Explainer | Why China launched a cybersecurity review into US memory chip maker Micron Technology and what could happen next
- Micron Technology has become the first foreign semiconductor company to be put under a cybersecurity review by China
- The move threatens to heat up tensions between Beijing and Washington, following US-led initiatives to restrict advanced chip tech exports to China
Boise, Idaho-based Micron said in a statement on Saturday that it was “in communication with the CAC and cooperating fully”. The company said it was “committed to conducting all business with uncompromising integrity” and stands by the security of its products.
Why has China opened a cybersecurity review into a foreign semiconductor firm?
The investigation comes at a time when China has been hemmed in on all sides of the semiconductor market by the US and its allies, even as Beijing pushes its self-sufficiency drive to cut the country’s reliance on American-made technologies.
Why did China target Micron for investigation?
Before the cybersecurity review of Micron was announced, Beijing had not taken any major steps to hit back at the US for implementing stringent restrictions on advanced chip exports to China on grounds of national security.
Micron has been perceived by the Chinese government as “playing a negative role” in the country’s technology industry, ICwise analyst Wang said. “There is some speculation that Micron was behind efforts to push the US government to impose sanctions against China”.
In 2017, Fujian Jinhua Integrated Circuit Co, a state-owned memory plant maker in southeastern Fujian province, was accused by the US of stealing technologies from Micron. The Chinese firm subsequently suspended production after it was sanctioned by Washington.
How significant would be the impact of Micron’s cybersecurity review?
The CAC’s investigation comes at a time when Micron appears to be vulnerable. Mainland China accounts for more than 10 per cent of Micron’s total sales, which makes the country its third-largest market behind the US and Taiwan.
Micron last week reported a net loss of US$2.3 billion in the second quarter ended March 2 of its latest financial year, owing to a sharp drop in demand for 3D NAND products, marking the company’s worst quarterly loss in the past two decades. As a result, Micron said it will accelerate lay-offs, reducing its workforce by nearly 15 per cent this year, as a measure to adapt to declining global demand for computers and other electronics that use its products. The job cuts will affect about 7,200 employees worldwide.
Amid that industry slowdown, China’s Micron investigation could potentially benefit the firm’s competitors in the global memory chip market.
What is the likely outcome of the Micron investigation?
While the CAC’s cybersecurity investigation takes at least 30 days to be completed, the process can take much longer if the case is complicated, according to Beijing-based semiconductor lawyer Feng Qiong, citing China’s Cybersecurity Review Measures.
Feng said China could impose various “penalties and restrictive measures” if Micron’s products were found to have cybersecurity issues. “The possibility of applying the stricter liabilities under the National Security Law can’t be excluded,” she said.
Wang of ICwise, meanwhile, said fines would represent “the mildest warning” for Micron. If there is “no remorse or any change” implemented by the company after the review, “the next step could be restrictions or even a ban on market access”.
“This move reflects a certain attitude from government officials who would say the market can be opened up to you and you will be given some carrots, but if you offend us, we can hit back with sticks,” Wang said.