China bans Micron chips in key infrastructure over “national security” risks

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China has banned some sales of Micron products after launching a probe at the US memory chip giant for cybersecurity risks in early April.

The decision is widely seen as part of a tit-for-tat 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 US aggregate China’s state-backed memory chip maker Yangtze Memory Technologies Corporation to the entity list, barring US companies from supplying it without approval. The United States has also Nvidia restricted from exporting H100its state-of-the-art GPU for AI generative trainingto China.

The Cyberspace Administration of China on Sunday said domestic companies that provide “key information infrastructure” to stop buying Micron. Micron’s products “have serious cybersecurity issues and pose a great risk to the country’s key 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 have reached out to Micron for comment.

“Key Information Infrastructure” such as China define it 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 did cite China Cybersecurity Law Going into effect in 2016, a far-reaching regulation aimed at strengthening government oversight of the internet, with rules like 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 as a result of significant investment in the semiconductor industry by the Chinese government and various state or affiliated entities, such as Yangtze Memory Technologies Co., Ltd. (“YMTC”) and ChangXin. Memory Technologies, Inc. (“CXMT”), whose goal is to further China’s established national policy objectives. In addition, the Chinese government may restrict us from participating in the Chinese market or may 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 US also urged South Korea not to fill China’s market gap in memory chips if Micron is banned. according to the Financial Times.

In response to the ban, the US Department of Commerce saying “He will engage directly with Chinese authorities to detail the US position and will engage with key allies and partners to address what he called memory chip market distortions caused by China’s actions.”

In recent years, China has been working to bolster its technological self-sufficiency in key industries such as advanced semiconductors, which have historically relied on foreign suppliers. For example, there has been a push replace foreign hardware and software with domestic alternatives in state-owned enterprises.