Tensions rise as China launches Micron security probe

For the first time, Chinese authorities have struck back at US chip restrictions, with the launch of a national security probe into memory-maker Micron Technology.

The Cyberspace Administration of China (CAC), the top Internet regulator, announced Friday it would carry out a security review of products sold by Micron in China to "ensure the cybersecurity of the information infrastructure supply chain" and prevent network security risks. Regardless of the outcome, the investigation sends a message of the government's intent.

Micron's stock fell 4.4% on the news. In China, it sparked a rally of semiconductor stocks on the view that it would open up space for domestic chip players. The E Fund CSI Chip Industry ETF added more than $14 billion in market value on Monday, Bloomberg reported (paywall applies).

Figure 1: The number of chip-related sanctions has been growing.
(Source: Unsplash)

Advanced Micro-Fabrication Equipment, which produces chipmaking gear, rose 13%. CPU firm Ingenic Semiconductor spiked 12.7%. SMIC, China's biggest chip fab, advanced nearly 7%. The CNI chip index, which tracks China's top semiconductor stocks, rose 5.2%, the South China Morning Post reported.

Micron has warned in recent filings of the risk of being partially or fully excluded from the China market, or of losing access to China's rare earth supplies.

Japan's new export controls

China is a relatively small part of its business, though. Headquartered in Boise, Idaho, Micron has R&D and chip fabs in four countries including the US but its China operation is assembly and testing only. It derived 11% of its $30.8 billion income last year from mainland Chinese customers.

The other development in the ever-advancing chip war is on the diplomatic front, where top Chinese officials have called on Japan to drop its new chip technology export rules. Japan unveiled its new semiconductor export control regime on Friday, mandating licenses for 23 types of semiconductor manufacturing equipment.

It parallels the US rules that have limited Chinese access to key technologies for the past four years as well as those introduced last month by the Netherlands, home to ASML, manufacturer of the world's most advanced chipmaking equipment.

China's Foreign Minister Qin Gang told his visiting Japanese counterpart Yoshimasa Hayashi on the weekend that the restrictions would "galvanize China's determination to seek self-reliance and prosperity on its own."

China last month warned the Netherlands that any attempts to restrict exports would bring "consequences."

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— Robert Clark, Contributing Editor, special to Light Reading