Domestic memory chip sector could be spurred to grow faster following Micron's failure to pass China review: analysts
Published: May 23, 2023 06:14 PM
Micron Photo: VCG

Micron Photo: VCG

Micron's stock price declined on Monday after it failed China's cybersecurity review, while its rivals in China, South Korea's Samsung Electronics and SK Hynix, rose.

The Micron drop came after China's Cybersecurity Review Office on Sunday made public the results of a cybersecurity review involving the company, saying that the company didn't pass the review, because it has relatively severe cybersecurity problems that could pose significant security risks to China's critical information infrastructure supply chain.

Markets responded despite the fact that some foreign media outlets reported that the Biden administration had long warned the South Korean government not to seize the opportunity to fill market void in China if Chinese authorities ban Micron chips.

On Monday, Micron's shares closed down 2.8 percent at $66.23 in New York while Samsung Electronics and SK Hynix still maintained gains on the heels of last week's rise.

Micron is a leading memory chip maker in the US and one of the global memory chip giants. The company's revenue from Chinese mainland in 2022 reached $3.3 billion.

According to a Reuter report, Micron's Chief Financial Officer Mark Murphy said at a conference on Monday that they are currently estimating the range of the impact in the low single-digit percentages of the company's total revenue at the low end, and high single-digit percentage of total company revenue at the high end.
"Direct and indirect sales to China-headquartered companies accounted for about a quarter of the chipmaker's revenue," Murphy said.

Chinese regulators' security review on Micron drew opposition from the US Department of Commerce. The department said that the action, along with recent raids and targeting of other American firms, is inconsistent with China's assertions that it is opening its markets and committed to a transparent regulatory framework.

In response, Mao Ning, a spokesperson from the Chinese Foreign Ministry said on Monday that China's review of Micron is aimed at protecting the security of China's key information infrastructure, which is a necessary measure to maintain national security.

"We are always committed to promoting high-level opening up... As long as the stipulations of Chinese laws and regulations are observed, we welcome all kinds of platform products and services of enterprises from all countries to enter the Chinese market," Mao said.

China will continue to welcome US companies to develop in China and achieve win-win results based on mutual respect and benefit, Wang Wentao, China's commerce minister, said at a symposium participated by representatives from some US companies on Monday.

Wang noted that China's unswervingly push for high-level opening-up and positive momentum of its economic recovery will provide more opportunities for foreign companies, including those from the US.

The issue of Micron may bring development opportunities for the Chinese memory chip makers. On Monday, the memory chip sector gained across the A-share market, with Raynen hitting a daily limit and Toyou Feiji Electronic rising nearly 14 percent.

Fu Qiang, an analyst with Ping An Securities said that the review highlights China's high regard for semiconductor security, which will further promote the development of domestic memory industry chain. 

Analysts from Sinolink Securities believe that the results of Micron review will benefit domestic memory chips makers significantly, and the speed of domestic memory chips production is expected to be accelerated.