Micron to Halt Server Chip Supply to China
SEOUL/SHANGHAI, Oct 17 – Micron has announced plans to cease supplying server chips to Chinese data centers in 2023. This decision comes after the Chinese government failed to reverse its ban on Micron’s products within critical infrastructure, according to sources familiar with the matter.
Micron was the first U.S. semiconductor company to be targeted by Chinese authorities. Many view this as a response to various U.S. regulations designed to limit the technological growth of China’s semiconductor sector.
Following this announcement, Micron’s stock dropped by approximately 1%.
Meanwhile, other chip makers, like Nvidia and Intel, have also faced scrutiny from Chinese officials who allege their products represent potential security threats, though no regulatory actions have been taken against them.
Continuing Business with Lenovo
Despite the halt in server chip supplies, Micron plans to maintain sales to two Chinese customers that operate large data centers outside the country, including laptop manufacturer Lenovo.
Last fiscal year, Micron generated $3.4 billion from sales in mainland China, representing 12% of its total revenue. The company will also continue to supply chips to sectors such as automotive and mobile phones in China.
When asked about leaving the China data center market, Micron stated it has been impacted by the ban but is committed to adhering to relevant regulations.
While Lenovo did not respond to requests for comment, an analyst noted that “Micron will seek new customers in other regions like Asia, Europe, and Latin America.”
“While China remains a significant market, the rising demand for AI is propelling global data center growth. So, Micron is hopeful to capture lost business elsewhere,” the analyst added.
The U.S.-China trade tensions and technological rivalry have escalated since 2018, particularly following tariff implementations on Chinese imports during President Trump’s tenure. That year also saw U.S. accusations against Huawei regarding national security risks, leading to further sanctions.
Huawei denies such allegations, and both Nvidia and Intel have rejected claims that their products are security threats. Micron has asserted the safety of its products as investigations continue in China.
Currently, the U.S. has imposed sanctions on numerous Chinese enterprises, while China has fewer restrictions, as it largely relies on imported technology.
Challenges Amidst China’s AI Growth
The prohibition against Micron products in China’s critical infrastructure markets has meant the company has missed out on the booming expansion of data centers. This presents a significant advantage for competitors like Samsung Electronics, SK Hynix, and domestic firms such as YMTC and CXMT, who are swiftly growing with government backing.
Investment in Chinese computing data centers skyrocketed last year, increasing ninefold to 24.7 billion yuan ($3.4 billion), as per a review of government procurement records.
Regardless of its challenges in China, Micron is benefiting from increasing global demand for data centers driven by the adoption of artificial intelligence. This trend has positively impacted the company’s quarterly sales, leading to significant growth.
Micron’s data center team in China includes over 300 employees, and while the exact number of potential job losses remains unclear, the company has already begun scaling back overall operations in the country. In August, Micron laid off hundreds from its universal flash storage program due to the decision to halt the development of future mobile NAND products globally, as reported by the South China Morning Post.
Nonetheless, Micron is continuing some operations in China, including a chip packaging facility in Xi’an. The company emphasized, “We have a strong business presence in China, which continues to be an important market for Micron and the semiconductor sector as a whole.”
