Beijing Bans Micron as Supplier to Big Chinese Firms, Citing National Security

Cyberspace Administration says chip maker failed review, in a move that seems aimed at hitting back at U.S. chip ban

China is banning major Chinese firms from buying from Micron Technology, saying its products pose a major national-security risk. The move caps an investigation that underscores strained relations between Beijing and Washington.

The Cyberspace Administration of China said Sunday its review of Micron products found “significant security risks” that would affect national security and warned operators of key Chinese information infrastructure—such as telecommunications firms and state-owned banks—against purchasing the company’s goods.

“We are evaluating the conclusion and assessing our next steps,” Micron said. “We look forward to continuing to engage in discussions with Chinese authorities.”

The Chinese ban came less than two months after Beijing announced an investigation on imports from Micron, the largest memory-chip maker in the U.S., in what seemed a political gesture aimed at hitting back at a sweeping ban Washington put in place late last year on selling advanced chip-making technology to China.

Chinese officials believe certain American companies lobbied the Biden administration to institute the ban. The Micron probe suggested Beijing zeroed in on Micron as a particular target. It also comes as China has broadly ratcheted up pressure on foreign businesses in a bid to fortify its economy from foreign influence.

“We firmly oppose restrictions that have no basis in fact,” the U.S. Department of Commerce said in a statement late 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.” The statement also said the Commerce Department will engage directly with Chinese authorities to detail the U.S. position and will engage with key allies and partners to address what it termed as distortions of the memory-chip market caused by China’s actions.

Even though the Micron ban only applies to big Chinese companies, the impact could be broader.

“Other domestic customers may also consider this to be a political signal to stop buying, and even replace, their products,” said Lester Ross, a Beijing-based lawyer at WilmerHale, who advises American companies in China.

The Micron review is the first investigation into foreign firms that was carried out by the cyberspace watchdog, which reports to a leadership group headed by President Xi Jinping. By comparison, past regulatory actions against foreign companies in China have been mainly conducted by market regulators over issues involving pricing and competition.

The action against Micron also comes on the heels of Beijing’s condemnation of a statement issued by President Biden and leaders of six other democracies pledging to take steps to block transfer of sensitive technology to China and protect nations from what they see as Beijing’s tactics of intimidation. China’s Foreign Ministry described the Group of Seven as fostering “Western rules” that lack international credibility.

At the same time, Beijing and Washington are trying to resume dialogue to prevent the bilateral relations from plunging further. High-level meetings have been all but frozen since the U.S. shot down an alleged Chinese spy balloon in February.

Beijing is planning to send Commerce Minister Wang Wentao to Detroit soon for a meeting of Asia-Pacific Economic Cooperation trade ministers. But given the increased bilateral tensions, senior leaders are still pondering whether Wang should go to Washington to meet with his U.S. counterpart, according to Chinese officials with knowledge of the matter.

“Such a bilateral meeting must be conducted on the basis of mutual respect,” one of the officials said.

Biden said at a news conference Sunday wrapping up the G-7 meeting in Japan that the U.S. wants to open more lines of communication with China. “Then this silly balloon that was carrying two freight cars worth of spy equipment was flying over the United States and it got shot down and everything changed in terms of talking to one another,” Biden said. “I think you’re going to see that begin to thaw very shortly,” he said.

China has been looking for ways to retaliate against intensified U.S. sanctions against Chinese companies. It has held back its required green light for mergers that involve American companies such as Intel as the U.S.-China technology war intensifies.

But Chinese officials have also been wary of punching too hard as to further limit Chinese companies’ access to advanced Western technology.

Micron represents an easy target for Beijing because Chinese companies can easily switch out its products for those made by competitors such as Samsung and SK Hynix, according to analysts and Western business executives who have consulted with Chinese authorities.

Micron derives only about 10% of its revenue from China, according to research firm Gavekal Dragonomics.

In the Sunday statement, China’s cybersecurity regulator said China welcomes products and services provided by companies of all countries as long as those goods comply with Chinese laws and regulations.