Micron gauges the damage after China’s sales ban, as South Korean firms stand to fill its void

Beijing on Sunday said products from the Boise, Idaho-based firm posed a “national security risk”, an allegation that the US commerce department said has “no basis in fact”. Micron has said it would maintain communications with Chinese authorities.

“We remain unclear as to what security concerns exist, and we’ve had no complaints from customers on the security of our products,” Murphy said. “We look forward to enabling our customer success in China within the confines of local laws and regulations.”

In China, CIIOs generally include a large range of sectors, such as communications and information services, energy, transport, water resources and finance. Micron currently expects the new ban to exclude consumer electronics manufacturers, such as smartphone makers, according to Murphy.

Micron will lose close to 10 per cent of its revenue if it loses customers in networking, server and cloud, and government-owned sectors that use its advanced memory chips, according to estimates by market intelligence provider TrendForce.

Mainland China and Hong Kong-headquartered customers represent about 16 per cent of Micron’s revenue, according to the Nasdaq-listed company’s filings.

Indirect sales through distributors to China, along with direct sales, make up about a quarter of its total revenue, said Murphy.

China’s move against Micron, seen as a retaliation against Washington’s tightened export controls of advanced US semiconductor technology, could shake up the memory chip supply chain in China and prove a boon for Korean chip makers.

Samsung and SK Hynix, the two largest memory chip makers in the world, have production facilities in China and the technical capabilities to adequately replace Micron’s chips, analysts say.

A Samsung Electronics semiconductor factory in Hwaseong, South Korea. Photo: Getty Images)

A Samsung Electronics semiconductor factory in Hwaseong, South Korea. Photo: Getty Images)

While the Biden administration has reportedly requested South Korea not to fill any market gap in China if Micron was banned, so far, there has been no signs that Seoul will intervene.

South Korea’s vice-minister of trade Jang Young-jin said it would be up to Samsung and Hynix to make their own judgment on the situation, according to a Financial Times report on Monday.

“Seoul has never restricted semiconductor trade with China,” said an expert with ties to South Korean policymakers, who spoke on condition of anonymity.

“Companies including Samsung and SK Hynix are very market-driven and generate [a major part] of their revenues from the Chinese market.”

Samsung and Hynix did not respond to requests for comment.

A SK Hynix factory in Cheongju, South Korea. Photo: Kyodo

A SK Hynix factory in Cheongju, South Korea. Photo: Kyodo

China’s ban will have a limited impact on global memory chip demand in the short run, as the market is suffering from an oversupply, according to Brady Wang, a Taipei-based semiconductor analyst with Counterpoint Research.

If the ban goes on for two or three years, however, South Korean players can reap the benefits of Micron’s absence in China, he said.

TrendForce data shows that in the first quarter of this year, Micron had a 28 per cent global market share of DRAM chips, used in everything from television sets to smartphones, behind Samsung’s 43 per cent.

But if South Korea chooses to limit its memory chip exports to China, it would make Beijing’s task of replacing US chips more difficult, according to Richard Windsor, research director at Counterpoint.

Regardless of whether Chinese manufacturers will be restricted from accessing Korean chips, the Micron ban may deter some of them from relying as heavily on foreign semiconductors, according to Ben Yeh, an analyst with technology market research firm Canalys.

“In the future, they may consider adopting a greater allocation to domestic makers as a result of this situation. This potential shift in their sourcing policies could have broader implications for the industry,” he said.

Che Pan contributed reporting

The news is published by EMEA Tribune & SCMP210520-twitter-verified-cs-70cdee.jpg (1500×750)

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