Following a security review by the Cybersecurity Administration of China (CAC), the use of Micron's memory chips for mission critical applications was banned in China. The Chairman of the U.S. House of Representatives’ Select Committee on China Mike Gallagher said that the U.S. Commerce Department should put trade curbs on Chinese memory chip maker Changxin Memory Technologies (CXMT) in retaliation. The U.S. “must make clear to the PRC that it will not tolerate economic coercion against its companies or its allies,” Gallagher said in a statement. White House Press Secretary Karine Jean-Pierre told reporters that the Chinese announcement on Micron was “not based in fact”.
CXMT is China’s leading maker of DRAM memory chips and the domestic competitor most likely to benefit if Micron is barred from China’s massive chip market. YMTC is a Chinese chip maker that was put on the U.S. trade blacklist in December 2022. Gallagher also said the Commerce Department must ensure “no U.S.-export licenses granted to foreign semiconductor memory firms operating in China are used to backfill Micron. South Korea’s Samsung Electronics and SK Hynix, which both operate memory chip factories in China, and other non-Chinese firms were spared the brunt of U.S. export controls on chip-manufacturing gear imposed in October, but they are operating under exemptions from the U.S. rules that can expire or be revoked. Analysts believe CXMT’s chips are two to three generations behind industry leaders Micron, Samsung and SK Hynix.
Gallagher’s call comes weeks after U.S. makers of chip-manufacturing equipment say they received a clarification from U.S. export control authorities that will allow them to ship more to China than initially anticipated. Lam Research, the leading maker of tools for manufacturing memory chips, told investors the clarification could result in hundreds of millions of dollars in additional sales to China. The Commerce Department clarified how memory chip features are measured for the purposes of applying export control rules, which can vary according to the tools and materials used to make them and how they are designed, said Dan Hutcheson, Vice Chair of TechInsights, which produces research reports on the semiconductor industry, the South China Morning Post reports.
China’s Foreign and Commerce Ministries described the Micron ban as an individual case and not a broader effort to damage the legitimate business activities of other U.S. firms in the country. Wang Wentao, China’s Minister of Commerce, told delegates from American enterprises in Shanghai, including Johnson & Johnson and Honeywell, that China would continue to welcome U.S. business investment. The U.S. Commerce Department described the ruling, along with recent raids on U.S. consultancy firms in China, as a violation of Beijing’s commitment to an open market economy and a transparent regulatory framework. Beijing has denied that this is the case. Micron's Chief Financial Officer (CFO) Mark Murphy said it estimates the impact on the company's business is “in the low single digits in total revenue at the low end, and high single digits at the high end”.
Nvidia’s Founder and CEO Jensen Huang called China a “very important” market for the technology industry, as demand for the U.S. company’s specialized chips is exploding amid a frenzy over artificial intelligence (AI). Huang, 60, was quoted by the Financial Times as saying that the Biden Administration’s export controls that bar the company from selling its most advanced chips to one of its biggest markets is like having “our hands tied behind our back”. The U.S. government ban on its most advanced graphic processing units (GPUs) has impacted about a quarter of Nvidia revenues, forcing the company to tailor-make alternative, lower-end versions for Chinese clients to comply with the export rules. “If we are deprived of the Chinese market, we don’t have a contingency for that. There is no other China, there is only one China,” Huang was quoted as saying. He also said Chinese companies were starting to build their own chips to rival Nvidia’s market-leading processors used for gaming, graphics and AI applications. Huang added that China will “just build it themselves” if its companies cannot buy from U.S. suppliers. “So the U.S. has to be careful,” he told the Financial Times.
China must make every effort to retain leading foreign companies amid the ongoing global supply chain restructuring, while also ensuring the competitiveness of its domestic players haunted by high U.S. tariffs, according to Yang Weimin, Vice Chairman of the Beijing-based China Center for International Economic Exchanges think tank. He warned that China is entering an “increasingly complex” international situation and should curb the outflow of foreign companies. “There is a tendency in the country to believe that the domestic market demand is strong enough to drive economic growth, but such a perception is lopsided,” said Yang. Speaking at a conference about the digital economy in Wuhan, Yang called on authorities to consider additional “pragmatic and effective” policies to stabilize trade and inbound investment. China’s foreign direct investment (FDI) shrank in the first four months, year-on-year, while imports contracted sharply in April and exports grew at a slower pace. The growth of retail sales also missed expectations last month despite a lower comparison base from a year earlier.
Meanwhile, the Netherlands, a supplier of advanced chip-making machinery to China, is expected to restrict exports of semiconductor technology in the name of national security, joining U.S. efforts to curb chip shipments to China. Dutch Foreign Affairs Minister Wopke Hoestra discussed the matter with his Chinese counterpart Qin Gang in Beijing last week. Minister Qin called for China and the Netherlands to jointly oppose decoupling in order to avoid the risk of fragmenting global trade and to promote the recovery of the world economy. China brings opportunities and assurances to the world rather than challenges and risks, he added. Premier Li Qiang told Dutch Prime Minister Mark Rutte last week that the Netherlands was China’s “priority partner” in the European Union.
China firmly opposes Japan’s export controls on 23 types of chipmaking equipment, and the restrictions will undoubtedly hurt the global semiconductor industry and backfire on Japan’s chip sector, officials and experts said. The comments came after the Japanese government unveiled export control measures, aligning its trade rules on technology with the push by the United States to curb China’s ability to make advanced chips, the China Daily added. The Chinese mainland is the largest export destination for Japanese semiconductor equipment manufacturers. In 2022, such exports from Japan to the mainland hit USD5.9 billion, exceeding 30% of Japan’s total chip-making equipment exports and almost double the amount of U.S. exports.
The China Daily also reports that a book containing 50 speeches and articles by President Xi Jinping on self-reliance and strength in science and technology has been published.
This overview is based on reports by the South China Morning Post, the Global Times and the China Daily.
