China has implemented a ban on the sale of products from Micron, the largest memory semiconductor company in the United States, marking the first time China has imposed sanctions on a US semiconductor company.
The escalating conflicts between the US and China in the semiconductor industry, along with concerns about management uncertainty at Korean semiconductor companies, are further complicating the situation.
On May 21, the Cyberspace Administration of China (CAC) stated that Micron products pose a significant network security risk, which in turn threatens China's information infrastructure supply chain and national security. Consequently, operators of critical information infrastructure within the country are prohibited from purchasing Micron products.
While the specific companies affected by the purchase ban were not disclosed, critical information infrastructure encompasses various sectors such as transportation and finance. There are growing concerns that other US semiconductor companies, including Intel and Qualcomm, might also face potential sanctions in the future.
The Korean semiconductor industry has responded unexpectedly to China's sanctions on Micron. Previously, in 2018, during a patent lawsuit involving a Chinese company, Micron faced a sales ban. This history made it unlikely for the same company to be subjected to sanctions again. However, the current situation raises concerns about uncertainty within the domestic semiconductor industry.
Amidst the situation, there are divergent views on the impact on Korean companies. Some anticipate that Korean companies will fill the void left by Micron in the Chinese market, while others fear that they might also face adverse consequences as the US responds to China's sanctions.
China's ability to impose sanctions on Micron this time is seen as a result of its belief that it can substitute Micron's products through imports. An industry insider noted that while replacing Micron solely with domestic companies would be challenging for China, it can adequately fill the gap through imports. Consequently, Korean semiconductor companies could benefit from this process.
In fiscal year 2022, Micron generated sales of $4.976 billion in China. However, if the suspension of Micron's product sales persists, it is highly likely that Samsung Electronics and SK Hynix, which compete in the Chinese market, will emerge as substitutes for Micron, especially considering the existing DRAM inventories in China.
China has been striving to increase its self-sufficiency rate in semiconductors to counter US trade sanctions. However, meeting domestic demand entirely remains challenging. In the first quarter of this year, China experienced a 26.7% decline in semiconductor exports and a 13.5% decrease in imports compared to the same period last year.
The US response to Chinese sanctions will be a crucial variable in the unfolding situation. The US government has reportedly approached the Korean government, inquiring whether Korean companies would supply the shortfall in case China bans Micron's semiconductor sales.
This strategic move aims to maximize the damage caused to China by the Micron sanctions and could potentially involve direct control over Korean semiconductor companies' business in China.
Consequently, the possibility of China imposing sanctions on Korean semiconductor companies following the Micron case cannot be ruled out.
An industry insider raised concerns that Samsung Electronics and SK Hynix, being allies of the United States, might also face sanctions by the Chinese government.
