China bans Micron’s products from key infrastructure due to security risks

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China said US chipmaker Micron Technology’s products pose “serious risks to network security” as it banned key infrastructure operators from buying them, in its first major move against a US semiconductor group.

The Cyberspace Administration of China announced on Sunday that the company, which is the largest US maker of memory chips, “posed significant security risks to China’s critical information infrastructure supply chain.” As a result, it ordered “operators of critical national infrastructure” to stop purchasing products from Idaho-based Micron.

The move follows a seven-week investigation of Micron by the CAC, an investigation that has been widely seen as retaliation for US efforts to curb China’s access to key technology. Last October, Washington introduced expansionary controls on wood chip exports, and the Netherlands and Japan have since followed suit.

Analysts said Micron presented an obvious first target for Beijing as its technology would more easily be replaced with chips from rival South Korean rivals Samsung and SK Hynix. The White House last month asked South Korea to urge its chipmakers not to fill any market gaps in China if the sale of Micron products were restricted.

China is an important market for Micron. Land China and Hong Kong generated 25% of its $30.8 billion in revenue last year, according to a person familiar with the matter.

Paul Triolo, a Chinese technology expert at consultancy Albright Stonebridge, said: “This could be really bad for Micron. It depends on how broad China’s definition of critical information infrastructure is, but this could include the financial sector, transportation, energy and data centers.”

He added that data centers are a particularly important customer for Micron memory chips.

Beijing’s edict comes a day after G7 leaders issued a sharp rebuke to China at the annual meeting of global leaders in Hiroshima, denouncing its human rights record, “non-market” economic policies and growing military assertiveness in the East and South China Seas.

Micron CEO Sanjay Mehrotra was part of a delegation of business leaders who attended the G7 summit. He had dinner with US Ambassador to Japan Rahm Emanuel and Citi chief Jane Fraser Saturday night in the Japanese coastal city.

“We have received notice from the CAC that it has concluded its review of Micron products sold in China,” Micron said in a statement. “We are evaluating the conclusion and evaluating our next steps. We look forward to continuing to engage in discussions with Chinese authorities.”

China informed Micron of its decision at a meeting in Beijing on Sunday, according to a person familiar with the matter.

“This is new for China,” Triolo said of Micron’s ban. “That it is not taking some of the actions of the United States [to curb China’s access to technology] to lay down.”

In its statement, the CAC said that “China welcomes global companies and various platform products to the Chinese market as long as they follow Chinese laws and regulations.” The regulator’s statement did not provide any information about the “security risks” posed by Micron’s products.

Analysts have warned that Beijing’s restrictions could even prompt Chinese companies that do not provide “critical information infrastructure” to seek to eliminate Micron from their supply chains.

“The radius of the blast could be much larger,” Triolo said.