Micron says China ban unfair but won't hurt revenue

U.S. Stock Market

U.S. Stock Market

On July 3, 2018, Fuzhou Intermediate People's Court of China issued a preliminary injunction against Micron, enjoining Micron from selling related items in China. If the judgment is enforced in the future, Micron will be prohibited from selling some of its memory products in China. This time, though, it's in court for a different reason: It has accused United States rival Micron of infringing its patents on memory technology, and has been granted an early win in the form of a temporary injunction against the company. Since the fourth fiscal quarter is underway, Micron anticipates that the negative impact to revenue this quarter relating to the injunction will be approximately 1%, and the company continues to expect revenue to be within the previously guided range of $8.0 to $8.4 billion.

Other semiconductor shares suffered as well on the news as the battle between Micron and China is considered a bellwether amidst a trade fight between Beijing and Washington, and China's attempt to gain advanced chip tech and knowledge.

UMC has not commented on the poaching allegations. 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. In order to acquire the technology, China has targeted top engineers at Taiwan's chipmakers, offering lucrative salary packages to lure them into working for Chinese firms instead.

The ruling, which hit shares of Idaho-based Micron and other United States chipmakers on Tuesday, comes amid an escalating trade spat between Washington and Beijing over tariffs.

Analysts believe the ban is largely symbolic as hurting the US chipmaker would end up creating more pain for local Chinese firms who would have to rely on Korean firms Samsung Electronics and SK Hynix, pushing up memory chip prices. However, that may not be good news to Korean semiconductor companies.


The move comes after UMC took Micron to the Chinese courts over patent infringement claims.

Other chipmakers also gained.

Meanwhile, Micron's ban could put pressure on Chinese companies and thus hike up the price on some domestic-made chips, said Wang Yanhui, secretary general of China Mobile Alliance, in an interview with Chinese business newspaper 21st-Century Business Herald.

"In the end, the Chinese court is expected to withdraw the preliminary ruling", said the official. Samsung, SK Hynix and Micron have been leading this market by supplying memory semiconductors to home appliance, smartphone and server companies.

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