Tech war: China's top server makers stop orders of memory modules containing Micron chips, sources say

China's top server makers, including Inspur Group and Lenovo Group, have asked suppliers to suspend shipments of modules containing chips made by US-based Micron Technology, after Beijing imposed a partial ban on the firm's products, according to a supplier with knowledge of the situation.

DRAM chips used in memory modules for servers are a commoditised component that is commonly supplied by Micron and Samsung Electronics, said the source, who declined to be named to protect relationships with clients.

It would take some time for the suppliers to make technical adjustments for newly-sourced alternatives, the person added.

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Lenovo and Inspur did not respond to requests for comment.

The halted orders highlight the immediate impact that China's ban, announced on Sunday, has already had on the United States' largest memory chip maker.

The Chinese market has been one of Micron's major revenue generators, contributing about 11 per cent of the company's total revenue of US$30.8 billion in 2022. The firm expects low to high single-digit losses to its total sales as a result of the ban, which prohibits critical information infrastructure operators in China from buying its products.

Inspur, which is under US trade sanctions, and Lenovo are among the biggest buyers of Micron products, according to Bloomberg data.

The ban also affects memory module makers and third-party suppliers.

A Lenovo logo seen in Beijing. Photo: Reuters alt=A Lenovo logo seen in Beijing. Photo: Reuters>

Chinese memory module manufacturers would have to change their product portfolios as a result of the Micron ban, Huang Leping, an analyst at Huatai Securities, was quoted as saying in a report on Monday by Chinese magazine Caijing.

Shenzhen Longsys Electronics, one of China's top memory module producers, counted Micron as its top supplier between 2018 and mid-2021, with purchases from the Boise, Idaho-based company exceeding 33 per cent of total procurement contracts annually during the period.

The Cyberspace Administration of China (CAC) in March launched a national security probe into Micron products to "safeguard key information infrastructure supply chain security" and "prevent cyberspace security risks due to problematic products".

It marked the first time a foreign semiconductor company was put under a cybersecurity review, and was seen as retaliation for Washington's tightened export controls on advanced US semiconductor technology to China.

The CAC did not disclose which products it tested or the methods it used to test them.

Chinese foreign ministry spokesperson Mao Ning gestures during a press conference in Beijing on Wednesday. Photo: AP Photo alt=Chinese foreign ministry spokesperson Mao Ning gestures during a press conference in Beijing on Wednesday. Photo: AP Photo>

The US commerce department on Monday said the Micron ban and recent raids of international consulting firms by Chinese authorities contradicted the country's commitment to an open market and transparent regulatory framework.

Chinese foreign ministry spokeswoman Mao Ning said at a regular press conference on Wednesday that the country's investigation into Micron was conducted in accordance with the law and the latest decision was based on facts.

The review "does not target any particular countries or regions, nor does China seek to exclude technologies or products from any specific country," she added.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

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