China's cyberspace authority is launching a review of products sold in the Chinese market by U.S.-based memory chip maker Micron to ensure supply chain security for key information infrastructure and to ward off cybersecurity risks. The review is being conducted in accordance with China's state security law, cybersecurity law, and cybersecurity review measures, the Cyberspace Administration of China (CAC) said in a statement posted on its website. It is the first probe of a foreign company by the Administration. Zuo Xiaodong, Vice President of the China Information Security Research Institute, told the Global Times that whenever the government detects a potential hazard that could endanger or compromise national security, it is necessary to conduct an investigation. Although the cybersecurity regulator did not provide specific details, Zuo said that possible reasons for the watchdog to initiate the review include the risk that foreign products sold in China could be manipulated, data thefts, and potential disruption of supply chains due to political, diplomatic or trade issues, or compromised transparency of products that could endanger China's national security, among other moves that are forbidden by laws and regulations.
The review may signal the increasing attention that large countries like China and the U.S. attach to cybersecurity amid tensions over technology, Xin Haiguang, an independent IT industry observer, told the Global Times. “I think it is a normal action. There are quite a few cases of countries censoring each other because of cybersecurity, as it is becoming an increasingly important part of national security,” Xin said.
Micron's sales revenue dropped by 53% in the second fiscal quarter ended March 2 to USD3.7 billion, as weak PC and smartphone demand continued to weigh on company results, it revealed in a recent financial report. Micron is cutting its workforce by 10% to 15% as a result. Their is currently a supply glut on the market of dynamic random access memory (DRAM), Micron’s main product that accounts for nearly three quarters of its sales, with average DRAM prices down 20% in the first quarter of 2023 compared to the previous quarter. China accounts for over 10% of its total sales. One of Micron’s major clients in China is Shenzhen Long Sys, which bought CNY3.1 billion worth of chips from Micron in 2021. Micron, however, has come under increasing scrutiny in China as it is has been seen as a major lobbying force behind the U.S. government’s moves to sanction Chinese businesses, several which were added to the U.S. entity list last year.
The review came as the U.S. kept escalating a technology war against China, with export control measures, adding Chinese technology firms to its entity list, and offering subsidies to high-tech companies that set up production capacity in the U.S. The U.S. is also investigating TikTok, the social-media platform owned by Beijing-based ByteDance.
Chinese companies have also been investigated by the Cybersecurity Administration of China (CAC). In July 2022, regulators fined ride-hailing firm Didi CNY8.03 billion for violating cybersecurity and data laws after a review that lasted for about one year during which the company had to cease new user registration. In June 2022, the cybersecurity regulator conducted a cybersecurity review of China National Knowledge Infrastructure (CNKI), the country's largest academic research database. The company was fined CNY87.6 million, or 5% of its 2021 domestic sales revenue, for abusing its dominant market position, the Global Times and the South China Morning Post report.
