failed network security review

The Chinese government has banned American chipmaker Micron from selling memory chips to key domestic industries, saying the company failed a security review. In a statement on Sunday (May 21), China's cyberspace regulator said that Micron failed its network security review and that it would block operators of key infrastructure projects from buying from the company.

It is the first American chipmaker to be targeted by China following a series of export controls by the US on certain American components and chipmaking tools to block them from being used to advance China's military capabilities, according to a report by the news agency Reuters

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The cybersecurity administration (CAC) said that Micron's products "have relatively serious potential network security issues, which pose a major security risk to China's critical information infrastructure supply chain and affect China's national security."

Micron ban boosts shares in local firms

The ban comes after Chinese authorities launched a review in March of products sold in the country by Micron. The move also helped boost shares in some local chipmaking-related firms on Monday. Reuters reported that shares in companies including Gigadevice Semiconductors, Ingenic Semiconductor, and Shenzhen Kaifa Technology opened up by between 3% and 8%.

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Micron's major rivals also saw their shares gain, with South Korea's Samsung Electronics and SK Hynix rising 0.7% and 2%, respectively, versus a 0.9% rise in the broader market.

According to Bernstein analysts, as China's domestic memory suppliers are not competitive in technologies and capacity, the country would need to resort to Samsung, SK Hynix, Kioxia, Western Digital or other foreign suppliers as the alternative to Micron.

US opposes ban; Micron says would engage in discussions with China

The US Commerce Department opposed the ban on Micron. In a statement, a spokesperson from the Commerce Department said, "We firmly oppose restrictions that have no basis in fact. This action, along with recent raids and targeting of other American firms, is inconsistent with (China's) assertions that it is opening its markets and committed to a transparent regulatory framework."

The department would now speak directly with Chinese authorities in Beijing to clarify their actions.

The ban marks the latest escalation between the US and China, with Washington looking to cut off Beijing's access to cutting-edge semiconductors.

Micron, meanwhile, said it received the CAC's review and looked forward to continuing to engage in discussions with Chinese authorities. "We are evaluating the conclusion and assessing our next steps," the company said in a statement.

(With inputs from agencies)

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