When it comes to cutting foreign tech companies out of China’s supply chains, the Chinese government has long chosen to work in a roundabout way or covertly. Regulators lectured executives behind closed doors, overburdened them with excessive paperwork and occasionally raided offices. Governments rarely made it clear to businesses that they were no longer welcome.
But that’s what Micron Technology was told in an announcement late Sunday night.
The Chinese government has banned sensitive information companies from buying microchips made by Boise, Idaho-based Micron. The company’s chips, which are used as memory storage in phones, computers and all sorts of electronic devices, were reviewed by China’s Internet watchdog and deemed to pose a “relatively serious cybersecurity problem.”
Micron said it was “evaluating” the government’s findings and “evaluating” what to do next. Analysts said the company, which has long sold chips in China, could eventually be cut off from Chinese companies.
The candor and speed with which Chinese officials acted against Micron (the investigation took less than two months) highlights just how far apart the two countries are when it comes to technology policy. The Biden administration last year took tough measures to block Chinese chip makers from accessing critical tools needed to build advanced chips, as well as chips that run supercomputers and create powerful artificial intelligence algorithms. rice field.
Micron’s actions, widely viewed as retaliation for such moves, demonstrate some of China’s advantages over the United States. It is a swift and feared authoritarian government that can instantly declare and enforce absolute bans. Beijing’s new tactics can also be glimpsed.
With Micron’s block, officials have carved out a space in the industry for Chinese chipmakers to fill. The move could also create a new wedge between the United States and its allies, with billions of dollars in sales if companies from those allies can step in and win business Micron could lose. may be obtained.
For Beijing, harming American companies that make critical equipment advances the government’s goal of strengthening the country’s high-tech sector.
“It may not be practical or necessary to completely replace all products with domestic products, but we need to develop our own capabilities for these core products and avoid overdependence,” he said. said Xian Ligang, director of a technology consortium in Beijing. He advised the Chinese government on technology issues. “This applies not only to the chip industry, but to other sectors,” he added.
For much of this decade, China and the United States have been vying for global technological leadership. China’s computer hacks into American companies and its policies aimed at acquiring closely held intellectual property have brought red flags to Washington. In Beijing, the revelations of former US intelligence contractor Edward J. Snowden exposed the vulnerability of being overly dependent on US technology.
As both sides sought to find new advantages, both turned their focus to the semiconductor industry. The tiny microchips that do almost all electronic thinking were convenient chokepoints for the United States, seeking to cut off China’s access to the smallest and fastest chips. The hope was to make China’s supercomputers less smart, making smartphones less marketable.
To compete with the U.S. government, China has subsidized its domestic chip leaders heavily. Some companies have failed to catch up with global rivals in cutting-edge chips, but have thrived in less sophisticated components such as memory chips and the large logic chips that power cheap smartphones and cars.
Then in October, the Biden administration announced a series of key policies aimed at China’s most successful semiconductor companies. Paul Triolo, senior vice president of China for strategic advice firm Albright Stonebridge Group, said the move, along with new multi-billion dollar subsidies for chip production in the United States, will help Chinese policy makers. He said he was seen as dull by foreigners.
“Beijing officials have been complaining in recent months to anyone willing to listen to what the US is doing,” he said. “The Chinese government sees these moves as largely politically driven and intends to retaliate,” Triolo added.
In some ways, China is better equipped for that exchange. China’s authoritarian regime allows for rapid action and ensures that few domestic companies break its policies.
In the United States, political debates and legal challenges can dull the sharpness of government efforts. For example, major U.S. companies have found legal workarounds against U.S. government attempts to cut parts sales to companies such as Chinese telecom-equipment maker Huawei. Some multinationals have successfully lobbied for licenses so they can continue to sell to blacklisted companies.
By targeting Micron specifically, China is hitting memory chips, one of the few areas where the U.S. chip race has a foothold.
While it makes strategic sense to protect such success by keeping American competitors out of the way, says economist Teng Tai, director of the Expo New Economics Research Institute in Beijing, China’s position when it comes to advanced chips. It remains heavily dependent on the United States.
“The ultimate goal of retaliation against Micron is to encourage some American companies to exercise restraint so they can further advance technology and trade cooperation and avoid pursuing an isolated and autonomous approach,” he said. wrote on Chinese social media Weibo on Monday. Exit.
Another question Sunday’s action against Micron raises is how US ally South Korea will react. Its companies, notably Samsung and SK Hynix, have benefited the most from Micron’s ban. Both companies stand to win customers from Micron, which reported $3.3 billion in sales in China in 2022.
“Why should South Korea blindly follow the United States and undermine its own interests?” said Xiang, an adviser to the Chinese government. I don’t think South Korea has such an obligation. ”
