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China Fuels New Chip War as It Bans Purchases from Micron Technology

The chip and semiconductor industry is likely to see its next major distortion following the labeling of United States-based chipmaker Micron Technology Inc (NASDAQ: MU) as a threat to its National security infrastructure. As reported by CNBC, China’s Cyberspace Administration said Micron failed to pass its latest security review.

This failure prompted the regulator to direct all operators of “critical information infrastructure” in the country to refrain from buying any product from Micron Technology.

This pronouncement has caused an immense plunge in the price of the shares of Micron Technology. The shares dropped 6.12% in the Pre-market and are changing hands at a price of $64. What turned out to be a major bane for Micron appears to be a key growth driver for Chinese chip stocks.

Hong Kong-listed Hua Hong Semiconductor Ltd (HKG: 1347) inked a slight growth of 0.93% at the time of writing, data shows it has printed over 3% earlier in the day. Besides Hua Hong, the Semiconductor Manufacturing International Ord Shs (HKG: 0981) stock is also seeing a very definitive bullish growth, soaring by 1.20% over the past 24 hours.

Labeling Micron Technology as a security threat has reawakened the now obvious war between the United States and China as it concerns the maintenance of dominance in the semiconductor industry. The Micron ban can be likened to a related move from the US when it placed a ban on China’s biggest chipmaker SMIC.

During the President Trump Administration Semiconductor Manufacturing International was banned from using American technology, a move that limits its ability to expand. This ban impacted other fast-growing technology companies like Huawei Technologies Co Ltd which was also banned by the US Government.

China Ban on Micron, US Responds

The ban on Micron Technology has drawn a response from US Commerce Secretary Gina Raimondo who said America will not sit back and firmly oppose restrictions that are not backed by proper facts.

“We firmly oppose restrictions that have no basis in fact,” he said, adding that the commerce department will enter into negotiations with the Chinese government to “detail” its position and seek further clarity.

In the meantime, the Secretary said the government will enter into talks with its key allies and partners to ensure that the already fragile chip industry does not face any major distortions. While it remains uncertain the timeline that these negotiations will take, the US may seek to deepen its business ties with South Korea as it will look to cushion the impact of the Chinese ban on its technological advancement.

With the impact of the COVID-19 pandemic just wearing off in the semiconductor industry, sanctions and counter-sanctions will weigh the industry down and may impact on the bottom line of the frontline industries in this space.

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China Fuels New Chip War as It Bans Purchases from Micron Technology