China announces security review of US chipmaker Micron

Move highlights ongoing struggle between China and the US for supremacy in the semiconductor industry

The US and China are currently engaged in an intensifying semiconductor conflict, and China has now opened a new front in the battle by launching a cybersecurity investigation into imports from Micron Technology, one of US's leading memory chip manufacturer.

Last week, the Cyberspace Administration of China (CAC) announced its intention to scrutinise products sold by Micron in the country.

The regulator said that the review is aimed at ensuring the integrity of the information infrastructure supply chain, mitigating network security risks and maintaining national security.

The announcement came the same day as Japan - a key US ally - announced its decision to limit the export of 23 types of sophisticated semiconductor manufacturing equipment to certain countries, including China.

Yasutoshi Nishimura, Japan's minister of economy, trade and industry, stated that stricter export protocols would be enforced for around 160 destinations, such as China.

In contrast, Japan recognises 42 territories - including South Korea, Taiwan and the US - as having satisfactory export controls already in place.

Nishimura clarified that the newly implemented measures were intended to prevent the diversion of the restricted equipment for military purposes.

Also last month, the Netherlands' announced similar restrictions on overseas sales of semiconductor technology, citing national security concerns as the main reason behind their decision.

In October last year, the US government instituted a ban on Chinese companies purchasing advanced chips and chipmaking equipment unless they obtain a licence.

Additionally, the US government placed limits on American citizens providing support for chip production or development at select facilities in China.

China has expressed its strong disapproval of technology export restrictions, stating earlier this month that it "firmly opposes" such measures.

The recent cybersecurity review of Micron Technology further emphasises the ongoing struggle between China and the US for supremacy in the semiconductor industry.

Micron said it was in communication with the Chinese regulator, adding that it was confident about the security of its products.

Mainland China represented approximately 11% of Micron's annual sales, equivalent to $3.3 billion, in 2022. The company has said that it faces increasing competition in China as the central government and state-owned enterprises ramp up their investments in the semiconductor sector to achieve the country's national policy objectives.

In a prior filing, the Idaho-based company had cautioned about these potential risks.

"The Chinese government may restrict us from participating in the China market or may prevent us from competing effectively with Chinese companies," Micron said.

Micron also highlighted the risk of losing access to rare earth materials, which are predominantly produced in China.

"Constrained supply of rare earth elements, minerals and metals may restrict our ability to manufacture certain of our products and make it difficult or impossible to compete with other semiconductor memory manufacturers who are able to obtain sufficient quantities of these materials from China," the company noted.

Amid the economic slowdown caused by three years of Covid-19 restrictions, China is making renewed efforts to attract foreign investment.

Executives from global companies were warmly received by Chinese officials at the recent China Development Forum, a high-level meeting hosted by a research centre of the State Council.

However, Beijing seems to be simultaneously exerting pressure on multinational companies.

For instance, last month Chinese authorities conducted a raid on the Beijing offices of New York-based due diligence firm Mintz Group, detaining five members of staff.

Also last month, the authorities suspended Deloitte's operations in Beijing for three months and imposed a fine of $31 million over alleged deficiencies in its work auditing a state-owned distressed debt manager.