U.S. memory chip maker Micron Technology is retreating from China’s data center space, a major exit following Beijing ban on its products from sensitive infrastructure in 2023. The exit is the latest casualty following mounting tech hostilities between the globe’s two biggest economies.
Two sources familiar with the move revealed that Micron is to halt server chip shipments to Chinese data centers amid the inability of the business to gain momentum from the government-imposed restrictions. The share price of the company fell by approximately 1% with the exit news.
Micron, Nvidia, and Intel in the Crosshairs of US-China Trade Tensions
Micron became the first large U.S. chip firm to come up against Beijing’s regulatory hammer in what many perceived as a form of reprisal for Washington’s chip restrictions aimed at China. The 2023 ban barred critical infrastructure operators in China from buying products from Micron, effectively denying the firm entry to a huge category of the market.
Restrictions were introduced with the broader U.S.-China trade tensions that have been brewing since 2018, when the first Trump administration started to impose tariffs on Chinese products and sanction Chinese companies due to national security issues.
Since the sanction of Micron, other American chip titans have been implicated by Beijing. Nvidia and Intel were blamed by both Chinese regulators and business groups for being security risks, but so far, no real regulatory proceedings have been taken up with the two corporations. The three corporations all vigorously dismissed the claim that what they produce is any kind of security risk.
Despite Micron getting out of the data center business, it is not completely giving up hope for China. The company will continue to sell to two Chinese customers with significant data center operations outside China, including laptop maker Lenovo. Micron also wants to maintain a presence in the automotive and cell phone markets in China.
Micron Forfeits China Data Center Boom to Rivals, Bets on Global AI Demand
China was a very large piece of business for Micron, contributing $3.4 billion or about 12% of the overall sales for the last fiscal year of the firm. The loss in server business is a very important blow, but the firm is expecting to make up for it somewhere else.
“Micron will seek clients beyond China in other Asian regions, Europe and Latin America,” said Jacob Bourne, an analyst at Emarketer. “China is an important market, but we are witnessing the build-out of the data centers around the globe that is being stimulated by demand for AI, and thus Micron is taking a bet that it will capture the business it loses elsewhere.”
While Micron misses out, rivals are rejoicing. South Korean titans Samsung Electronics and SK Hynix have gained major market share, and so too China locals YMTC and CXMT, which are aggressively growing with the support of the government.
Micron couldn’t time it worse. China’s spending last year on data centers boomed, going up nine times to 24.7 billion yuan (around $3.4 billion), government procurement papers seen by Reuters showed. The surge, mostly due to the use of artificial intelligence, is a huge opportunity that Micron will now forfeit.
Nonetheless, the company hasn’t been completely left out. Global uptake of AI has generated unprecedented demand for the United States’ data center gear from around the globe, enabling Micron to gain record quarterly revenues even with China problems.
The shutdown is purported to affect Micron China employees. The China team for the company that supplies the data center has over 300 members, but the jobs that are at risk are not certain.
Micron Cites China Ban and Global Cuts as Tech Supply Chains Fractionate
Micron has already been reducing operations elsewhere. In August, the company released several hundred staffers from its universal flash storage program when it decided to end development for future mobile NAND products around the globe.
“It is a very strong customer and operating presence, and China is a very critical market for Micron and the overall semi industry,” the company said in a statement, even if it also verified that the business division for the data centers had been impacted due to the ban.
As Washington-Beijing tech rivalry continues to escalate, Micron’s departure is an illustrative example of how geopolitical tensions are fractionalizing technology supply chains at the international level and presenting challenging strategic decisions for companies.
