Micron Technology chips: China ban and security fears explained - what impact will it have on company?

Tensions between Washington and Beijing have risen following China's announcement that products from US chipmaker Micron Technology had failed a cybersecurity review. Users of sensitive computer equipment have been instructed by Chinese authorities to stop purchasing goods from Micron, the largest US memory chip manufacturer.

China says that Micron failed a network security review that was announced last month, meaning operators of critical infrastructure are now banned from making purchases from the company, according to the Cyberspace Administration of China (CAC).

The move intensifies the ongoing dispute between the US and China over technology and security. The Biden administration stopped approving new telecom devices from Huawei Technologies and ZTE in November of last year, claiming that they presented "an unacceptable risk" to American national security.

What is Micron Technology?

Micron Technology is an American multinational corporation that specialises in the production of semiconductor devices and memory products. It was founded in 1978, and now has manufacturing facilities and sales offices worldwide.

Micron is one of the leading providers of memory and storage solutions for a wide range of applications, including personal computers, servers, mobile devices, consumer electronics, automotive, and industrial applications.

The company designs and manufactures various types of memory products, which are crucial components in numerous devices, helping to contribute to their performance, storage capacity and energy efficiency.

Why have they been banned in China?

Micron products are no longer allowed to be purchased by operators of critical infrastructure in China because the company failed a network security review that was announced last month, according to the CAC.

"The review found that Micron’s products have serious network security risks," is said, "which pose significant security risks to China’s critical information infrastructure supply chain, affecting China’s national security."

China has a broad definition of critical information infrastructure., and so the decision could affect industries as diverse as telecoms, transportation and banking.

Micron Technology manufactures semiconductors, and the CAC's move comes as the Chinese government implements policies and initiatives to foster the growth of the domestic semiconductor industry. This includes the "Made in China 2025" plan, which focuses on promoting high-tech industries, including semiconductors, to reduce reliance on imports.

The ban on Micron can be seen as part of a broader strategy to nurture and protect Chinese semiconductor companies, allowing them to gain market share and advance their technological capabilities. For now, the ruling seems to be having an effect, with the news that it had failed China's security review helping to increase shares in local companies involved in the chipmaking industry.

What impact will China's ban have on the company?

China is the world's largest consumer of memory chips and semiconductors, with a booming consumer electronics market that has driven substantial demand for memory products. This demand has a significant impact on global memory chip manufacturers, influencing production levels, pricing and overall market dynamics.

But Micron claims that the impact of China's ban will be negligible. That's because while its chips have been banned from use in infrastructure, the majority of Micron's Chinese customers are consumer electronics firms such as smartphone and computer manufacturers, which are not impacted by the ruling.

A note from bio-tech analysts Jefferies said that Micron's DRAM and NAND products are rarely used in servers, and "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.”

DRAM is a type of memory commonly used in computers and other electronic devices to store data that is actively being used. NAND flash memory is a storage medium that retains data even when the power is turned off, and is commonly used in solid-state drives (SSDs), USB flash drives and memory cards.