The tech war between the US and China is not ending anytime soon.
On Monday, Beijing banned Idaho-based chipmaker Micron Tech from selling microchips to domestic companies in the country, further escalating tensions between the world’s top leading economies.
A Cyberspace Administration of China (CAC) statement said that a review of Micron’s products under the Network Security Law had found “serious network security risks, which pose significant security risks to China’s critical information infrastructure supply chain, affecting China’s national security.”
This means operators of critical tech infrastructure in China will stop purchasing products from the memory chip maker. Within hours of the announcement, Micron’s shares dropped. The firm is the world’s 13th biggest chip producer, with a market capitalization of $74.6 billion.
Three days before Beijing’s announcement, Micron, as if anticipating the ban, said it will invest some $3.6 billion in Japan to make next-gen chips. The move indicated its keenness to maintain its grip on the Asian market. Micron supplies memory chips to Apple’s iPhone-making plant in China.
Why China is retaliating
Beijing’s move comes six months after the US government banned the approval of equipment from China’s Huawei Technologies and ZTE, saying they posed “an unacceptable risk” to the country’s national security.
Other Chinese companies barred from shipping their products to the US include surveillance equipment maker Dahua Technology, video surveillance firm Hangzhou Hikvision Digital, and telecom firm Hytera Communications.
Washington DC has long maintained that Chinese tech companies have been spying on Americans. In February, the White House reportedly considered an executive order to ban US investment in high-end Chinese technologies such as artificial intelligence, quantum computing, 5G, and advanced semiconductors.
It’s not clear when the rule could take effect, but last September, the Biden administration banned federal-funded US tech firms from building advanced facilities in China for a decade. The US has a $53 billion plan to manufacture semiconductors locally.
What’s the cost of the US-China tech war?
A study published by Barclays last November said China could lose 0.6% of its GDP to these tensions, and see its currency’s value against the dollar plunge by 3%. Huawei has previously said it records annual losses of $30 billion in its smartphone business due to US sanctions.
In the US, on the other hand, the face-off is causing economic pain, adversely impacting tech firms that rely on microchips for innovation and product advancement. The feud has also spilt over to Europe at a time when the global semiconductor industry is projected to grow to $1.4 trillion by 2029.