Micron Says China Ban Won't Hurt Profit But Ruling Is Unfair

(Bloomberg) -- Micron Technology Inc. said a ban on the sale of some of its products in China is unfair and won’t hurt its earnings.

The preliminary injunction by the Fuzhou Intermediate People’s Court of the People’s Republic of China doesn’t cover technology that’s fundamental to its memory chips and therefore will only impact about 1 percent of its annual revenue, the Boise, Idaho-based company said in a statement.

“The central government of China has often stated that the rights of foreign companies are fairly and equally protected in China,” Micron said in the statement. “Micron believes the ruling issued by the Fuzhou Court in Fujian Province is inconsistent with this proclaimed policy.”

The U.S.’s largest maker of computer memory confirmed it received a court order telling it to stop selling certain products in China as part of a ruling in a patent infringement case brought by United Microelectronics Corp. The Taiwanese chipmaker was retaliating against Micron’s accusation that UMC stole chip technology and gave it to its Chinese partner, Micron said.

Micron said none of the patents referred to in the ruling were used in its DRAM or NAND memory products. A representative for UMC declined to comment beyond saying the Taiwanese company was happy with the court’s decision.

U.S. analysts who have been recommending Micron’s stock as it racks up record profits amid one of the strongest periods of demand in the memory chip industry’s 50-year history, expressed relief at Micron’s analysis. The shares rose as much as 3.6 percent, rebounding from a fall of more than 5 percent on Tuesday when UMC claimed victory in the law suit.

Micron reiterated its fiscal fourth quarter revenue forecast of $8 billion to $8.4 billion.

China’s aim may not be to bar shipments of Micron’s chips, instead the ruling may be part of a strategy to push it into a partnership with Chinese semiconductor makers, which could speed up the country’s internal chip industry development, according to Stifel Nicolaus analyst Kevin Cassidy.

While this ruling may have little impact on Micron’s activities in China, the company is still facing an investigation by a Chinese antitrust regulator along with its Korean rivals, the companies have said. Local media has reported that authorities are looking into increases in chip prices.

That’s fueled concern that Micron’s legal issues have made it a pawn in the broader trade dispute between China and the U.S. President Donald Trump has railed against Chinese companies for allegedly stealing U.S. companies’ intellectual property.

China is the largest market for semiconductors, yet isn’t home to even one of the top 10 producers of the crucial electronic components. Beijing wants to change that and has set aside billions of dollars to bolster local companies.

The memory chip market has been increasingly concentrated in the hands of Micron and its two Korean rivals, Samsung Electronics Co. and SK Hynix Inc. They have generated record profits recently from the components that are essential to everything from supercomputers to smartphones.

--With assistance from Debby Wu.

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Molly Schuetz, Andrew Pollack

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