Sales of Micron Chips Blocked in China Amid Trade Tensions with US

Despite dire need for chips, China targets US chipmaker as payback
By Frank Fang, Epoch Times
July 6, 2018 Updated: July 6, 2018

A Chinese court has temporarily halted a U.S. memory chip maker from selling its semiconductor products in China, a move that could further intensify the ongoing trade dispute between Beijing and Washington.

The Fuzhou Intermediate People’s Court, located in southern China’s Fujian Province, issued a preliminary sales injunction against Micron, the world’s largest manufacturer of memory chips, claiming that the company violated patents held by Taiwanese chip manufacturer, United Microelectronics (UMC).

The injunction prevents Micron from selling 26 semiconductor products, including DRAM and Nano flash memory chips, which are building blocks for mobile phones, computers, and other IT (information technology) devices, as well as solid-state computer hard drives (SSD), according to a July 3 online announcement on UMC’s website.

Micron said it had not been served with the injunction and would not comment further until it had reviewed documentation from the Chinese court, according to Reuters. The court declined to comment on the case and said injunctions were not posted publicly.

Back in December 2017, Micron filed a civil lawsuit in California, accusing UMC and its Chinese partner Fujian Jinhua Integrated Circuit of stealing design and manufacturing technologies related to its DRAM chips.  

In its filing, Micron said UMC, which is scaling up its China business and plans to list on the Shanghai Stock Exchange, had poached key Micron employees with the aim of helping Fujian Jinhua improve its own DRAM technology.

UMC has not commented on the poaching allegations. The U.S. case is still being heard.

This prompted UMC to countersue on Jan. 12, filing a patent infringement lawsuit against Micron at the Fuzhou Intermediate People’s Court. The lawsuit covers three areas, including specific memory applications and memory used in graphics cards.

The ban comes amid an escalating trade spat between Washington and Beijing that is spurring China to accelerate its moves to develop domestic chipmakers in order to reduce its heavy reliance on U.S. firms like Micron and Qualcomm, another U.S.-based chip maker.  

ZTE, China’s telecom giant, is currently in limbo after the Trump administration banned U.S. suppliers from providing tech components to the firm in April, as punishment for ZTE disobeying a previous agreement related to its violations of sanctions against Iran and North Korea.

The ban has crippled ZTE’s business operations and highlighted China’s severe shortage of domestic chips.  

Such is the reason why China wants to quickly narrow the technology gap with global semiconductor powerhouses such as South Korea, Japan, and the United States. In order to acquire the technology, China has targeted top engineers at Taiwan’s chipmakers, offering lucrative salary packages to lure them into working for Chinese firms instead. Micron’s own engineers at its own subsidiary companies in Taiwan were poached as well, leading Micron to file lawsuits in 2017 against former employees for stealing trade secrets and bringing them to their new employers.


The ban, along with a separate antitrust probe by China in early June against Micron and two South Korean chipmakers, SK Hynix and Samsung Electronics, are all “politically connected and intertwined,” said Arisa Liu, an analyst with Taiwan Institute of Economic Research, a leading nonprofit think tank in Taiwan, in an interview with Japanese magazine Nikkei Asian Review.  

“UMC’s move to deepen ties with China and the eagerness to join the Chinese chip ecosystem could definitely help it leverage more resources and gain business interests from the nation when many emerging Chinese chip providers still need technical support from Taiwan,” said Liu.

Much of Taiwanese semiconductor firms’ business is conducted with the mainland. According to Taiwanese business news site CnYes, in 2017, China’s top source of semiconductor imports was Taiwan, providing 36.7 percent of them. South Korea was the second-biggest provider, at 27 percent.

In 2017, Taiwan exported $92.3 billion worth of products from its semiconductor industry, 55.5 percent (worth $51.2 billion) of which went to China and Hong Kong.

Ho Chin-cheng, president of Taiwanese investment consulting firm Forwin, also believes the ban to be politically driven.

“I think that China is using this case as a payback against the U.S.,” said Ho in an interview with the Taiwan branch of New York-based broadcaster New Tang Dynasty Television.

Li Yiqiang, a partner at law firm Faegre Baker Daniels, told Reuters that normally, Chinese courts set a very high bar for granting injunctions in complex patent infringement cases, but the trade tensions may have given the court more leeway in this case.

“In today’s environment, because of the tensions between China and the United States,” local judges may feel more comfortable granting an injunction knowing they will “face less pressure from the higher courts,” Li said.


China is the largest importer of memory products, consuming 20 percent of the world’s DRAM.

Micron makes big business from selling its products to China. In 2017, Micron generated about half of its $20.3 billion fiscal revenue from China. Its other top markets, the United States (about 13 percent) and Taiwan (about 12 percent), make up a much smaller share.

The Micron ban could be a major opportunity for other global chipmakers to step in. “This is an opportunity for SK Hynix and Samsung, because the banned products are not what the Chinese can make on their own. So they have to import anyway,” Greg Roh, an analyst at Hyundai Motor Securities, told Reuters in an interview.

Others believe the ban will be short-lived. Because China cannot replace Micron’s supply of chips with its own domestically produced chips, this could ultimately lead to a reversal of the court’s ban, according to an unnamed official in South Korea’s semiconductor industry, in an interview with South Korean news portal Business Korea.  

“In the end, the Chinese court is expected to withdraw the preliminary ruling,” said the official.

Meanwhile, Micron’s ban could put pressure on Chinese companies and thus hike up the price on some domestic-made chips, said Wang Yanhui, secretary general of China Mobile Alliance, in an interview with Chinese business newspaper 21st-Century Business Herald.

According to Wang, Micron currently supplies SSD modules to Alibaba, China’s largest e-retailer; Huawei, the world’s third-largest smartphone maker; Tencent Holdings, a Chinese conglomerate providing internet and telecommunications services; and Baidu, China’s largest search engine. These Chinese companies would all need to find another supplier to meet their demand.

The unnamed South Korean industry insider also added that China already has already set South Korean chipmakers as its next target. He believes the antitrust investigation on SK Hynix and Samsung Electronics demonstrated that Chinese authorities intend to “hold Korean semiconductors in check.”

And if Chinese chipmakers advance to the technological capabilities of South Korean chipmakers in the future, “there could be a stronger pressure or sanction on Korean companies,” akin to the Micron ban, the insider said.

Reuters contributed to this report.

Follow Frank on Twitter: @HwaiDer