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China bans Micron chips in key infrastructure due to ‘national security’ risks

China has banned some sales of Micron products after launching an investigation into the US memory chip giant for cybersecurity risks in early April.

The decision is widely seen as part of the tit-for-tac in the ongoing economic competition between the United States and China, which has begun to upend a deeply intertwined global technology supply chain.

Last year, the United States added Chinese state-backed memory chipmaker Yangtze Memory Technologies Corporation to the Entity List, barring American companies from supplying it without approval. The United States has also banned Nvidia from exporting the H100, its cutting-edge GPU for generative AI training, to China.

China’s Cyberspace Administration on Sunday asked domestic companies that provide “key information infrastructure” to stop buying from Micron. Micron’s products “have serious cybersecurity issues and pose a significant risk to the nation’s major information supply chains, raising cybersecurity concerns.”

Micron, which opened its first factory in China 16 years ago, specializes in the production of computer memory and data storage such as dynamic random-access memory, known as DRAM, and flash memory. China is its third-largest market, accounting for 10.7% of its annual revenue in 2022. We reached out to Micron for comment.

“Key information infrastructure”, as defined by China, includes telecommunications, energy, transport, finance, defense and any other area that concerns national interests.

The authority did not specify how Micron poses a cybersecurity risk, but it cited China’s cybersecurity law that came into force in 2016, a wide-ranging regulation aimed at tightening government oversight of the internet, with rules such as real name verification and storing local user data on local servers.

Micron anticipated its challenges in China in its 2022 annual report.

In particular, we face the threat of increased competition due to significant investments in the semiconductor industry by the Chinese government and various state-owned or affiliated entities, such as Yangtze Memory Technologies Co., Ltd. (“YMTC”) and ChangXin Memory Technologies, Inc. (“CXMT”), which aims to advance China’s stated national policy goals. In addition, the Chinese government may prevent us from participating in the Chinese market or prevent us from competing effectively with Chinese companies.

The ban could benefit Micron’s competitors in China, South Korean giants Samsung Electronics and SK Hynix. But the United States has also urged South Korea not to fill the void in China’s memory chip market if Micron is banned, according to the Financial Times.

In response to the ban, the U.S. Department of Commerce said he “will engage directly with Chinese officials to detail the U.S. position and engage with key allies and partners to address what he said are memory chip market distortions caused by the actions of the China”.

In recent years, China has worked to strengthen its technological autonomy in key sectors like advanced semiconductors, which have historically depended on foreign suppliers. For example, there has been a push to replace foreign hardware and software with domestic alternatives in state-owned enterprises.

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