China urges companies to stop buying Micron products, citing security risks

The Chinese government has warned users of computer equipment that is considered sensitive to stop purchasing products from Micron Technology Inc., the largest memory chipmaker in the United States. The Cyberspace Administration of China has stated that Micron products pose unspecified “serious network security risks” that threaten national security and the country’s information infrastructure. The government agency’s six-sentence statement did not provide further details. It has asked operators of critical information infrastructure in the country to avoid purchasing products from Micron Co.

China’s struggle to retaliate without hurting its own industries

China has been involved in a dispute with the US, Europe, and Japan, who have been reducing Chinese access to critical technology, including chipmaking. The countries have stated that they are concerned about the technology being used in weapons, particularly when President Xi Jinping’s government has threatened to attack Taiwan and has become increasingly assertive towards Japan and other neighbouring countries. The Chinese government has warned of unspecified consequences but is finding it difficult to retaliate without damaging its own smartphone producers and other industries, as well as its efforts to develop its processor chip suppliers.

Micron was subjected to an official review under China’s increasingly stringent information security laws on April 4, just hours after Japan joined the US in imposing restrictions on Chinese access to technology to make processor chips on security grounds. Foreign companies have been impacted by police raids on two consulting firms, Bain & Co. and Capvision, as well as due diligence firm, Mintz Group, but Chinese authorities have declined to explain the reasons for the raids. They have, however, stated that foreign companies are required to comply with the country’s laws.

China aims to reassure foreign companies

Despite the rhetoric from Xi in March about Washington trying to block China’s development and his call for the public to “dare to fight,” Beijing has been slow to retaliate against the US, likely to avoid disrupting its own industries, which manufacture the majority of the world’s smartphones, tablet computers and other consumer electronics. Such industries import over $300bn worth of foreign chips each year. Beijing is investing billions of dollars to accelerate chip development and reduce the need for foreign technology. While Chinese foundries can produce low-end chips for use in home appliances and autos, they cannot support smartphones, artificial intelligence and other advanced applications.

Observers have warned that the dispute may cause the world to decouple, with separate spheres of incompatible technology standards. This would increase costs and slow innovation. US-Chinese relations are now at their lowest level in decades due to disputes over security, China’s treatment of Muslim ethnic minorities and Hong Kong, territorial disputes and China’s multibillion-dollar trade surpluses. China has stated that it is promoting high-level opening up to the outside world and is welcoming enterprises and various platform products and services from various countries to enter its market as long as they comply with Chinese laws and regulations.