Shares of Micron Technologies dropped 4.4% on Friday after the Chinese Cybersecurity Agency said it would examine the devices the U.S. produced. The main aim was memory chips, which the U.S. manufacturer sells there for cybersecurity.
China’s cyberspace authority intends to protect national security, prevent network security concerns, and guarantee the integrity of its information infrastructure supply chain. However, the regulatory authority did not offer many details regarding expanding its inspection operation. Additionally, the Micron goods will be subject to scrutiny.
Some interpret the change as a response by the Chinese government to the U.S. government’s tightening controls on Chinese access to important semiconductor technology.
The United States announced an export embargo on specific cutting-edge processors used in data centers for computing, artificial intelligence, and data analytics applications in October 2022. The Netherlands and Japan have recently joined the United States in preventing China from producing sophisticated chips.
The tit-for-tat tactics may endanger Micron Technologies’ prospects, which already suffer from a lackluster market for its memory chips. Besides, chip sales in China account for about 11% of Micron’s overall revenue.
Micron’s Q2 loss was higher than the Zacks estimate
For the second quarter of fiscal 2023, Micron’s financial results were poorer than anticipated last week. Therefore, the company’s non-GAAP loss was $1.91 per share. It was much larger than the loss of 67 cents by the Zacks Consensus Estimate. In contrast to the prior-year quarter’s earnings of $2.14 per share, the bottom line performed poorly.
Micron’s quarterly sales decreased 53% year over year to $3.69 billion, falling short of the $3.76 billion average estimate. The key causes of the poor quarterly performance were the fast declining consumer demand and significant client inventory adjustments across end markets during macroeconomic uncertainty.
The manufacturer of memory chips has offices in Shanghai and Shenzhen, as well as a chip packaging plant in Xian. According to the announcement, Micron’s Shanghai will discontinue DRAM design operations by the end of the year. The announcement refers to the escalating trade tensions between the United States and China. The U.S. considered the decision a deliberate pivot to bring back chip production.
The world’s two biggest nations’ tech rivalry has affected more semiconductor companies than only M.U. NVIDIA Corporation announced on August 31, 2022, that the U.S. government contacted them on AugU.S.26. Therefore, the US notified them about the implosion U.S. a new licensing requirement. Additionally, the government has forbidden NVIDIA from shipping out DGX or any machines that utilize A100 or H100 chips.
Any future chip designs created by NVIDIA with a threshold greater than or equivalent to A100 will likewise be implied by the new licensing rules. Moreover, export restrictions will apply to any future systems created that include the kinds above and thresholds.