The US has been on the offensive against China and its tech companies for quite some time now, first going after their semiconductor companies, and then attacking TikTok. Now, China has started to retaliate by targeting American companies who do business in China.
The US has been going after Chinese tech businesses for quite some time now. ByteDance and TikTok in particular has seen a lot of the brunt of the US and so has China’s semiconductor industry. It seems that now China has decided to push back.
China has begun a cybersecurity audit of Micron Technology, the US’ largest memory chip maker. This evaluation follows the closure of Micron’s DRAM manufacturing activities in Shanghai last year.
China retaliates against the US in tech war
The Cyberspace Administration of China (CAC) stated on Friday that it has launched an inquiry into Micron’s products in China in order to protect the supply chain security of critical information infrastructure and to avoid cyberspace security threats caused by defective and problematic products.
Micron, headquartered in Idaho, said in a statement on Saturday that it was “in communication with the CAC and fully cooperating.” The firm stated that it is “committed to conducting all business with uncompromising integrity” and that its goods are secure.
Following US-led efforts to restrict shipments of advanced chips and semiconductor manufacturing equipment to China, the CAC’s action promises to exacerbate hostilities between Beijing and Washington.
The following are some things to consider in light of this newest development in the US-China tech war.
The probe comes at a time when the US and its partners have boxed China in on all parts of the semiconductor market, even as Beijing promotes its self-sufficiency drive to reduce the country’s dependence on American-made products.
A message to Japan and South Korea
According to Wang Lifu, expert at Shanghai-based semiconductor research company ICwise, it appears to be about “sending a warning signal” to neighbouring nations like Japan and South Korea.
These two nations, along with Taiwan, have joined the US-led Chip 4 Alliance, which Beijing sees as a Washington plan to exclude China from semiconductor supply networks. This group’s senior officials conducted their first video conference in February to talk supply chain resilience.
According to Wang at ICwise, South Korea is anticipated to take note of the CAC’s cybersecurity assessment of Micron. The probe served as a warning to Korean memory chip makers Samsung Electronics and SK Hynix, which still have manufacturing sites in China, he said.
Following a stated deal between the Dutch, Japanese, and US governments to limit shipments of some sophisticated chip-making equipment to China, this caution would apply to the Netherlands. This has resulted in a powerful new coalition that could undermine Beijing’s aspirations to develop local chip capabilities.
Prior to the announcement of the Micron cybersecurity review, Beijing had taken no significant measures to retaliate against the US for imposing severe limits on advanced chip exports to China on national security grounds.
Why Micron?
According to ICwise expert Wang, the Chinese government regards Micron as “playing a negative role” in the country’s technology sector. “There is some speculation that Micron was behind efforts to persuade the US government to impose sanctions on China.”
Micron is said to be one of several US semiconductor companies that have increased their political expenditures since the Biden administration signed the CHIPS and Science Act into law in August last year, which provides US$52 billion in government money for chip manufacturing in the US.
Months before the legislation became law, Micron declared the closure of its Shanghai chip design facility at the end of 2022 and offered relocation incentives to 150 Chinese engineers in the US or India.
The US charged Fujian Jinhua Integrated Circuit Co, a state-owned memory plant manufacturer in southern Fujian province, of stealing Micron technologies in 2017. Following Washington’s sanction, the Chinese company halted manufacturing.
Micron looks to be susceptible at the time of the CAC’s inquiry. Mainland China accounts for more than 10 per cent of Micron’s overall revenue, making it the company’s third-largest market after the United States and Taiwan.
Micron recorded a net loss of $2.3 billion in the second quarter concluded March 2 of its most recent fiscal year, due to a sharp drop in demand for 3D NAND products, representing the company’s worst quarterly loss in two decades.
As a result, Micron announced that it will accelerate layoffs, cutting nearly 15 per cent of its staff this year, in order to adjust to falling worldwide demand for computers and other electronics that use its products. Around 7,200 people will be laid off globally. In the midst of that industry slowdown, China’s Micron probe could help the company’s competitors in the worldwide memory chip market.
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Updated Date:
April 03, 2023 16:11:37 IST
