China imposes sales restrictions on Micron as it escalates tech battle with Washington.

 Hong Kong CNN — 

China has banned US chip maker Micron from selling to Chinese companies working on key infrastructure projects, in a significant escalation of an ongoing battle between the world’s top two economies over access to crucial technology.

The Cyberspace Administration of China (CAC) announced the decision on Sunday, saying the US chip maker had failed to pass a cybersecurity review. The news came shortly after the close of the Group of Seven (G7) summit in Hiroshima, Japan, where leaders of significant democracies spoke in one voice on their growing concerns over China.

“The review found that Micron’s products have relatively serious cybersecurity risks, which pose significant security risks to China’s critical information infrastructure supply chain and would affect national security,” the Chinese regulator said in a statement.

As a result, operators involved in critical domestic information infrastructure projects should stop purchasing products from Micron, it said.

Micron Technology’s (MU) shares sank about 6% in premarket trading Monday. Its Asian rivals had finished the day higher. Shares of Chinese memory chip maker Ingenic Semiconductor jumped 2.8%. Shenzhen Techwinsemi Technology surged 6.3%. Toyou Feiji Electronics soared by 14%. In Seoul, SK Hynix, one of the world’s largest memory chip makers, gained 0.9%, outperforming the South Korean market.

The Chinese regulator’s decision came seven weeks after it kicked off a cybersecurity review of Micron’s products in apparent retaliation against sanctions imposed by Washington and its allies on China’s chip sector.

Micron is one of the largest memory chip makers in the United States. It derives more than 10% of its revenue from mainland China.

The company told CNN that it had received the regulator’s notice and was assessing its next steps.

“We look forward to continuing to engage in discussions with Chinese authorities,” it said.

The US Commerce Department said it firmly opposed the restrictions that “have no basis in fact,” according to Reuters.

“This 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,” it was quoted as saying.

On Sunday, China’s Foreign Ministry accused G7 leaders of “hindering international peace” and said the group needed to “reflect on its behavior and change course.

China’s‘ economic coercion’

In a landmark joint communique Saturday, G7 member countries had made the group’s most detailed articulation of a shared position on China to date — stressing the need to cooperate with the world’s second-largest economy but also to counter its “malign practices” and “coercion.” in a landmark joint communique Saturday.

Since October 2022, Washington has imposed sweeping export curbs on advanced chips and chip-making equipment in China to cut off China’s access to critical technology for military purposes.

In March, Japan and the Netherlands, both key US allies, also announced restrictions on overseas sales of chip-making technology to countries including China. China has strongly criticized the conditions, labeling them “discriminatory containment” directed at the government.

US curbs on microchips could throttle China’s ambitions and escalate the tech war.

Chips are central to Beijing’s bid to become a tech superpower. China has its chip manufacturers, but they supply primarily low- to mid-end processors used in home appliances and electric vehicles.

The semiconductor battle is part of a growing divide between the United States and China. In recent years, relations between the two have reached their lowest level in decades.

Tensions escalated this year after US fighter jets shot down a suspected Chinese spy balloon in February. Beijing continued to deepen its ties with Russia despite its continued invasion of Ukraine.

However, US President Joe Biden said on Sunday that he expected ties between the two countries to improve soon.

“I think you are gonna see that begin to thaw very shortly,” Biden told a news conference at the end of the Group of Seven summit in Japan.

He said he had agreed with Chinese President Xi Jinping in November to keep communications open. However, everything changed after a “silly balloon carrying two freight cars worth of spying equipment” was shot down.

“We are not looking to decouple from China,” he said. “We are looking to de-risk and diversify our relationship with China.”