China Bans Micron Chips: Trade War Accelerates

China accounts for 50% of Micron's revenue. China put an end to that today.

MarketWatch reports Micron Stock Dives as China Blocks Sales, other chip stocks join in fall.

Fireworks came early for shares of Micron Technology Inc. on Tuesday, following a report that a Chinese court had blocked sales in China of memory chip products from the Boise, Idaho-based company.

Shares of Micron MU, dropped 5.5% to close at $51.48 in Tuesday’s abbreviated session ahead of the July Fourth holiday, after touching an intraday low of $50.10. Shares are still up 25% for the year, compared with a 3.6% rise in the PHLX Semiconductor Index SOX, and a 1.5% gain in the S&P 500 index SPX.

While China accounts for an estimated quarter of global memory chip sales, half of Micron’s revenue comes from China sales, according to FactSet data. Another 12.5% comes from sales to Taiwan, according to FactSet.

Micron Revenue by Country

Patent Issue?

Bloomberg reports Micron Chip Sales Banned in China on Patent Case, Rival UMC Says.

This is not a patent issue. This is further escalation of a trade war and it strikes smack at US giant Micron.

The headline may be correct, at least in terms of what China claims, but we know the real reason is an escalating trade war. The body of the article has some interesting details.

China’s Huawei Technologies Co. and ZTE Corp. are fighting U.S. government action that threatens to cut them off from U.S. suppliers and potential customers. On Monday, the U.S. moved to block China Mobile Ltd., the world’s largest mobile phone service provider, from entering the U.S. market, citing national security grounds. Meanwhile, Qualcomm Inc. is still waiting for permission from Chinese regulators to complete its acquisition of NXP Semiconductors NV. That delayed deal was scheduled to be closed at the end of last year and has been approved everywhere else in the world.

While their governments fight, companies face potential disruption of a complex supply chain that produces most of the world’s smartphones, computers and their components. For example, Qualcomm designs its chips at its San Diego headquarters, then has them manufactured in Taiwan, Korea and China. The semiconductors then become the most important electronic parts in phones that are mostly made in China and then sold worldwide.

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Comments

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David B. Johnson 11 months ago Member's comment

Hi Mish, I'm a fan but I think this is a misleading headline. China did not ban all #Micron chips. Only what amounts to a small percentage of their profits. $MU

Harry Goldstein 10 months ago Member's comment
Ayelet Wolf 11 months ago Member's comment

Mish Shedlock, are you going to address this point? made by David?