The disengagement between China and the U.S. picked up momentum Sunday when Chinese firms were prohibited from purchasing chips from American manufacturer Micron Technology.
Reuters reported the Cyberspace Administration of China (CAC) declared it found “significant security risks” posed by the chips to the communist nation’s infrastructure. It specifically noted risks to banks operated by Beijing as well as telecom companies.
The Chinese government announced in March that it would launch a review of Micron imports into the nation.
Many saw this move as an obvious retaliation for sanctions the U.S. has imposed on the country’s chipmakers for the past few years.
Its effects on Micron are significant though not critical. Chinese markets account for roughly 10% of the company’s annual income, but there’s a catch.
China govt effectively banned the use of Micron Technology memory chips in critical infrastructure, just one more step in the Washington-Beijing decoupling process. Micron chips are commoditized, so this is a low-risk ban for China. (via @knowledge_vital) https://t.co/rXBIaLVzvL pic.twitter.com/tVoFHFO5sV
— Holger Zschaepitz (@Schuldensuehner) May 21, 2023
According to the Wall Street Journal, the Chinese prohibition does not apply to companies importing Micron chips for use in products distributed elsewhere in the world. On the surface, this leaves most of Micron’s export business to China intact.
However, some analysts warn that Beijing’s admonishment of Micron’s customers could lead to some firms rejecting the company’s products over the risk of drawing the ire of the Communist Party.
Micron Chief Financial Officer Mark Murphy said Monday that the company was uncertain as to what specific concerns China had over its chips. “We are currently estimating a range of impact in the low single-digit percentage of our company’s total revenue at the low end.”
Murphy added, however, that the high-end projections show that Micron revenue could reach the high single-digit range.
His observations helped buoy Micron stock, which had fallen up to 6% in premarket trading. Losses in stock price lowered to 3.4% after his comments.
The U.S. Commerce Department protested the move by Beijing, with a spokesperson declaring that “we firmly oppose restrictions that have no basis in fact. They declared that China’s recent targeting of U.S. companies is “inconsistent” with its claims that it is opening up its markets.
There have also been raids on American firms by Chinese authorities in recent months. Some receiving “visits” from authorities include the corporate due diligence firm Mintz Group and Bain & Company, a management consultant company.