18 August 2019
Micron Technology has accused Fujian Jinhua of stealing its chip designs. Photo: Reuters
Micron Technology has accused Fujian Jinhua of stealing its chip designs. Photo: Reuters

US restricts exports to Chinese semiconductor firm Fujian Jinhua

US President Donald Trump’s administration took action to cut off a Chinese state-backed chipmaker from US suppliers amid allegations the firm stole intellectual property from US semiconductor company Micron Technology Inc.

The Commerce Department said it had put Fujian Jinhua Integrated Circuit Co. Ltd. on a list of entities that cannot purchase components, software and technology goods from US firms.

The administration is concerned the Chinese firm could flood the market with cheap chips that are also made by US companies that supply the US military. If the US chipmakers go out of business, the military would lose a supplier for an item that must come from the United States.

Trade experts said the Trump administration’s move may be an unprecedented effort to use a legal tool known for punishing foreign companies that send US-origin goods to sanctioned countries such as Iran to instead protect the economic viability of a US firm.

The move escalated what until now had been a business dispute into the realm of an international trade conflict between the US and China. The Commerce Department spokesman said the move was “based on the regulatory standard”.

The action against Fujian Jinhua is likely to ignite new tensions between Beijing and Washington since the company is at the heart of the “Made in China 2025” program to develop new high-technology industries.

The world’s top two economies are already waging a tariff war over their trade disputes, with US duties in place on US$250 billion worth of Chinese goods and Chinese duties on US$110 billion of US goods.

Fujian Jinhua makes so-called DRAM, the memory chips that make computers, phones and other devices run more quickly and smoothly.

Micron, a maker of memory chips with factories in Virginia and Utah, has accused Fujian Jinhua and Taiwanese partner United Microelectronics Corp. of stealing its chip designs in a lawsuit in California. In turn, the companies countersued Micron in China, where courts sided with them and banned some of Micron’s chips in China.

“When a foreign company engages in activity contrary to our national security interests, we will take strong action to protect our national security,” Commerce Secretary Wilbur Ross said in a statement.

A Commerce Department spokesman said the agency would review any appeal by Fujian Jinhua.

Speaking in Beijing, Chinese Foreign Ministry spokesman Lu Kang referred specific questions on the case to the Commerce Ministry, which has yet to comment.

But, in principle, the Chinese government has always asked Chinese companies to strictly follow local laws when they operate overseas, and asks foreign governments to provide fair treatment to Chinese firms, Lu added.

The action is similar to a Commerce Department move that nearly put Chinese telecommunications equipment company ZTE Corp. out of business earlier this year by cutting it off from US suppliers.

Linley Gwennap, a chip expert and president of the Linley Group, said Fujian Jinhua was a relatively new company building DRAM as part of China’s larger plan to become self-sufficient at making such chips.

He said suppliers such as Applied Materials Inc., Lam Research Corp. and KLA-Tencor Corp. were likely supplying equipment to Fujian Jinhua.

“It’s pretty much impossible to build a leading-edge fab [semiconductor plant] without buying equipment from these American companies,” Gwennap said.

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