The Cyberspace Administration of China (CAC) has issued a formal statement advising operators of vital information infrastructure to "stop buying Micron products." The ruling was discovered by Wen-Yee Lee and follows a network security analysis of Micron goods offered for sale in China.
According to the Chinese government's security analysis, it has been asserted that Micron's products harbor substantial network security issues, thereby posing a significant security risk to the critical information infrastructure supply chain of the country. However, no information is provided regarding any unique security vulnerabilities associated with the use of Micron products. We anticipate that the ban on Micron goods will be carried out quickly and completely because it is a question of "national security."
The CAC concludes its statement by affirming that companies from any country are invited to participate in the Chinese market, on the condition that they comply with local laws and regulations. Once again, no indication is provided regarding any regulatory violations committed by the US-based Micron.
In the absence of specific information regarding Micron's alleged wrongdoing, it is reasonable to question whether China's ban on the company's products stems from political or economic motivations. Consequently, it is beneficial to examine recent news pertaining to Micron and its relationship with China in order to gain a better understanding of the circumstances surrounding this decision.
Let's begin by examining the political context. The implementation of additional trade restrictions by the US last October had the consequence of limiting the market opportunities for emerging Chinese DRAM (Dynamic Random Access Memory) and NAND (Negative AND) giants, namely Yangtze Memory Technologies Co (YMTC) and ChangXin Memory Technologies (CXMT) respectively. An evident repercussion of the US government's decision was witnessed when Apple, following a period of close collaboration, had to abandon its plans to incorporate YMTC NAND in its iDevices. If China's ban on Micron is indeed driven by retaliatory actions in response to US sanctions, it would imply a clear tit-for-tat exchange.
Another possibility to consider is that China's efforts and investments in the field of DRAM and NAND production have begun to yield positive results. As a result, the country might perceive that alternative supply sources have become sufficient to meet its needs, thereby allowing it to disregard products from the US-based Micron without significant consequences.
We also need to consider how this China ban would impact Micron. One of the top three memory manufacturers is Micron, yet brands have little cachet for the commodity goods DRAM and NAND. According to recent financial data, sales in China are expected to account for 25% of Micron's 2022 revenue. The flow of DRAM and NAND ICs should be able to change quite quickly on a commodities market, though.
There were warning indicators that these semiconductor commodities were headed for further significant drops in 2023, but more lately, optimism has risen as a result of investors' growing interest in businesses that support and enable the AI technology sector. Thus, although Micron shares have experienced some ups and downs lately, they have still increased by almost 20% over the past six months, with the past five days being responsible for half of that increase. A portion of the goodwill surrounding Micron is partly attributable to its recent sizable investment in Japan, which was supported by the local government.
As of the current writing, there has been no noticeable reaction in the trading of Micron shares following the announcement of the China ban, particularly in after-hours trading. However, since this is a recent and rapidly developing news item, it remains possible that there could be a more significant market response when trading resumes on Monday.