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China Chip Stocks Rally After Beijing Said U.S. Chip Giant Micron Is ‘Major Security Risk'

Tomohiro Ohsumi | Bloomberg | Getty Images
  • China's cyberspace administration said Micron's products had failed its network security review, posing threats to its national security.
  • The administration said "operators of critical information infrastructure in China should stop purchasing Micron products."

China's chip stocks rallied on Monday morning following Beijing's announcement to bar some purchases of products from U.S. memory chipmaker Micron.

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China's Cyberspace Administration barred operators of "critical information infrastructure" in China from buying products from the U.S. chip giant following a security review conducted by the Cyberspace Administration of China.

Chinese authorities said Micron products have failed its network security review, and cited "serious potential network security issues." The firm poses a "major security risk" to China's critical information infrastructure supply chain and affects [its] national security," a statement said.

Shares of Chinese chipmakers largely rose on Monday following the move: Hong Kong-listed Hua Hong Semiconductor rose as much as 3.14% on Monday, while SMIC rose 2.64%.

Other memory chip producers in mainland China such as GigaDevice Semiconductor and Ingenic semiconductor jumped 3.74% and 8.08% respectively.

In response to Beijing's announcement, the U.S. Commerce Secretary Gina Raimondo told the Wall Street Journal, "We firmly oppose restrictions that have no basis in fact." The commerce department will engage with the Chinese government to "detail" its position and seek further clarity, he added.

Raimondo said the U.S. will engage with its key allies to address Beijing's actions, and that such measures will cause "distortions of the memory chip market."

This comes as the U.S. reportedly urged South Korean chipmakers not to fill the shortfalls in China if Beijing's ban comes into effect, the Financial Times reported.

Shares of South Korean chipmakers SK Hynix and Samsung Electronics, both Micron rivals, rose on Monday morning.

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