Micron Technology, one of the world’s largest memory chip manufacturers, has had a turbulent relationship with China over the past few years. In 2018, Micron became entangled in a legal dispute with Chinese companies that led to a temporary ban on sales of some Micron products in China. Since then, Micron’s status in the vital Chinese market has remained somewhat uncertain.
What led to Micron’s ban in China?
In early 2018, Micron sued Chinese firms Fujian Jinhua Integrated Circuit Co and Taiwan’s UMC in California, accusing them of stealing trade secrets related to Micron’s DRAM memory chips. Jinhua was building a new $5.7 billion memory chip factory at the time with support from the Chinese government.
In retaliation, Chinese authorities launched an antitrust investigation into Micron and halted sales of some of its chips in China. The Chinese court sided with Jinhua and UMC, banning sales of certain Micron products until the US company agreed to withdraw its lawsuit.
This effective ban on Micron chip sales in China dealt a blow to the US firm, as China accounted for over 50% of its revenue at the time. However, it also disrupted China’s own memory chip ambitions, as local manufacturers relied heavily on Micron’s supply.
Did Micron resolve the dispute and lift the ban?
In 2019, Micron and Jinhua/UMC reached a confidential settlement agreement covering all ongoing litigation between the companies. As part of the deal, Micron agreed to withdraw the civil lawsuit it had filed in California while Jinhua/UMC agreed to withdraw patent infringement cases against Micron in mainland China.
Shortly after this settlement, Micron confirmed that the Chinese market ban had been lifted and that it was resuming normal operational activities in China. This cleared the way for Micron to once again sell all of its DRAM and NAND memory products in China, its largest market.
So by early 2019, Micron appeared to be back in business as usual in China following the legal dispute and temporary sales ban. However, some industry watchers say the relationship remains fragile.
Does China still rely on Micron memory chips?
Despite efforts to develop its own memory chip industry and reduce reliance on foreign firms like Micron, China continues to lean heavily on imports of DRAM and NAND flash memory. Chinese memory chip makers have struggled to achieve competitive capabilities versus giants like Micron and Samsung.
In 2021, Micron accounted for around 45% of DRAM chip supplies in China and about 30% of NAND flash memory supplies, according to market research firm TrendForce. The firm estimates Micron will maintain roughly 40% DRAM market share in China through 2022.
So although it has enduring aspirations of memory chip self-sufficiency, China remains highly dependent on memory chip imports from overseas suppliers, with Micron chief among them. Any future disruptions to Micron’s participation in the Chinese market could have major repercussions throughout China’s electronics supply chain.
Is Micron still at risk of further restrictions in China?
Although the 2018 lawsuit and sales ban were resolved, Micron still faces risks in China due to the ongoing US-China technology rivalry and trade tensions. Under China’s broad Anti-Monopoly Law, for example, authorities could again target Micron with antitrust actions as political leverage if tensions escalate.
In 2020, China’s state economic planner put Micron on an “unreliable entity list” over reported restrictions on supplying Huawei. And in 2021, a Chinese court blocked Micron from selling certain memory products in Fujian province over alleged patent infringement. However, these actions have not thus far escalated into a nationwide sales ban.
Looking ahead, Micron’s privileged access to the valuable Chinese semiconductor market could be threatened by factors like:
- Chinese policies to boost domestic memory chip makers and reduce reliance on US firms
- US export controls restricting advanced semiconductor sales to China
- Flare ups in US-China trade and tech tensions
So while Micron appears to have normalized operations, its foothold in China looks far from fully secure. Any major deterioration in bilateral relations could put Micron at risk of further restrictions in the years ahead.
What leverage does China have over Micron?
Although Micron relies heavily on sales to China (over 50% of revenue), China is also dependent on Micron for supplies of crucial memory chips. But China potentially has significant leverage it could exert:
- Restricting Micron’s access to the enormous Chinese semiconductor market through bans, investigations or import barriers.
- Supporting the growth of domestic DRAM and NAND competitors that could displace Micron’s market share.
- Withholding approval for Micron to build new memory chip fabrication plants in China.
- Encouraging Chinese electronics firms to diversify supply chains away from Micron.
However, experts say China is unlikely to impose drastic measures that could severely disrupt its own high-tech manufacturing sector. More targeted restrictions are possible pressure tactics.
What leverage does Micron have over China?
Micron also retains important leverage:
- China’s domestic memory chip makers are still years behind Micron in terms of technology and output capacity.
- Restricting Micron would squeeze China’s chip supplies amid a global shortage.
- Banning Micron could prompt backlash from the US, stoking trade tensions.
- China needs access to Micron’s leading-edge memory chip production to fuel its tech ambitions.
So while China has options to pressure Micron, it cannot easily replace Micron’s output, especially for advanced DRAM and 3D NAND used in smartphones, data centers, and more. That mutual dependence will likely restrain both sides from major disruptions.
What has been Micron’s impact on the US-China trade war?
The tussle between Micron and China in 2018 was an early skirmish in the technology dimension of the US-China trade and tech rivalry.
Well before the Trump administration’s sanctions against Huawei and other Chinese tech firms, the US had voiced concern about Chinese theft of American intellectual property and forced technology transfer.
Micron’s lawsuit accused Chinese companies of stealing its trade secrets. This reinforced US arguments that China engages in unfair tech transfer practices. It also highlighted China’s multibillion dollar efforts to build competitive semiconductor firms.
However, the retaliation against Micron showed China’s capability and resolve to use its market as leverage in disputes with foreign tech firms. This presaged China’s “unreliable entities list” and other tactics later used in the trade war.
So the Micron case crystallized the core tech tensions underlying the trade war: competing subsidy and tech transfer allegations, mutual distrust, and willingness to weaponize markets. The episode remains instructive today as frictions persist between China’s tech rise and US competition concerns.
What is Micron’s current relationship with China?
While no longer outright banned, Micron continues to navigate lingering uncertainties in the vital Chinese market.
Positively, Micron appears to have regained stable access to Chinese customers following its legal settlement. In 2022, Micron announced plans for a new $15 billion memory fabrication plant in Xi’an, China. This shows an intention to strengthen its production base in China despite political risks.
However, relations remain fragile. Micron could face further probes, lawsuits, or restrictions from Chinese authorities in the event of political turmoil. Chinese efforts to cultivate domestic memory chip makers also pose a long-term threat to Micron’s market position.
For now, Micron and China maintain a mutually beneficial – if sometimes tense – economic relationship. Shared interests in avoiding major disruptions to China’s electronics sector will likely contain future disputes. But the Micron case highlighted how quickly semiconductor supply chains between China and the US can be weaponized during times of political conflict.
Could Micron face a similar ban in China again?
Based on current conditions, most industry experts think a blanket ban on Micron memory chip sales in China is unlikely in the near term.
However, Micron still faces an array of political risks that could result in some form of restricted access to the Chinese market:
- Targeted bans – Chinese courts could block sales of specific products in certain regions over disputes like alleged IP theft or patent infringement. For example, the Fujian court order in 2021 blocking certain memory sales in just Fujian province.
- Antitrust penalties – Chinese regulators could hit Micron with antitrust fines or other restrictions as political retaliation, like the 2018 probe.
- Export controls – Chinese customs could hold up shipments from Micron if the US imposes restrictive export policies targeting China.
- Unreliable entities list – China could add Micron to this list to restrict trade, as it threatened in 2020.
So while a comprehensive nationwide ban seems unlikely barring a major crisis, Micron still faces an uncertain regulatory climate in China. Smaller scale disruptions and restrictions remain plausible risks. Much depends on the overall state of US-China relations.
Conclusion
In summary, Micron has rebounded in China since its 2018 sales ban, but its long-term access to this vital market remains at risk due to political tensions. While Micron and China currently enjoy economic interdependence, deteriorating relations could prompt China to target Micron again to gain leverage. Micron gives both countries technology strengths but also political vulnerabilities. Ongoing uncertainties will compel Micron to tread cautiously in navigating China’s semiconductor landscape. With advanced memory supply chains increasingly politicized between China and the US, future disputes seem inevitable despite mutual interests in cooperation. But outright crises could likely be avoided if both sides opt for pragmatism over confrontation.