China escalates its US tech war with micron ban

In cutting off foreign technology companies from China’s supply chains, Beijing has long opted to act indirectly or even clandestinely. Regulators would lecture executives in backrooms, overburden them with excessive red tape or beat them with occasional office raids. The government rarely told the company it was no longer welcome.

But that’s what Micron Technology indicated in a late-night announcement on Sunday.

The Chinese government has banned companies that handle sensitive information from buying microchips made by Micron Corporation of Boise, Idaho. The company’s chips, which are used to store memory in all kinds of electronics, such as phones and computers, were deemed to pose “relatively serious cybersecurity issues” by China’s internet watchdog after a review.

Micron said it was “evaluating” the government’s outcome and “evaluating” what to do next. Analysts said the company, which has been selling chips in China for years, may find itself cut off from the future business of Chinese companies.

The openness and speed with which the Chinese authorities took action against Micron — which they spent less than two months investigating — underscore how far the two sides have drifted in technology politics. Last year, the Biden administration took drastic steps to deny Chinese chipmakers access to crucial tools needed to make advanced chips, as well as access to the chips that power supercomputers and craft powerful artificial intelligence algorithms.

Widely seen as retaliation for those moves, Micron’s action shows some of China’s advantages over the United States: A quick and fearless authoritarian rule that can quickly declare and enforce outright embargoes. It also provides a glimpse into Beijing’s new tactics.

With the Micron block, the authorities have carved out a space in the industry that Chinese chipmakers can fill. The move could also drive a new wedge between the United States and its allies, whose companies could generate billions of dollars in sales if they step in and win business Micron could lose.

For Beijing, harming a US company that makes critical equipment furthers the government’s goal of boosting the domestic technology sector.

said Xiang Ligang, director of the Beijing Technology Association who has advised the Chinese government on technology issues. “This applies not only to the chip industry but also to other sectors,” he added.

For the better part of a decade, China and the United States have competed for global technological leadership. Chinese computer hacks of American companies, and policies designed to obtain closely restricted intellectual property, have raised red flags in Washington. In Beijing, information revealed by Edward J.

While each side jockeyed to find new advantages, both focused on the semiconductor industry. The microchips that make up nearly all electronics have been a convenient choke point for the United States, which has served to cut off China’s access to the smallest and fastest chips. The hope was to make China’s supercomputers less intelligent and its smartphones less salable.

To counter Washington, China has dumped subsidies on its domestic chip leaders. While they failed to catch up with global competitors in the more advanced chip arena, some companies succeeded with less complex parts, such as memory chips and the larger logic chips that power smartphones and cheaper cars.

Then in October the Biden administration announced a slew of policies targeting China’s most successful semiconductor companies. The move, along with billions in new subsidies for chip production in the United States, was viewed dimly by Chinese policymakers, said Paul Triolo, senior vice president for China at Albright Stonebridge Group, a strategy consulting firm.

“Officials in Beijing over the past months have been complaining to anyone who will listen to the actions of the United States,” he said. “Beijing views these moves as primarily politically motivated, and is now willing to move forward with one,” Triolo added.

In some ways, China is better equipped for this exchange. China’s authoritarian system allows for quick action and ensures that few domestic businesses will break away from politics.

In the United States, political controversy and legal challenges can dampen government efforts. For example, major US corporations have found legal solutions to Washington’s attempts to cut component sales to companies such as Chinese telecoms equipment maker Huawei. Some multinational companies have successfully lobbied for licenses to allow them to continue selling to blacklisted companies.

By specifically targeting Micron, China is hitting in one of the few sectors — memory chips — that has a foothold in its chip competition with the United States.

While protecting such success by blocking out US competitors makes strategic sense, China remains highly dependent on the US for advanced chips, according to Teng Tai, an economist and director of the Wanbo Institute for New Economic Research in Beijing.

“The ultimate goal of responding to Micron is to get some US companies to restrain themselves, so that we can further strengthen technology and business cooperation, and avoid taking an isolated, self-reliant approach,” he wrote Monday on Weibo, a Chinese social media outlet. outlet.

Another question raised by Sunday’s action against Micron is how US ally South Korea will respond. Its companies, notably Samsung and SK Hynix, have the most to gain from the Micron ban. The two companies will pick up customers from Micron, which reported $3.3 billion in sales in China in 2022.

Mr. Xiang, an advisor to the Chinese government, said: “Why should South Korea blindly follow the United States and harm its own interests? I don’t think South Korea has such an obligation.”