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(Reuters/Yonhap)

The Chinese government issued orders to suspend purchases of products by the US semiconductor company Micron, citing “significant security risks.” The move triggered an outcry from the US, which announced plans to respond together with its allies.

The situation has the potential to drag South Korea into the heart of the US-China rivalry if the US asks its ally — the world’s top force in the memory semiconductor area — not to comply with Chinese requests for increased sales.

Responding to the announcement Sunday of findings from a security review by the Cyberspace Administration of China’s internet security review office, the US Department of Commerce was quoted by Reuters as saying later that day that it planned to respond jointly with its allies to the “distortions of the memory chip market caused by China’s actions.”

A spokesperson from the department was quoted as saying, “We firmly oppose restrictions that have no basis in fact.”

“This action, along with recent raids and targeting of other American firms, is inconsistent with [China’s] assertions that it is opening its markets and committed to a transparent regulatory framework,” they also said.

Chinese authorities previously raided the Beijing and Shanghai offices of the US consultancies Capvision and Bain & Company, sparking a major outcry from the US.

The US view is that the measures taken by China on Sunday with its ban on Micron product purchases by key information infrastructure and equipment companies are meant as a clear gesture of retaliation for the conclusions made public on the last day of the recent G7 summit.

Tufts University professor Christopher Miller, who wrote about the semiconductor competition in his book “Chip War,” told Reuters that it was no coincidence that China used the G7 summit as an opportunity to make its move, suggesting that the aim was to retaliate against a major US semiconductor company.

He also noted that Biden had talked at the summit about the need to “de-risk” relationships with China and counter economic “coercion.”

“This case could be an early test of the G7’s efforts on this front,” he suggested.

Holden Tripplett, who worked in Beijing as a US Federal Bureau of Investigation counterintelligence official, told Bloomberg that “no one should understand this decision by CAC as anything but retaliation for the US’ export controls on semiconductors.”

“These are political actions pure and simple, and any business could be the next one to be made an example of,” he added.

It remains unclear how much of an immediate negative impact this will have on Micron. China and Hong Kong account for US$5.2 billion of its sales, or only around 16%. Additionally, a large percentage of those sales are to foreign companies operating in China, rather than for servers to be used in key Chinese information infrastructure.

The US investment bank Jefferies explained that with few cases of Micron DRAM or NAND products being used in servers, the company is unlikely to have much in the way of supplies to telecoms or the Chinese government.

“The ultimate impact on Micron will be quite limited,” it predicted. To be sure, it is impossible to rule out China expanding its retaliatory measures to other US businesses such as Qualcomm, Broadcom, or Intel, depending on the situation.

The focus of much attention has been on the US Commerce Department’s mention of a joint response with allies.

In their joint communique on Saturday, the leaders of G7 nations said they planned to launch a new initiative dubbed the Coordination Platform on Economic Coercion — signaling plans for a joint response to China imposing politically motivated sanctions on exports and imports.

The Financial Times also reported on April 23 that the US had asked Seoul to discourage South Korean businesses from making up the shortfall in Chinese semiconductors in the event that Micron was sanctioned. This raises the possibility of the platform being used to pressure South Korea into not cooperating with China’s requests when the sanctions become a reality.

By Lee Bon-young, Washington correspondent

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