Experts: China's Latest Strike in US-China Chip War May Backfire

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Following the end of the G7 Summit in Hiroshima Summit, Beijing's Cyberspace Administration of China, or CAC, issued a statement requesting that "operators of critical information infrastructures in China should stop purchasing products made by Micron Technology" due to "national security risks."

The U.S. Department of Commerce dismissed the ban issued Sunday as "unsubstantiated," while Micron, the biggest U.S. memory chipmaker, said in a written statement, "We have received CAC’s notice. … We are evaluating the conclusion and assessing our next steps. We look forward to continuing to engage in discussions with Chinese authorities."

VOA Mandarin’s email requesting Micron’s comments on whether it will appeal China’s decision or consult with the U.S. government went unanswered as of the press time.

The news of China's decision to block Micron after nearly two months of investigation came as a shock to the foreign business community in China. The company is the first U.S. chipmaker to be targeted by Beijing after Washington in October placed export controls on some American-made components and tools for chipmaking to prevent them from being used to expand China's military capabilities.

Michael Hart, president of the Beijing-based American Chamber of Commerce in China (AmCham China), said in a written response to VOA Mandarin on Monday that U.S. businesses are worried about being the next target of China's security review.

Hart said in his emailed reply, "Our members are asking us two things: will they be targeted because they are American, and how can they ensure they remain compliant in a business environment that appears to be increasingly influenced by national security concerns?"

Representatives of AmCham China expressed concerns about the Micron case in late April. When asked about the case at a video news conference on April 26, Lester Ross, chairman of the Chamber's policy committee, said that China’s "taking action against particular foreign individuals or companies…It is a major concern because China lacks transparency in many dimensions in law and policies. In the absence of data and real evidence showing that Micron’s products are understood as an example is of particular vulnerability to China."

He said "it is a concern on the part of other companies, in other industries as well that they could suddenly be singled out without any clear evidence being presented on the basis of unclear suspicions [and] that their ability to do business…will be jeopardized and their investment will go away."

Hart said at the same news conference that China was traditionally known for its "predictable investment environment, whether that be predictable rules and places to invest." But recent Chamber polls show that U.S. businesses are less comfortable with the predictability. The uncertainty comes from both last year’s COVID controls and China’s increasing security probes.

European businesses also worry

European companies in China are also worried, especially about the possible impact on the semiconductor supply chain.

Jörg Wuttke, president of the European Union Chamber of Commerce in China, said in a Monday email response to VOA Mandarin that the chamber issued a report in January 2021 outlining the impact that decoupling will have on company operations. In this regard, he wrote, "geopolitical and COVID 19-releated factors have shone a spotlight on the fragility of global supply chains, including their susceptibility to chip shortages."

As a result, Wuttke said, the Micron case "could potentially add to these [supply chain] pressures."

He said, "European companies operating in China need to closely monitor the situation, evaluate the risk that the U.S.-China technology competition poses to their supply chains, and make contingency plans accordingly."

Founded in 1978 and headquartered in Idaho, Micron is the leading memory chip company in the U.S. and the third-largest memory chipmaker in the world, behind Samsung and SK Hynix in South Korea. Micron's main products are DRAM (dynamic random access memory) and NAND Flash (flash memory). According to the company's 2022 financial report, DRAM accounts for about 73% of total revenue and flash memory accounts for 25%, for 98% of total revenue.

Micron's products are used in cell phones, personal computers and servers. Their components can be found in the automotive, industrial and consumer markets as well. China, the world's biggest semiconductor buyer, has gradually reduced its reliance on foreign-made chips as part of a years-long push to develop self-sufficiency.

Micron has offices in Shanghai, Xi'an and Shenzhen, China, and a test and assembly facility in Xi'an. Because of the U.S.-China trade war, China is no longer Micron's largest market. China revenue has reportedly plummeted from 57% of its global revenue in 2018, or about $17 billion, to 10.8% last year, or about $3.26 billion, according to its 2022 financial report and other reports.

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