The Chinese internet government declared on Sunday that Micron Technology Inc.’s goods had failed an examination of their network security and that users of critical infrastructure would no longer be allowed to purchase their products.

According to China’s expansive definition of essential information infrastructure, the decision, which was made during a disagreement over semiconductor technology between Washington and Beijing, may cover industries as diverse as telecom, transportation, and finance.

“The review found that Micron’s products have serious network security risks, which pose significant security risks to China’s critical information infrastructure supply chain, affecting China’s national security,” the Cyberspace Administration of China (CAC) said in a statement.

Micron stated that it has received the CAC’s notification of the conclusion of its investigation into the company’s goods marketed in China and looks “forward to continuing to engage in discussions with Chinese authorities.”

The CAC didn’t go into specifics about the hazards it had identified or which Micron goods they might have an impact on.

Since its primary clients in China are companies that produce consumer electronics like smartphones and computers rather than suppliers of infrastructure, Jefferies analysts anticipated a modest impact on Micron.

“Since Micron’s DRAM and NAND products are much less in servers, we believe most of its revenue in China is not generated from telcos and the government. Therefore, the ultimate impact on Micron will be quite limited,” they said in a note.

The South Korean companies Samsung Electronics Co Ltd and SK Hynix Inc, as well as the Japanese company Kioxia, a division of Toshiba Corp., are competitors to Micron, which develops DRAM and NAND flash memory chips.

Early on Monday, shares of SK Hynix and Samsung increased by 1% and 0.5%, respectively, while the overall market increased by 0.6%. Stocks in Toshiba were unchanged.

According to Christopher Miller, a professor at Tufts University and the author of “Chip War: The Fight For The World’s Most Critical Technology,” the timing of the CAC’s announcement during the Group of Seven (G7) leaders’ summit in Japan was crucial.

Last week, Micron announced a proposal to invest up to 500 billion yen ($3.70 billion) in Japan’s extreme ultraviolet technology. As the first chipmaker to introduce the cutting-edge chip manufacturing technology to the nation, which is now looking to revitalise its chip sector, Micron is the first to bring this technology to Japan.

Joe Biden, the president of the United States, stated on Sunday that the G7 countries had decided to “de-risk and diversify our relationship with China.” The decision-makers also decided to launch a programme to fight economic “coercion.”

“This case could be an early test of the G7’s efforts on this front,” Miller said.

In late March, China revealed that it was reviewing Micron’s products. At the time, the corporation said that it was complying and that business as usual was being conducted in China.

Washington has implemented a number of export limitations on chipmaking technology to China as part of the disagreement between the American and Chinese governments. Washington has also taken steps to prevent Yangtze Memory Technologies, a competitor of Micron, from purchasing specific American components.

Requests for reaction from American officials, including those on a congressional select committee looking into competitiveness with China, were not immediately answered.

It is unclear if the ruling will impact Micron’s sales to non-Chinese clients in China, where the company receives about 10% of its revenue.

According to Jefferies, it received $5.2 billion in revenue from China and Hong Kong last year, or roughly 16% of its overall revenue.

According to analysts, non-Chinese companies are buying the majority of Micron’s exports to China for usage in locally produced goods.

China implemented regulations in September 2021 that mandate their operators adhere to higher requirements around areas like data security. These regulations are aimed at protecting important information infrastructure.

Beijing has vaguely described the public communication and transport sectors as being among the “critical” industries, but it has not made it clear what specific companies or business scopes this will apply to.

(Adapted from ThePrint.in)

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