Korean memory chipmakers ― Samsung Electronics and SK hynix ― could benefit from Micron Technology’s absence in the Chinese market over the short term as China’s sanctions on the U.S. chipmaker went into effect, Sunday. But the latest development is not expected to be favorable for them in the long run as Beijing’s action will also benefit Chinese chipmakers, according to industry experts, Monday.

On Sunday, the Cyberspace Administration of China (CAC) released a statement titled, “Micron’s products sold in China fail cybersecurity review.” The cyberspace regulator said it decided that products made by the U.S. chipmaker had failed its network security review and that it will ban operators of critical infrastructure from buying products from Micron.

“The purpose of this network security review of Micron’s products is to prevent product network security issues from endangering the security of the country’s key information infrastructure, which is a necessary measure to maintain national security,” the CAC said. The key information infrastructure includes transport, public services, finance and energy.

China’s sanction on Micron was nothing new. In March, the CAC said it was conducting a cybersecurity review of Micron’s products sold in China, citing national security concerns. This was the first time China has conducted a cybersecurity review of a foreign chip company and the move is interpreted as being an obvious retaliation against a U.S. ban on semiconductor exports to China since October 2022.

The ban dealt a significant blow to Micron as the Chinese market accounts for the third-largest portion of the company’s revenues following the U.S. and Taiwan, with 25 percent of its $30.8 billion revenue in 2022 coming from China and Hong Kong.

Banning Micron in the infrastructure market in China also put Samsung and SK in the middle of an escalating U.S.-China chip war, because Washington reportedly urged the Korean government in April to prevent Korean chip companies from filling the shortage if China bans Micron’s sales.

Jim Handy, general director of Silicon Valley-based semiconductor market research company, Objective Analysis, said banning Micron from the key infrastructure market in China would benefit Samsung and SK, the two other major players in the global memory chip market. But on the other hand, he said this also means that Korean companies must deal with the rapid rise of Chinese chipmakers.

“Although China’s action could be very beneficial in the short term to Samsung and SK Hynix, both of these companies understand the value of having a third competitor, so I am certain that they will deal with the situation responsibly,” the analyst told The Korea Times.

He speculated that China may have taken advantage of the current oversupply of semiconductors in the market and decided not to use Micron’s products.

“There’s a big DRAM and NAND flash oversupply right now. I suspect that the Chinese government expects it will be able to use this to its advantage in the China-U.S. trade war. I also suspect that right now, Chinese companies that are using DRAM and NAND flash are calling their political representatives asking for them to reconsider. The same kind of thing happens in the U.S. when the U.S. government takes any action against China. These actions usually hurt both sides. In the U.S. we call this a ‘double-edged sword,'” the analyst said.

Kyung Hee-kwon, an associate research fellow at the Korea Institute for Industrial Economics and Trade (KIET), also said the Chinese government’s decision to exclude Micron from semiconductor products used in critical infrastructure could be seen as stemming from a political dispute with the U.S., but it could also be seen as a situation where products from Chinese companies could be replaced.

“This is not a good thing for Korean companies. In the first quarter of this year, Micron’s share of NAND memory semiconductors was around 10 percent, while China’s YMTC accounted for almost 6 percent. The share of 128-layer NAND semiconductors accounts for about 40 percent of the total share of NAND, and YMTC may have acted because it believes its technology can displace Korean and U.S. technology,” the researcher said.

“We don’t know what security concerns the Chinese government is referring to. However, if we look at it purely from the perspective of market logic, China could think that it wouldn’t be hurt by not using Micron products. They didn’t say they were banning Micron products used in IT products,” Kyung added.


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