China Escalates U.S. Tech War With Micron Ban

When cutting foreign technology companies from Chinese supply chains, Beijing has long chosen to work obliquely or even secretly. Regulators would give executives back-room lectures, weigh them down with excessive red tape or hit them with occasional office raids. Rarely did the government tell a firm outright it was no longer welcome.

But that is what it signaled to Micron Technology in a late-night announcement on Sunday.

The Chinese government barred companies that handle critical information from buying microchips made by the Boise, Idaho-based Micron. The company’s chips, which are used for memory storage in all kinds of electronics, like phones and computers, were deemed to pose “relatively serious cybersecurity problems” by China’s internet watchdog after a review.

Micron said it was “evaluating” the government’s finding and “assessing” what it would do next. Analysts said the company, which has been selling chips in China for years, could find itself cut out of future business from Chinese companies.

The openness and speed with which the Chinese authorities took action against Micron — they spent less than two months on the investigation — underscore how far apart the two sides are drifting on tech policy. Last year, the Biden administration took harsh steps to block Chinese chip makers’ access to crucial tools needed to make advanced chips, as well as access to the chips that run supercomputers and craft powerful artificial intelligence algorithms.

The Micron action, widely seen as a reprisal for those moves, shows some of China’s advantages over the United States: a speedy, and feared, authoritarian rule that can quickly pronounce and enforce absolute bans. It also offers a glimpse of new tactics by Beijing.

With the block of Micron, the authorities carved out a space in the industry that Chinese chip makers could fill. The move could also present a new wedge between the United States and its allies, whose companies could make billions of dollars in sales if they were to step in and pick up business that Micron might lose.

For Beijing, hurting an American company that makes critical equipment advances the government’s goal of boosting its domestic tech sector.

“It may not be feasible or necessary to completely replace all products with domestic ones, but for these core products, we need to develop our own capabilities and avoid being overly dependent,” said Xiang Ligang, a director of a Beijing technology consortium who has advised the Chinese government on technology issues. “This applies not only to the chip industry but also to other sectors,” he added.

For the better part of a decade, China and the United States have jockeyed over global technological leadership. Chinese computer hacks of American firms, and policies designed to acquire closely held intellectual property, raised red flags in Washington. In Beijing, revelations from Edward J. Snowden, the former U.S. intelligence contractor, exposed the vulnerability in relying too much on American tech.

As each side maneuvered to find new advantages, both came to focus on the semiconductor industry. The tiny microchips that do the thinking for just about all electronics were a convenient choke point for the United States, which worked to cut off China’s access to the smallest and fastest chips. The hope was to make China’s supercomputers less smart and its smartphones less salable.

To counter Washington, China lavished subsidies on domestic chip leaders. While they failed to catch up to global rivals in the arena of the most advanced chips, some firms succeeded with less sophisticated parts, like memory chips and larger logic chips that work in cheaper smartphones and cars.

Then the Biden administration in October announced a major set of policies aimed at China’s most successful semiconductor companies. The move, along with billions in new subsidies for chip production in the United States, were viewed dimly by Chinese policymakers, said Paul Triolo, the senior vice president for China at Albright Stonebridge Group, a strategy advisement firm.

“Officials in Beijing over the past months have been complaining to anyone who will listen about U.S. actions,” he said. “Beijing views these moves as primarily politically driven and is now willing to go tit for tat,” Mr. Triolo added.

In some ways, China is better equipped for that exchange. China’s authoritarian system enables quick action and guarantees that few domestic firms will break with policy.

In the United States, political debate and legal challenges can dull the sharpness of government efforts. Major American companies, for instance, found legal workarounds to Washington’s attempts to cut component sales to companies like the Chinese telecom equipment maker Huawei. Some multinationals successfully lobbied for licenses to allow them to keep selling to blacklisted companies.

By targeting Micron specifically, China is hitting at one of the few sectors — memory chips — that it has a toehold in with its chip competition with the United States.

While protecting such success by barring American competitors makes strategic sense, China remains very reliant on the United States for advanced chips, according to Teng Tai, an economist and the director of the Wanbo New Economic Research Institute in Beijing.

“The ultimate goal of retaliating against Micron is to urge certain American companies to restrain themselves, so we could further promote technology and trade cooperation, and avoid pursuing an isolated and self-reliant approach,” he wrote Monday on Weibo, a Chinese social media outlet.

Another question that Sunday’s action against Micron raises is how the United States’ ally South Korea will respond. Its companies, in particular Samsung and SK Hynix, have the most to gain from the Micron ban. The two companies stand to pick up customers from Micron, which reported $3.3 billion in sales in China in 2022.

Mr. Xiang, the Chinese government adviser, said: “Why should South Korea blindly follow the United States and harm its own interests? I don’t think South Korea has such an obligation.”