China to Investigate Micron

China’s internet watchdog is launching a cybersecurity investigation into the local sales of US memory chip giant Micron Technology to “safeguard national security”, signalling an increase in tech tensions between the world’s two largest economies.

The Cyber Security Review Office under the Cyberspace Administration of China (CAC) said in a brief statement on Friday that the probe, which is the first ever into a foreign company by the office, has been launched to “safeguard key information infrastructure supply chain security” and to “prevent cyberspace security risks due to problematic products”.

It is also the first time that the Chinese government has targeted a US semiconductor company, as Washington tightens export controls on advanced chip products and equipment to China on national security concerns.

The CAC, which has gained enormous power in recent years to defend the country’s internet and information infrastructure, flashed its teeth with an investigation of Chinese ride-hailing giant Didi Chuxing in July 2021, levying a fine of 8 billion yuan (US$1.16 billion) after a lengthy probe.

However, until now, it has never launched an investigation into the products and services of a foreign company.

Micron has had a bumpy relationship with China in recent years as the country’s domestic memory chip makers, including Yangtze Memory Technologies Co (YMTC), have been expanding their operations.

The global dynamic random access memory (DRAM) market, Micron’s main product that accounts for nearly three quarters of its sales, currently has a supply glut with average DRAM prices down 20 per cent in the first quarter of 2023 compared to the previous quarter, according to TrendForce.

China accounts for over 10 per cent of its total sales. One of Micron’s major clients in China is Shenzhen Long Sys, which bought 3.1 billion yuan worth of chips from Micron in 2021.

Micron, however, has come under increasing scrutiny in China as it is has been seen as a major lobbying force behind the US government’s moves to sanction Chinese businesses, including YMTC, which was added to the US entity list last year.

In a widely reported case, Fujian Jinhua Integrated Circuit Co, a state-owned memory plant in Fujian, was accused by the US of stealing technologies from Micron, which eventually led the company to be sanctioned by the US and to a suspension of production.

Micron has previously warned of the risks of being excluded from the China market. In its 2021 annual financial report, the company told investors that Beijing’s support for domestic DRAM makers could restrict Micron’s growth.

“In addition, the Chinese government may restrict us from taking part in the China market or may prevent us from competing effectively with domestic companies,” it said.

Micron last year closed its DRAM design operations in Shanghai and relocated some of the 150 Chinese engineers to the US and India.

Micron this week reported a 53 per cent year-on-year fall in revenue for the quarter ending March. It also forecast that its revenue would tumble nearly 60 per cent in the current quarter.

https://www.scmp.com/tech/tech-war/article/3215622/tech-war-china-hits-back-american-chip-firms-regulator-launches-cybersecurity-probe-microns-products?module=lead_hero_story&pgtype=homepage