"If anything, the US restrictions are only further solidifying China's drive for self-reliance."
Micron, the biggest maker of memory chips in the United States, got barred by major Chinese companies on Sunday. The Cyberspace Administration of China stated that their evaluation of Micron products revealed significant security risks that could potentially impact national security.
This ban arrives shortly after Beijing authorities initiated an investigation into Micron imports, which appears to be a political maneuver in response to the U.S.'s implementation of export controls on Chinese chip firms.
The U.S.'s decision to impose such controls demonstrates America's technological prowess and concerns over China's ability to independently design and produce semiconductors, which U.S. officials believe could bolster China's military advancement.
Chinese authorities have singled out Micron as the first U.S. chipmaker to face their scrutiny, and this evaluation is expected to have a significant negative impact on Micron's business opportunities in the country. Prior to this incident in 2022, Micron successfully generated $5 billion in revenue from China, contributing to 16% of its overall revenue.
While the ban specifically targets major firms, it is highly probable that smaller companies in China will follow suit and distance themselves from Micron. However, this decision creates opportunities for numerous emerging chip companies in China and aligns with the government's objective of promoting its domestic technology sector.
The global memory chip industry is dominated by two types, DRAM and NAND. In 2021, these two types accounted for 97% of all memory chips in China. Globally, in 2022, Micron held 23% of the DRAM market and 10.7% of the NAND flash memory market.
With Micron out of the way, now up-and-coming companies like Chengxin Memory Technologies can step up to the plate. They are China's most well-known DRAM manufacturer, and their global market share is currently about 1%. They are getting ready to launch an IPO on Shanghai's NASDAQ-style star market, which could value the company at $4.5 billion.
For NAND chips, China's top player is Yongtze Memory Technologies Core, with a global market share of 4.5% as of 2021. The company's innovative technology has allowed it to fabricate denser NAND chips than any other company in the world, to a point where in 2022 Apple announced that it would be using their chips in its products. However, this deal fell through following the imposition of U.S. export controls.
The banning of Micron shows that China is willing to go tit for tat in the escalating tech war between the United States and China. However, the country is still heavily reliant on the United States and other countries for advanced chips.
The most recent data shows that the United States and Japan provide almost 60% of China's microchip fabrication equipment, with the Netherlands also serving as an important supplier. The restrictions placed on China's tech sector could slow development. However, there are factors outside of the US's reach.
China has the ability to produce higher quality chips. What it strongly lacks is the commercial capability to scale up production. And the US's bans on chip exports could actually shoot itself in the foot, as it closes the door to some of its biggest tech companies' most significant market. For example, in recent years, China accounted for 27% of sales at Intel.
If anything, the US restrictions are only further solidifying China's drive for self-reliance. While they might have slowed China's progress, cutting its access to much-needed resources and isolating the country from buyers, the banning of Micron shows that the tech war is likely to get messier before things calm down if communications between the US and China continue to be cold.
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