Probe into Micron could help Chinese suppliers, South Korean rivals
Beijing’s cybersecurity probe into Micron Technology, the world’s fourth-largest semiconductor company, could shake up the memory chip supply chain in China, but whether its bigger local rivals will benefit is still unclear, according to analysts and industry experts.
Micron’s products are being investigated on the grounds of “safeguarding supply-chain security of critical information infrastructure, cyber and national security”, the Cyber Security Review Office under the Cyberspace Administration of China (CAC), said in a statement last Friday.
The probe, the first involving a US chip maker, was widely seen as a reprisal against tighter US sanctions on China’s semiconductor sector and more widely its hi-tech sector. Earlier this week, many articles on Chinese social media accused Micron of lobbying against Chinese chip firms like domestic rival Yangtze Memory Technologies Corp (YMTC) and Fujian Jinhua.
“Micron’s product shipments, engineering, manufacturing, sales and other functions are operating as normal,” the Boise, Idaho-based company said in a statement on Monday, adding that it was “in communication and cooperating fully with the CAC”.
The China market contributed about 11 per cent of Micron’s total 2022 revenue of US$30.8 billion, with products such as DRAM, NAND flash memory and SSD products.
Analysts believe the CAC investigation could accelerate the pace of localisation of products among downstream customers in the supply chain. Memory chips made by Shenzhen Longsys and BIWIN Storage Technology Co are expected to “benefit first”, analysts at Citic Securities wrote in a research note published earlier this week.
However, Micron’s technology prowess in both DRAM and 3D NAND could make it harder to find domestic alternatives for advanced memory chips because its Chinese rivals like ChangXin Memory Technologies and YMTC have been under US sanctions since October 2022, curbing their ability to produce leading-edge products.
The Citic analysts also believe that South Korean DRAM giants Samsung Electronics and SK Hynix could end up benefiting at Micron’s expense. “To reduce supply chain risks, domestic companies may transfer their end products/wafer purchase orders to non-US manufacturers such as Samsung and Hynix” they said.
Some analysts believe the probe could also affect Micron’s customer base in China, which procures memory chips directly or indirectly from the US company for use in products such as servers, which are considered critical information infrastructure (CII) in China.
CII regulations in China are expansive, covering numerous sectors considered crucial to national security, people’s livelihoods, as well as public interest sectors such as communications and information services, energy, transport, water resources and finance.
“The investigation focuses on supply chain security, therefore it could involve both Micron’s products in China and partners along its supply chain,” said Sun Pengcheng, a partner and attorney at law firm Dentons. “If problems caused by use of Micron’s products were detected during the investigation, it could lead to a replacement requested by the regulator.”
If Micron’s products fail to pass the cybersecurity review, Chinese operators of CII will not be able to purchase Micron products, and they could even be fined for previous purchases, said Hong Yanqing, a cybersecurity expert close to the regulator.
Micron’s top seven customers in China, ranked by contributions to its revenue, were Lenovo, Xiaomi, Inspur Electronics Information, ZTE, Coolpad, China Electronics Corp, and Oppo, according to a search of Bloomberg data.
Lenovo, Xiaomi, Oppo and Coolpad – which are in the smartphones and personal computer markets – rely on large quantities of memory chips for their products.
Xiaomi declined to comment when reached by the Post on Tuesday. Oppo and Lenovo did not reply to a request for comment.
Shenzhen-based ZTE, which has huge exposure to CII from its telecoms and enterprise businesses, declined to comment on Tuesday.
Inspur, a major supplier of computers to data centres, was put on a US trade blacklist last month over alleged activities contrary to US national security and foreign policy interests. China Electronics Corp, which was added to the same blacklist in August 2020, is a major company in China’s electronics industry.
At the end of last year, Micron shrank its China presence by shutting down its DRAM design research centre in Shanghai, although it still maintains sales offices in Beijing, Shanghai, and Shenzhen, as well as a semiconductor packaging and testing factory in Xian. South China Morning Post
You must be logged in to post a comment Login