Micron Technology, the largest US memory chipmaker, anticipates a revenue setback in the low-single to high-single-digit percentage range after China’s recent ban on the sale of its memory chips to key domestic industries. The move is the latest development in the ongoing trade dispute between the United States and China.
China’s cyberspace regulator announced on Sunday that Micron had failed its network security review, leading to a ban on operators of critical infrastructure from purchasing the company’s products. The regulator did not disclose specific risks or which products would be affected.
While analysts suggest that Micron’s direct impact may be limited as its key customers in China are primarily consumer electronics players, there are concerns that some companies may choose to remove Micron products from their supply chains due to political risks.
Mark Murphy, Micron’s Chief Financial Officer, stated that it is unclear what concerns Beijing has, but direct and indirect sales to China-based companies account for approximately a quarter of the chipmaker’s revenue. He projected a low single-digit to high single-digit percentage impact on the company’s total revenue as a result of the ban.
Micron’s shares initially declined but partially recovered after Murphy’s remarks, closing down 3.4 percent. The ban by Beijing received opposition from Washington and benefited stocks of Micron’s competitors in China and South Korea, as mainland companies sought alternative memory product sources.
The decision by Beijing to target Micron comes in the wake of export controls imposed by the United States on certain American components and chipmaking tools, aimed at preventing their use in advancing China’s military capabilities.
The review was launched by China in March amid a chip technology dispute and deteriorating US-China relations. It also coincides with the recent agreement among the Group of Seven nations to engage with China economically while managing risks.
The US Commerce Department plans to engage directly with Beijing authorities to seek clarification on their actions and coordinate efforts with key allies and partners to address distortions in the memory chip market caused by China’s actions.
While China’s official statement claims that the Micron ban is based on national security concerns rather than geopolitics, prominent Chinese commentator Hu Xijin offered a different perspective, suggesting that the world should be wary of the US.
The ban has sparked uncertainty among US companies operating in China, raising concerns about potential targeting and compliance in a business environment influenced by national security concerns.
Other US chipmakers with significant exposure to China, including Qualcomm, Intel, and Broadcom, experienced a decline of approximately 1 percent in their stock prices.
Meanwhile, Chinese chipmaking-related firms, such as Gigadevice Semiconductors, Ingenic Semiconductor, and Shenzhen Kaifa Technology, saw their shares rise before stabilizing. Micron’s major rivals, Samsung Electronics and SK Hynix from South Korea, also experienced stock gains, albeit limited.
As China seeks to reduce its reliance on foreign-made chips, the impact on Micron is expected to be relatively small, particularly considering its lower presence in the enterprise and cloud server segment.
Overall, the ban on Micron’s memory chip sales in China further escalates the trade tensions between the United States and China, leading to uncertainties in the semiconductor market and supply chains.
