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Setbacks for Chip Makers

The Chinese court has banned a portion of Micron Technology Inc. sales further adding burden to some of the largest chip makers in the world. Micron has been caught up in dueling intellectual property lawsuits with United Microelectronics Corporation and received a preliminary injunction from the court stopping sales of over twenty products. Some of the products include dynamic random-access memory and Nand flash memory chips.

It has become increasingly fraught to do business in China for various chip making giants regardless of the fact that China is the world’s biggest market for semiconductors. South Korean rivals and Micron have been probed by antitrust authorities while regulators have been silent on their investigation of Qualcomm Inc.’s bid for NXP Semiconductors.

Keith Knutsson of Integrale Advisors said “The growing trade war between China and US will mean a very turbulent market. Companies like Micron are right in the middle of this war.“

Shares of Micron dropped as much as eight percent thus leading a slump in technology stocks. The Micron ban escalates a trade dispute that’s engulfing industries from steel to autos and increasingly also electronics sector. Not only that, but President Donald Trump has railed against Chinese companies for allegedly stealing U.S. companies’ intellectual property. Last year Micron sued UMC claiming they stole memory and the lawsuits have been back and forth since then.

China is the largest market for semiconductors, yet it lacks one of the top producers of the crucial components. The memory chip market has been increasingly concentrated in the hands of Micron and its Korean rivals like Samsung Electronics Co. On another note, the world’s largest mobile phone service provider, China Mobile Ltd. is banned from entering the U.S. market due to national security grounds. As the governments continue fighting, companies face potential disruption of a complex supply chain that produces most of the world’s smartphones, computers and their components.

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