US chipmaker Micron fails security review in China

Micron Technology Inc., a US memory chipmaker, has failed China's network security review, according to the Cyberspace Administration of China (CAC). As a result, operators of crucial infrastructure in China will be prohibited from purchasing Micron's products. The decision comes amid an ongoing dispute between Washington and Beijing over chip technology and could impact sectors such as telecommunications, transportation, and finance, which fall under China's definition of critical information infrastructure.

The CAC stated that Micron's products pose significant network security risks to China's critical information infrastructure supply chain, thereby affecting national security. However, specific details about the identified risks and the affected Micron products have not been disclosed by the CAC.

Micron has acknowledged the CAC's notice and expressed its willingness to engage in further discussions with Chinese authorities. According to a report by Reuters, analysts from Jefferies believe that the impact on Micron will be limited since its major customers in China primarily consist of consumer electronics firms focused on smartphones and computers, rather than infrastructure suppliers. This suggests a relatively minor overall impact for the company. As a prominent manufacturer of DRAM and NAND flash memory chips, Micron competes with companies like Samsung Electronics, SK Hynix, and Kioxia. 

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The timing of the CAC's announcement coincides with a summit of the Group of Seven (G7) leaders in Japan, potentially adding significance to the situation. Christopher Miller, a professor at Tufts University, highlighted the potential implications, stating that this case could serve as an early test of the G7's efforts on these matters.

China initiated the review of Micron's products in late March, and at that time, Micron expressed cooperation and confirmed that its business operations in China remained unaffected. The ongoing trade dispute between the United States and China has led to export controls imposed by Washington on chipmaking technology to China and measures to prevent Micron's rival, Yangtze Memory Technologies, from purchasing specific American components.

Approximately 10 per cent of Micron's revenue is generated from China. However, it remains unclear whether the restrictions will impact the company's sales to non-Chinese customers within the country. Last year, Micron reported $5.2 billion in revenue from China and Hong Kong, representing around 16 per cent of its total revenue.

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