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SEOUL/SHANGHAI: US-based Micron Technology Inc on Monday (May 22) forecast a hit to revenue in the low-single to high-single digit percentage after a ban by China on the sale of its memory chips to key domestic industries marked the latest in the Sino-American trade dispute.
China’s cyberspace regulator said late on Sunday that Micron, the biggest US memory chipmaker, had failed its network security review and that it would block operators of key infrastructure from buying from the company.
It did not provide details on what risks it had found or what products from the company would be affected.
Analysts said they saw a limited direct impact on Micron as most of its key customers in China are consumer electronics players, but warned the move could prompt some companies to rid their supply chains of Micron products due to political risks.
Micron Chief Financial Officer Mark Murphy said at a conference on Monday it was unclear what concerns Beijing had and direct and indirect sales to China-headquartered companies accounted for about a quarter of the chipmaker’s revenue.
“We are currently estimating a range of impact in the low single-digit percentage of our company’s total revenue at the low end, and high single-digit percentage of total company revenue at the high end,” Murphy said.
The remarks helped Micron’s shares pare losses, with the stock closing down 2.8 per cent at US$66.23 on the Nasdaq on Monday.
Beijing’s decision was opposed by Washington but helped stocks of Micron’s rivals in China and South Korea, which are seen benefiting as mainland firms seek memory products from other sources.
“We firmly oppose restrictions that have no basis in fact,” a spokesperson from the US Commerce Department said on Sunday.
“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.”
Tensions between Washington and Beijing have grown in recent months following raids and visits by Chinese authorities to US corporate due diligence firm Mintz Group and management consultancy Bain.
Micron is the first US chipmaker to be targeted by Beijing following a series of export controls by Washington on certain American components and chipmaking tools to block them from being used to advance China’s military capabilities.
China launched the review in late March amid a dispute over chip technology and worsening relations between Washington and Beijing.
The move also comes shortly after the Group of Seven nations agreed to “de-risk, not decouple” economic engagement with China and as US President Joe Biden called for an “open hotline” between Washington and Beijing.
The US Commerce Department said it would speak directly with authorities in Beijing to clarify their actions.
“We also will engage with key allies and partners to ensure we are closely coordinated to address distortions of the memory chip market caused by China’s actions,” the department said.
While the Chinese statement and state media said the Micron decision needed to be seen as an individual case in the context of national security concerns, not geopolitics, prominent Chinese commentator Hu Xijin struck a different note.
“Washington itself encourages US companies to do things that endanger China’s national security, so it suspects that Chinese companies are doing the same,” the former editor-in-chief of nationalist state tabloid Global Times tweeted. “The whole world should be wary of the US.”
Michael Hart, president of the American Chamber of Commerce in Beijing, said the ban sparked uncertainty among US companies operating in China.
Hart said: “Members are asking us two things: will they be targeted because they are American, and how can they ensure they remain compliant in a business environment that appears to be increasingly influenced by national security concerns?”
The Republican chairman of the House Foreign Affairs committee, Michael McCaul, called the Chinese legal system “mafia-like” and blasted Beijing for “bullying an American company”.
