China Imposes Ban on Micron’s Products in Key Infrastructure, Citing Security Risks

China Imposes Ban on Micron's Products in Key Infrastructure, Citing Security Risks

China has imposed a ban on Micron’s products in key infrastructure, citing security risks. The move marks the country’s first major action against an American semiconductor group.

The Cyberspace Administration of China (CAC) announced on Sunday that Micron, the largest US memory chip maker, posed significant security risks to China’s critical information infrastructure supply chain. Consequently, it ordered critical national infrastructure operators to cease purchasing Micron’s products.

This decision comes after a seven-week investigation by the CAC, which is widely seen as retaliation for US efforts to restrict China’s access to critical technology. Last October, the US implemented extensive chip export controls, with the Netherlands and Japan subsequently following suit.

The US Department of Commerce strongly opposes this action, asserting that it lacks any factual basis. It emphasized that such actions, along with recent raids and targeting of other American firms, contradict China’s claims of market openness and a transparent regulatory framework. The Department of Commerce intends to engage with Chinese authorities to seek clarification and collaborate with key allies and partners to address the distortions caused by China’s actions in the memory chip market.

Analysts suggest that Micron became an obvious target for Beijing, as its technology can be readily replaced by chips from South Korean competitors such as Samsung and SK Hynix. Last month, the White House requested that South Korea’s chipmakers refrain from filling any market gap in China if the sale of Micron products were restricted.

China is a significant market for Micron, with mainland China and Hong Kong contributing 25% of its $30.8 billion revenue last year. Paul Triolo, a China tech expert at consultancy Albright Stonebridge, warned that the ban could have severe consequences for Micron, potentially affecting critical sectors such as finance, transportation, energy, and data centers, where Micron’s memory chips are in high demand.

The Chinese ban on Micron comes shortly after G7 leaders strongly criticized China’s human rights record, non-market economic policies, and increasing military assertiveness in the East and South China Seas during their annual meeting in Hiroshima.

Micron CEO Sanjay Mehrotra was part of a delegation of business leaders attending the G7 summit. He had dinner with US Ambassador to Japan Rahm Emanuel and Citi Chief Jane Fraser in the coastal town of Hiroshima.

Micron issued a statement acknowledging the CAC’s conclusion of the review and expressed its intention to evaluate the decision and determine the next steps. The company looks forward to continuing discussions with Chinese authorities.

China informed Micron of its decision during a meeting in Beijing on Sunday, according to a knowledgeable source. Micron had not received any communication from the CAC after responding to regulator’s inquiries in March until being summoned for the meeting over the weekend.

Experts note that this ban on Micron is unprecedented for China and suggests that Beijing is not passively accepting the actions taken by the US.

The CAC stated that China welcomes global companies and their products as long as they adhere to Chinese laws and regulations. However, the regulator did not provide specific information about the security risks associated with Micron’s products.

Analysts caution that Beijing’s restrictions may prompt Chinese companies not involved in critical information infrastructure to consider removing Micron from their supply chains.

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