China and US step up war on chips

China and US step up war on chips

Micron's ban is seen as retaliation by China against US chip restrictions

Micron’s ban is seen as retaliation by China against US chip restrictions

On May 21, the Cyberspace Administration of China (CAC) announced that it would prohibit companies involved in major infrastructure projects in the country from purchasing Micron products. Consequently, the company’s products such as DRAM, NAND memory and solid state drives will be banned from being sold in China.

Beijing “playing big”?

According to the New York Times, in the past, when it wanted to exclude foreign technology companies from its domestic supply chain, Beijing often chose to work indirectly or even covertly, such as conducting raids on offices, rarely saying openly that it was no longer well- coming. .

But with the case of Micron it seems to have been different. This is a major escalation in the ongoing battle between the world’s two largest economies over access to key technologies. The US previously banned installation of the TikTok app on government devices and imposed export restrictions on some advanced computer chips to China.

According to China’s explanation, Micron failed the cybersecurity audit. The CAC alleges that its products contain “serious cybersecurity risks”, endangering China’s information infrastructure and affecting national security.

Meanwhile, the US Department of Commerce firmly opposes China’s “unsubstantiated” restrictive measures. This action, along with recent (Chinese) research from other US companies, are inconsistent with Beijing’s assertion that it is opening up its market and is committed to complying with the legal transparency framework.”

Micron is one of the largest memory chip manufacturers in the United States. Mainland China contributes about 11% of the company’s total revenue of $30.8 billion in 2022. Micron has received notice from the Chinese regulator and is calculating next steps.

Beijing’s ban comes a day after leaders of the G7 countries sharply criticized China during a summit in the Japanese city of Hiroshima on human rights, “non-market” economic policies, Beijing’s military activities in the East China Sea, as well as as in the South China Sea. China Sea…

Source: Bloomberg - Data: BAO ANH - Charts: T.DAT

Source: Bloomberg – Data: BAO ANH – Charts: T.DAT

Retaliation and personal empowerment

Since October 2022, the United States has imposed extensive restrictions on the export of advanced chips and chip-making equipment to China to prevent Beijing from accessing critical technology and military use.

In March of this year, Japan and the Netherlands – two US allies – also announced restrictive measures on the sale of chip manufacturing technology to foreign countries, including China. China has sharply criticized the restrictions, calling them a “discriminatory restriction” aimed at Beijing.

China’s ban comes less than two months after Beijing announced an investigation into Micron’s imports. The ban appears to be a political move in response to a sweeping ban imposed by Washington last year, according to the Wall Street Journal.

Furthermore, with the new ban, Beijing has created a vacuum that domestic chip makers can step into. “Hurting” an American company like Micron would be useful to promote domestic technology, as chips play a key role in China’s efforts to become a tech superpower.

“It may not be possible or necessary to completely replace all products with local products, but for these core products, we need to develop our own capabilities and avoid becoming overly dependent. This applies not only to the chip industry, but also to other fields,” explained Xiang Li Gang, director of a Chinese technology company that advises the government.

By attacking Micron, China hits one of the few areas – memory chips – where it has a place in competition with the US. However, economist Teng Tai of the Wanbo New Economic Research Institute in Beijing noted that China still relies on the US for advanced chips.

The expert pointed out on Weibo: “The ultimate goal of targeting Micron is to urge some US companies to exercise self-restraint, so that we can further promote business and technology cooperation while avoiding an isolating approach.”

Do Korean chip makers benefit?

According to Chinese news site Caixin, South Korean memory chip makers such as Samsung Electronics and SK Hynix could benefit from a ban on Micron in China.

But last month, the White House asked Seoul to urge domestic chip makers not to enter market loopholes in China if Micron’s products are restricted.

What do you think?

Written by Esme Dominguez

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