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China escalates tech battle with review of US chipmaker Micron

China launched a review into US chip manufacturer Micron Technology on “national security” grounds, as Beijing retaliates against Washington’s increasing curbs on Chinese access to semiconductor technology.

In a statement released late on Friday, the Cyberspace Administration of China said it would review imports of Micron’s products in order to maintain national security, ensure the security of its information infrastructure and prevent risks caused by product problems.

Nasdaq-listed Micron Technology is America’s largest maker of memory chips. Its shares fell 4 per cent in the US following the announcement.

The semiconductor industry is at the heart of economic decoupling between the world’s two superpowers. In October last year, Washington introduced expansive chip export controls in an effort to slow China’s progress in artificial intelligence and super computers. Since then, the Netherlands and Japan joined the US in imposing more restrictions.

The CAC announcement late on Friday marks a retaliatory move from Beijing and adds to the challenges facing businesses caught between the two countries.

The Biden administration has intensified economic pressure on China, with a special committee in Washington adding to bipartisan scrutiny on US businesses operating in the mainland. In response, companies in China are exploring how to diversify their supply chains.

In September last year, Micron announced it would receive around $320mn in subsidies from the Japanese government to expand co-operation with the US.

Despite China adopting a more conciliatory tone to business as it reopens from years of isolation during the pandemic, there are signs there could be more retaliation in response to Washington’s restrictions.

Last week, top US business leaders including Apple chief Tim Cook largely kept a low profile at the China Development Forum, an annual opportunity for them to meet top officials in Beijing.

The Netherlands and Japan in January reached a deal with the US regarding semiconductor exports, with the latter unveiling restrictions on 23 types of equipment on Friday. The deal is designed to cut off China’s access to advanced chips that could be used in sophisticated weaponry and machines.

Tan Jian, the Chinese ambassador to the Netherlands, last month warned of “consequences” if the country went ahead with export curbs.

In its quarterly report published in March, Micron said that “the Chinese government may restrict us from participating in the China market or may prevent us from competing effectively with Chinese companies”.

It also warned over the risk of losing access to rare earth materials that are mainly produced in China.

“Constrained supply of rare earth elements, minerals, and metals may restrict our ability to manufacture certain of our products and make it difficult or impossible to compete with other semiconductor memory manufacturers who are able to obtain sufficient quantities of these materials from China,” the company said.

In a statement provided to Bloomberg following the announcement of the investigation, Micron said it was communicating with the Chinese regulator and co-operating fully.

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