Korean Chipmakers Become Tense as China Bans Sale of Micron Products in China

China is escalating the trade war with the US while making an announcement of a ban on the sale of products of Micron, a US semiconductor company, in China. Micron is the third largest DRAM manufacturer after Samsung Electronics and SK Hynix. Korean chip makers are keenly checking the situation, fearing that the sanctions of China will be extended to Korea later than enjoy reflective benefits.

According to the semiconductor industry on July 4, UMC, a Taiwanese chipmaker, announced on July 2 that the Fuzhou City Court of China issued a preliminary injunction order of ban on the sale of Micron products in China. The order applied to 26 products, including Micron's DRAM and NAND flash products.

Micron and UMC have been at loggerheads over the issue of stealing trade secrets in the Chinese court since last year. Last December, Micron filed a lawsuit against UMC in the Northern District Court of California of the US, claiming that UMC violated intellectual property rights by copying its memory patents and trade secrets. Then, UMC counterpunched. In January this year, UMC filed a lawsuit against Micron in the court of Fuzhou City, China, demanding 270 million yuan (US$40.5 million) in compensation, claiming that Micron infringed upon its DRAM technology patents. The Chinese court made a preliminary ruling on this. However, the Chinese court did not informed Micron of the decision to prohibit production and sale of by Micron, but the story was leaked from UMC, a competitor of Micron.

In the semiconductor industry, experts say that China pursuing the rapid growth of the Chinese semiconductor industry sided with the Chinese company. UMC is building a DRAM production plant in cooperation with JHICC, a state-owned enterprise under Fuzhou City of China.

China is the largest market that accounts for 65% of world semiconductor trade. Samsung, SK Hynix and Micron have been leading this market by supplying memory semiconductors to home appliance, smartphone and server companies. Last year, more than half of Micron's sales came from the Chinese market.

The world DRAM market is led by Samsung Electronics with a market share of 45%, followed by SK Hynix (28%) and Micron (14%). The three companies are in control of the market. When the ban on the sale of Micron products in China is realized, the ban is expected to benefit the Korean semiconductor industry. However, that may not be good news to Korean semiconductor companies.

"We are busy meeting demand for DRAMs so we cannot produce more semiconductors," a semiconductor industry official said. “The worst scenario is that Korean companies are included in the sanction list of China." China recently did not hide its will to hold Korean semiconductors in check while conducting an antitrust investigation of these largest DRAM producers.

"In DRAMs, Korean companies have a wide technological gap with its Chinese competitors. So a disruption in the supply of DRAMs from Korean companies to Chinese buyers can give rise to damages to Chinese manufacturers of end-use products," the official said. “In the end, the Chinese court is expected to withdraw the preliminary ruling, but if Chinese chipmakers have technological power that can match that of Korean chipmakers several years from now, there will be a stronger pressure or sanction on Korean companies." The US and China have decided to impose an additional 25 percent tariff on their respective imported products whose total amount hits US$50 billion each per year starting on June 6. Some experts say that the preliminary ruling on this day may be China's plan to secure cards for future negotiations.