China says Micron chips pose ‘major security risk’

China has made its first major move in the IT trade war between Washington and Beijing by telling its operators not to use Micron chips in certain infrastructure projects, due to national security concerns.

The decision was announced in a six-sentence statement by the Cyberspace Administration of China (CAC) on Sunday, although the agency provided no further details regarding the security concerns or the specific products affected. 

Nonetheless, the decision could affect a broad swathe of sectors in China, including telecommunications, transport and finance.

"The review found that Micron's products have serious network security risks, which pose significant security risks to China's critical information infrastructure supply chain, affecting China's national security," the CAC said. "Operators of critical information infrastructure in China should stop purchasing products from Micron Co."

Micron is a manufacturer of DRAM and NAND flash memory chips. Since the CAC's decision was made public, shares in its competitors, and competes with South Korea's Samsung Electronics Co Ltd and SK Hynix Inc rose 0.5 per cent and 1 per cent respectively.

The US chipmaker has confirmed it has been notified of the CAC's decision and "looks forward to continuing to engage in discussions with Chinese authorities." It added: "We are evaluating the conclusion and assessing our next steps".

In turn, the US government said it would work with allies to address what it called "distortions of the memory chip market caused by China's actions".

"We firmly oppose restrictions that have no basis in fact," a US Commerce Department spokesperson said. "This action, along with recent raids and targeting of other American firms, is inconsistent with [China's] assertions that it is opening its markets and committed to a transparent regulatory framework."

The CAC's announcement came a day after a G7 summit in Japan, where global leaders criticised China's use of "economic coercion" and stressed their aim to diversify their supply chains to reduce their independence from the Asian superpower. 

Micron derives around 10 per cent of its revenue from China. Last week, the company also revealed its plans to invest around 500bn yen (£2.9bn) to develop ultraviolet technology in Japan, as part of the country's effort to reinvigorate its semiconductor sector.

China's security review of Micron's chip technology was announced on 4 April, only hours after Japan announced that it would join the US in imposing restrictions on Chinese access to semiconductor technology.

The CAC's announcement can be understood in the context of a US-China trade war, as well as supply chains' efforts to address the surge in demand for semiconductors used in consumer electronics. Although the global chip shortage that hit the world in 2020 has begun to ease, US officials have warned that it is likely to continue to some degree through the rest of 2023.

The US has restricted China’s access to semiconductor technology since at least 2019 when the Trump administration banned Huawei from buying vital US technology. In August 2022, the US further prohibited the export of four technologies tied to semiconductor manufacturing, citing how they were “vital to national security” and signed a “historic” bill aimed at boosting the domestic production of semiconductors.

After meeting global leaders at the G7 summit, the UK's Prime Minister, Rishi Sunak warned that an increasingly authoritarian China poses the “biggest challenge of our age” and described the nation as the “only country with both the means and intent to reshape the world order”.

Last week, the government announced a £1bn investment in the UK’s semiconductor industry as part of efforts to reduce its reliance on Chinese-manufactured IT products.