Micron's Sturdy Moat: Analysts Foresee Negligible Impact from China Actions Thanks to US Chipmaker Ties

On March 31, China launched a cybersecurity review of Micron Technology, Inc's MU export products to ensure the security of its information infrastructure supply chain, prevent network security risks, and maintain national security.

China's move intensified the already tense environment with the U.S. since it cut down China's access to cutting-edge semiconductor technology by slapping embargoes on the country.

Recent reports suggested that China's cybersecurity review of Micron is not affecting its ability to deliver products.

Industry insiders say Micron, which generates 11% of its revenue in mainland China and another 5% in Hong Kong, was the first likely target for Beijing as its tech was easily replaceable. Also, Micron had been downsizing some of its operations on the mainland while increasing investment in the U.S., Financial Times reports.

Interestingly, industry experts estimate restrained retaliation given Chinese reliance on artificial intelligence chips from Nvidia Corp NVDA and other processors manufactured by Intel Corp INTC and Qualcomm Inc QCOM.

Mark Li, a senior semiconductor analyst at Bernstein, said, "memory chips are standardized, so it is easy to change suppliers from US to non-US," adding that South Korean groups Samsung Electronics Co, Ltd SSNLF and SK Hynix would mop up most of Micron's orders in China. However, Li also highlighted the lack of gain to domestic rivals due to the lack of Chinese competitors to Micron.

Wang Lifu, a chip analyst at Shanghai-based research group ICwise and Paul Triolo, an expert on China tech at consultancy Albright Stonebridge flagged Micron for "supporting specific controls" that "severely restricted China's memory leaders YMTC [Yangtze Memory Technologies Corp] and CXMT [ChangXin Memory Technologies] from obtaining semiconductor manufacturing gear.

Analysts also saw a minimal commercial impact on Micron if China bans the chipmaker as Micron can easily redirect elsewhere. 

Price Action: MU shares traded higher by 7.90% at $63.19 on the last check Monday.