China Prohibits Major Chipmaker Micron From Participating In Crucial Infrastructure Projects, Jeopardising China-US Ties.

The Chinese government has instructed operators of the nation’s critical infrastructure to discontinue equipment purchases from the US chipmaker Micron Technology. According to a statement on the Cyberspace Administration of China’s website, its goods pose “serious network security risks” to China’s information infrastructure and threaten national security. It implies that the company’s equipment will be prohibited from being used in essential infrastructure projects in the world’s second-largest economy.

The Chinese government announced on the weekend that operators of critical information infrastructure in the dragon country should cease buying Micron goods. 

The Cyberspace Administration of China did not specify the vulnerabilities it claimed to have discovered or which Micron products they were discovered in.

The stance of the US side.

According to a US Department of Commerce representative, the move has “no basis.” Micron’s revenues from China and Hong Kong account for around 15% of total revenue, and the company’s stock plummeted 3.7% in early trade in New York. However, the US administration stated that it will collaborate with partners to solve “distortions in the memory chip market caused by China’s actions.”

Micron’s chief financial officer, Mark Murphy, stated that they are presently predicting an effect in the low single-digit percentage of total company sales at the low end and a high single-digit percentage of entire company revenue at the high end.

According to the Chinese cyberspace agency’s statement on the weekend, China firmly promotes high-level opening up to the outside world and welcomes firms and various platform products and services from myriad countries to enter the dragon market as long as they comply with Chinese laws and regulations. As China’s wide definition of key information infrastructure, the decision could harm Micron goods in industries ranging from telecommunications to transportation and banking. According to a Micron official, the financial cost would be in the single digits as a proportion of the company’s revenues.

The chipmaker, located in Boise, Idaho, manufactures DRAM chips, flash memory, and solid-state hard drives under the Crucial, Ballistix Gaming, and SpecTek brands.

Opinions from Experts.

According to investment banking group Jefferies, it produced $5.2 billion (£4.2 billion) in revenue from China last year, including $1.7 billion from Hong Kong, accounting for around 16% of overall revenue. They said that “the overall impact of the ban on Micron will be quite limited” since the company does not rely on the Chinese government or telecommunications for the majority of its sales in the nation.

However, CJ Muse, an analyst at Evercore ISI, believes there is a possibility that Micron clients in China would switch to competitors Samsung and SK Hynix, both of which are domiciled in South Korea. “The US, in the meantime, is asking South Korea not to fill any China shortfalls,” he said.

Compromising China-US relations.

The Micron statement came on the same day that Joe Biden said on the closing day of the G7 conference in Japan that ties with China will improve “very soon.” The US president stated on the weekend that a squabble over a “silly balloon” has strained relations, referring to the February shooting down of a Chinese surveillance balloon off the US east coast.

On April 4, China initiated a formal probe of Micron under its information security regulations, only hours after Japan joined Washington in putting security limits on Chinese access to processor chip technology.

The action is the latest indication of technological tensions between the US and China, following a US ban on using the social video app TikTok on government phones and limitations on the shipment of some advanced computer chips to China. In the long-running spat, Washington has imposed a slew of sanctions on Beijing’s chip-making business and invested billions of dollars to develop America’s semiconductor sector.

Conclusion.

Beijing is putting billions of dollars into chip research in order to lessen the demand for foreign technology. Low-end chips used in automobiles and household appliances can be supplied by Chinese semiconductor makers but not those used in smartphones, artificial intelligence, and other sophisticated applications.

Proofread & Published By Naveenika Chauhan