Micron says China ban unfair but won’t hurt revenue

07 July, 2018, 04:00 | Author: Frank Williams
  • Semiconductors are among China's biggest imports rivalling oil

A Chinese court has temporarily barred Micron Technology Inc (MU.O) from selling its main semiconductor products in the world's biggest memory chip market, citing violation of patents held by Taiwan's United Microelectronics Corp (UMC) (2303.TW).

However, sources close to the company say it is now drafting a response to the ruling by the Fuzhou Intermediate People's Court of the People's Republic of China. In January, UMC filed a patent infringement lawsuit against Micron in China.

China's aim may not be to bar shipments of Micron's chips, instead the ruling may be part of a strategy to push it into a partnership with Chinese semiconductor makers, which could speed up the country's internal chip industry development, according to Stifel Nicolaus analyst Kevin Cassidy.

"The Fuzhou Court issued this preliminary ruling before allowing Micron an opportunity to present its defense", said Joel Poppen, Micron's general counsel.

In its civil complaint in December, Micron accused UMC of attempting to recruit high level personnel in Taiwan and entice former staff at Micron Taiwan to steal files which could help Jinhua, at the time little-known, to jumpstart China's campaign of developing its own technology for chips.

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Micron said it had not received the injunction and could not comment.

It said in June the case could "have a material adverse effect" on its business, requiring changes to its China operation. Micron, naturally, disagrees with UMC's claims, and in an interesting twist has issued a statement of its own claiming to have not yet been served with any such injunction. Jinhua has denied the allegations.

Li Yiqiang, a partner at law firm Faegre Baker Daniels, told Reuters that normally, Chinese courts set a very high bar for granting injunctions in complex patent infringement cases, but the trade tensions may have given the court more leeway in this case.

Roughly one quarter of all global memory chip demand comes from China. If the ban is enacted, Micron's competitors, including Samsung, SK Hynix, WDC, Intel, Toshiba and the new entrant YMTC would be benefited.

And if Chinese chipmakers advance to the technological capabilities of South Korean chipmakers in the future, "there could be a stronger pressure or sanction on Korean companies", akin to the Micron ban, the insider said. "So they have to import anyway", said Greg Roh, an analyst at Hyundai Motor Securities. Micron shares closed down 5.5% the day before the Fourth of July holiday. Taiwanese rival United Microelectronic Corporation (UMC) released a statement yesterday revealing the news, which saw shares in the American firm fall by as much as 8 percent.

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