Despite a ban, Micron invests US$600 million in China

• US chipmaker Micron to invest more than US$600 million in China. 
• However, Micron warns a ban would hurt revenue.
• US Secretary of State is in China meet top envoy and President Xi Jinping.

When the US started implementing bans on certain tech products from China, most Chinese companies took a big hit. In fact, Huawei remains one of the biggest casualties from the actions taken by the US. Not only did Huawei experience a dip in profits, but it also needed to source and develop its own technology to cope.

Then, the US started imposing restrictions on the chip supply to and from China. This included allyships with Taiwan, Japan and Korea to control the chip supply trade and block China’s access to cutting-edge semiconductors. The Chip4Alliance goal however remains a pipeline dream as chip companies from these three countries are still operating in China.

The next target was TikTok, which the US government claimed was being used by China to spy on users. The episode with TikTok led to several states in the US banning the app from government services with one state insisting a full ban starting next year.US allies soon began implementing similar bans on TikTok, Huawei and other Chinese products.

The ban on certain Chinese brands meant the country eventually imposed a ban on Micron Technology chips in its critical infrastructure projects. China’s cybersecurity watchdog said Micron had failed a national security review, telling operators of “critical information infrastructure” to stop buying its products.  This marked the first time China had imposed a ban on the American chipmaker.

Here’s where it gets interesting though. Since China made the announcement over a month ago, several tech leaders from US companies have visited China and promised to continue their relationships with the country. This included Tesla’s Elon Musk, Apple’s Tim Cook and Microsoft’s Bill Gates. All three companies have significant investments in China, especially in manufacturing.

The biggest visit to China however is the US Secretary of State Antony Binken. Binken arrived in China over the weekend and according to a report by AFP, he will meet China’s top envoy and potentially President Xi Jinping. The trip aims to improve straining ties between both countries.

Micron Technology invest in China despite ban

Now, US chipmaker Micron said it would invest more than US$600 million in a packing and testing factory in northern China, less than a month after Beijing banned its chips from critical infrastructure projects.

In a WeChat statement, the firm said it would invest more than 4.3 billion yuan (US$605 million) over the next few years in its plant in the city of Xi’an to acquire equipment and add a new factory at the facility.

“This investment project underscores Micron’s unwavering commitment to our China business and our China team members,” CEO Sanjay Mehrotra said in a statement.

Micron said it would buy chip-packaging equipment from the Xi’an-based Licheng Semiconductor, which had already been operating some equipment in the US company’s facility under a previous agreement.

“The investment is in line with Micron’s global packaging and testing concept and would give the company the flexibility to manufacture a wide portfolio of products in Xi’an,” the firm said in its WeChat statement.

Micron will also build a new facility with production lines for mobile DRAM, NAND and SSD chips, it added.

A peaceful chip war?

About 10% of Micron’s US$30.8 billion annual revenue last year came from China, according to company data. But a large portion of Micron products sold in the country were bought by foreign manufacturers, analysts noted, and it was not clear if last month’s decision by China’s cybersecurity watchdog affected sales to foreign buyers.

Washington has said it has “very serious concerns” about China’s restrictions on Micron.

China began an investigation into Micron in late March, five months after the United States unveiled sweeping curbs aimed at cutting off the country’s access to high-end chips, chipmaking equipment and software used to design semiconductors.

In May, China imposed a ban on American chip producer Micron. Now, the US is hoping to counterattack with sanctions on Chinese chip manufacturer CXMT — more evidence that sanctions are a TIT-FOR-TAT LOSERS’ GAME.https://t.co/RMk729HZGo

— Steve Hanke (@steve_hanke) June 18, 2023

Reuters reported that Micron warned of a bigger hit to revenue from a Chinese ban on the sale of its chips to key domestic industries, sending the memory chipmaker’s shares down about 2%. The company said it now expects an impact on about half of its revenue from China-headquartered firms, which equates to a low-double-digit percentage of its total revenue. It had earlier flagged a hit in the low-single to high-single digit percentage.

The United States cited national security concerns for the restrictions unveiled last year, expressing concerns that China will use US technology to develop advanced military equipment.

The White House has also urged South Korean chipmakers not to export to China to fill any gap left by a ban on US semiconductor imports. The Netherlands and Japan-US allies that are both leading manufacturers of specialized semiconductor technology — have also announced restrictions on exports, without explicitly naming China.

With additional reporting from AFP.

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