China does not screen Micron’s products in a security investigation and blocks some purchases

BEIJING (Reuters) – China’s cyberspace regulator said on Sunday that products from US chipmaker Micron Technology Co (MU.O) had failed its network security assessment and would deter major infrastructure managers from buying from the company.

The decision, announced amid a chip technology dispute between Washington and Beijing, could span industries ranging from telecoms to transportation and finance, according to China’s broad definition of critical information infrastructure.

“The review found that Micron’s products have serious network security risks, which pose significant security risks to China’s critical information infrastructure supply chain and affect China’s national security,” the China Cyberspace Administration (CAC) said in a statement.

Micron said it has received notice from the CAC that it has completed its review of the company’s products sold in China and looks forward to “continuing to participate in discussions with Chinese authorities.”

The CAC has not provided details of the risks it found nor which Micron products would be affected.

Jefferies analysts expected a limited impact on Micron, as China’s top customers are consumer electronics companies such as smartphone and computer manufacturers, not infrastructure providers.

“Because Micron’s DRAM and NAND products are much lower in servers, we believe that most of its revenue in China is not generated by telcos and the government. Therefore, the ultimate impact on Micron will be very limited,” they said in a note. .

Micron makes DRAM and NAND flash memory chips and competes with South Korean Samsung Electronics Co Ltd (005930.KS) and SK Hynix Inc (000660.KS) and Japan’s Kioxia, a division of Toshiba Corp (6502.T).

Shares in SK Hynix and Samsung were up 1% and 0.5% respectively on Monday, while the broader market (.KS11) was up 0.6%. Shares in Toshiba have been flat.

Christopher Miller, a professor at Tufts University and author of “Chip Wars: The Battle for the World’s Most Important Technology,” said the timing of the CAC’s announcement was important as it occurred during the G7 leaders’ summit. in Japan. “

Micron last week announced a plan to invest up to 500 billion yen ($3.70 billion) in UV technology in Japan, becoming the first chipmaker to bring advanced chip manufacturing technology to the country and now seeking to revitalize the chip industry. blow.

US President Joe Biden said on Sunday that the G7 countries have agreed to “reduce and diversify our relationship with China.” The leaders also agreed to launch an initiative to counter economic “coercion”.

“This issue could be an early test of the G7’s efforts in this area,” Miller said.

China announced its assessment of Micron products in late March. The company said at the time that it was cooperating and that business in China was operating normally.

In the spat between the US and China governments, Washington has imposed a series of export controls on chipmaking technology to China and taken measures to prevent Micron rival Yangtze Memory Technologies from buying certain US components.

US officials, including members of a US congressional selection committee on competition with China, did not immediately respond to requests for comment.

Micron gets about 10% of its sales from China, but it’s not clear if the decision will affect the company’s sales to non-Chinese customers in the country.

According to Jefferies, it drew $5.2 billion in revenue from China and Hong Kong last year, about 16% of its total revenue.

According to analysts, most of Micron’s products flowing to China are purchased by non-Chinese companies for use in products manufactured there.

In September 2021, China imposed rules to protect critical information infrastructure, requiring operators to comply with stricter requirements in areas such as data security.

Beijing has broadly defined sectors that it considers “critical”, such as public communications and transportation, but has not specified exactly what type of company or company size this will apply to.

(Reporting by Kevin Yau; Editing by Elaine Hardcastle)

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