The conflict between the USA and China reaches a new level: Beijing bans chips from the US company Micron – apparently in response to the export bans on high-quality chips to China, which countries such as the Netherlands and Japan have joined. China itself recently shut down about 10,000 chip companies because they were unable to compete.
China bans Micron chips in revenge against the US
China launched a fresh attack in the escalating semiconductor war with the US, announcing that Micron Technology Inc.’s products failed a cybersecurity review. Bloomberg reports.
In a statement on Sunday, Beijing warned operators of key infrastructure not to buy the products. Cybersecurity risks are “relatively serious,” the Cyberspace Administration of China (CAC) statement said. They created “significant security risks to our critical information infrastructure supply chain” and would have national security implications.
Micron is down as much as 6.8% in premarket trading, marking its biggest intraday decline since November. The stock is up 36% this year to close at $68.17 on Friday.
About six weeks ago, the CAC announced the security audit of Micron, the last major memory chip manufacturer in the USA. The technology sector has become a key battleground between the two largest economies. Washington has blacklisted Chinese tech firms, banned shipments of advanced processors and banned US citizens from providing certain assistance to China’s chip industry.
The US Commerce Department said Beijing’s decision was “unfounded” and that Washington would continue to try to limit industrial disruption with its allies.
US chipmakers are heavily dependent on China — Micron is less dependent on the country than many of its peers
“No one should take this CAC decision as anything other than retaliation for US semiconductor export controls,” said Holden Triplett, a former FBI spy investigator who now runs his own consulting firm. “No foreign company doing business in China should be fooled by these pretenses. These are political actions, pure and simple, and any company could be the next to be followed.”
US President Joe Biden expressed optimism about relations with China on Sunday at the conclusion of the G7 summit in Japan. He said he expected relations between the two countries to “thaw out very soon”.
Micron said Sunday that it would evaluate the findings of the investigation and “continue to discuss” with the Chinese authorities.
Jefferies analysts conclude that the CAC’s decision will have little impact on Micron because it focuses on “critical information infrastructure,” meaning operations like data centers and cloud computing services. Most of Micron’s memory chips sold in China, on the other hand, are used in consumer electronics, such as smartphones and notebooks.
“We believe this ban is narrow in scope,” they write. “As such, the ultimate impact on Micron will be quite limited.”
China criticizes US policies
China has questioned the “sincerity” of the Biden administration, which is pushing to resume high-level diplomatic talks with Beijing while slapping technical sanctions on its key economic rival.
“On the one hand, the United States is asking for communication, on the other hand, it is suppressing China by all possible means,” Chinese Foreign Ministry spokeswoman Mao Ning said at a regular briefing in Beijing on Monday.
“It imposes sanctions on Chinese officials, institutions and companies – what is the sincerity and meaning of such communication,” she added. “The US should immediately lift the sanctions, remove the hurdles and create favorable conditions for dialogue.”
US President Joe Biden said on Sunday he expects relations with China to improve “very soon” and called an alleged spy balloon that sparked a diplomatic row earlier in the year “stupid”. The US President added that his administration could lift sanctions on Chinese Defense Secretary Li Shangfu, removing an obstacle to a possible meeting with US Defense Secretary Lloyd Austin at an event in Singapore next month.
The Biden administration has sought to improve diplomatic ties with China by bombarding Beijing with requests for talks, Bloomberg previously reported. At the same time, it has blocked China from acquiring US technology to modernize the military, citing national security concerns.
There are indications that this strategy is working to a point. China’s Commerce Minister Wang Wentao will meet with US Commerce Secretary Gina Raimondo and US Trade Representative Katherine Tai this week.
But the two-pronged policy has also created a disconnect between the US’ desire for more outreach and its campaign to contain the world’s second largest economy.
Biden has called on other countries to adopt the US strategy. Leaders of the Group of Seven issued a communiqué over the weekend announcing a new initiative to counter China’s “economic coercion” while pledging to promote “constructive and stable” relations with Beijing.