For obvious reasons, the stock market only began to react to yesterday’s ban by Chinese authorities on the use of Micron products in critical infrastructure in China after the start of the business week. Many analysts agree that this won’t be a huge loss for Micron’s business, but the company’s shares are down 5% before the start of trading.
According to the company’s annual reports, Micron Technology’s sales have been less and less dependent on the Chinese region in recent years. The company generated no more than 11% of its total sales directly from mainland China last year, which is well below the numbers of many companies from the United States. At the same time, Jefferies analysts in general claimthat the majority of the memory chips Micron sells in China are used in consumer electronics such as laptops and smartphones and that the ban by Chinese regulators only applies to critical infrastructure facilities such as data centers.
According to analysts AmberA total loss of all Chinese revenues by Micron is unlikely and the negative impact of sanctions by local authorities is likely to be limited to just a few percent. Chinese authorities will certainly ask South Korean manufacturers to make up for losses caused by the ban on Micron products, but American opponents have already reached out to Samsung Electronics and SK Hynix, urging them not to do so. In addition, both Korean manufacturers are highly dependent on the favor of the US authorities, as they have the largest memory manufacturing companies in China, which inevitably need to be upgraded, and US officials have banned the supply of certain manufacturing equipment to China. The Korean authorities were able to negotiate a delay until October this year to put these restrictions into effect, and they expect to extend these exceptions further, which will be difficult to achieve in the event of a confrontation with US authorities.
According to Bernstein analysts, Kioxia and Western Digital are also unlikely to fill the gaps left by bans on the use of Micron products in critical infrastructure facilities in the Chinese market. According to experts from Counterpoint Research, the situation is partially saved by the general situation in the memory market, which is facing the strongest overproduction in many years. Available stocks will mitigate the negative impact of Chinese sanctions in the short term, but if the ban stays in place in two or three years, Chinese customers will have to turn to foreign suppliers like Samsung and SK Hynix. However, the latter are literally between two fires in the current situation.