Micron’s latest forecast: China’s “restrictions” will have a significant impact

Micron Technology warned that about half of its sales related to China-based customers could be affected by the Chinese government's ongoing cybersecurity investigation, accounting for a "low double-digit percentage" of its global revenue.

Officials are contacting several Micron customers as part of an investigation by the China Cybersecurity Administration announced earlier this year, the company said in a regulatory filing. Revenue from Micron's operations in China and Hong Kong, including direct sales and indirect sales through distributors, account for about a quarter of Micron's global revenue and remain a major exposure, the company said.

"Micron is working to mitigate this impact over time and expects quarterly revenue volatility to increase," the company said in the filing.

Shares of Micron, the largest U.S. memory chip maker, fell 1.5% in New York on Friday morning.

The tech industry has emerged as a key national security battleground between the two largest economies. U.S. lawmakers condemned the move against Micron as a thinly veiled attack on an American company at a time when Washington itself is imposing sanctions on China. The United States has blacklisted some Chinese technology companies, cut off the flow of advanced processors, and banned China from providing certain assistance to the domestic chip industry.

In May, China's cybersecurity regulator said Micron's products failed review and banned the company's chips from being used in "critical infrastructure." It warned operators of critical infrastructure not to buy the company's products, saying it had found "relatively serious" cybersecurity risks in Micron products sold in the country.

Micron has previously said it stands by the safety of its products and its commitment to customers.

The ban on Micron chips adds to the uncertainty plaguing U.S. chipmakers that sell into China, the world's largest semiconductor market. Companies such as Qualcomm Inc., Broadcom Inc. and Intel Corp. supply billions of dollars' worth of chips to China, which imports more semiconductors than oil.

Despite those restrictions, the Boise, Idaho-based company announced Friday that it will invest an additional $600 million in an existing packaging plant in central China. The company announced on a Chinese social media platform that it will purchase equipment and add assembly lines at its existing plant in the city center of Xi'an over the next few years.

Washington is working to strengthen key supply chains outside China. It comes as rising global tensions raise concerns about the world's dependence on its Asian hub.

Micron announced plans to invest more than 4.3 billion yuan in its packaging and testing factory in Xi'an, China, in the next few years. The company has decided to acquire the packaging equipment of Licheng Semiconductor (Xi'an) Co., Ltd. (Licheng Xi'an), and also plans to build a new factory in Micron's Xi'an factory and introduce new and high-performance packaging and testing equipment in order to better satisfy Chinese customers. needs.

According to the long-term strategic agreement previously reached, Licheng Xi'an's equipment has been operating in Micron's wholly-owned factory since 2016. The agreement has currently expired. Micron expects the acquisition to be completed in about a year, subject to Chinese regulatory approval.

Micron said it will provide new labor employment contracts to all 1,200 employees of Licheng Xi'an. The new investment project will also create an additional 500 jobs, bringing Micron's total number of employees in China to more than 4,500.

LiCheng pointed out through a press release that the Xi'an plant was established in 2014 with the purpose of providing Micron with dynamic memory (DRAM) using WBGA packaging technology for global computers. According to the service contract that took effect in January 2016, Micron has the right to purchase Xi'an's assets after six years of the contract. It is also agreed that when Micron decides to purchase, both parties will have a one-year transition period to implement the asset transfer and delivery.

LiCheng pointed out that this week it received a formal notice from Micron about its decision to purchase LiCheng's assets in Xi'an. Based on the contract, LiCheng believes that accepting Micron's request is in the best interest of both parties. Licheng will convene an interim board of directors on the 27th to review the asset purchase and sale transaction.

Li Cheng said that it maintains a long-term partnership with Micron and hopes that both parties will continue to strengthen cooperation with each other on the existing basis.

Power Cheng explained that the transfer of Xi'an factory operations will not have any significant financial impact on Power Cheng, and the reduction in turnover will only occur after a one-year transition period.

Lichen pointed out that it rebuilt and expanded new WBGA production capacity in Taiwan last year. In recent years, we have actively worked to expand the logic and high-end packaging and testing markets. The related production capacity will continue to contribute to revenue and profits. The negative impact of the transfer of Xi'an factory operations on Licheng's turnover will be limited.

Li Cheng previously pointed out in a corporate briefing that due to the possible impact of geopolitical variables, it will evaluate the purchase of ready-made factories outside Taiwan and China and then upgrade them, but it has not yet been finalized. Licheng currently has more than 18,000 employees worldwide, with factories located in Hsinchu and Zhunan, Taiwan, Suzhou, Xi'an, China, and Japan.

In addition, people familiar with the matter said that Intel announced on Friday that it would invest US$4.6 billion in a new chip factory in Poland, and Micron was close to reaching an agreement to commit at least US$1 billion to establish a semiconductor packaging plant in India.

One of the people said the amount committed could be as high as $2 billion. Details may change as discussions proceed, and there is no guarantee that an agreement will ultimately be reached.

The deal would mark a victory for Modi's ambitious "Make in India" initiative while providing Washington with an opportunity to strengthen key supply chains outside China. Removing technical trade barriers between the two countries is a key part of Modi's state visit, US National Security Adviser Jake Sullivan said in New Delhi on Tuesday.

India's Ministry of Science and Technology and Ministry of External Affairs did not respond to requests for comment, while a representative for Micron declined to comment.

The United States is pushing to diversify advanced chip manufacturing as the industry worries about its reliance on Asian manufacturing hubs. Micron Technology also received financial support for a $3.6 billion next-generation factory it plans to build in Japan.

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