Micron Technology | $MU Stock | Shares Slump On Memory Chip Ban

Micron temporarily banned in China

According to the semiconductor industry on July 4, UMC, a Taiwanese chipmaker, announced on July 2 that the Fuzhou City Court of China issued a preliminary injunction order of ban on the sale of Micron products in China. Then, UMC counterpunched. In January this year, UMC filed a lawsuit against Micron in the court of Fuzhou City, China, demanding 270 million yuan (US$40.5 million) in compensation, claiming that Micron infringed upon its DRAM technology patents.

"Micron anticipates that the negative impact to revenue this quarter relating to the injunction will be approximately 1%, and the company continues to expect revenue to be within the previously guided range of $8.0 to $8.4 billion", the company said in a press release.

The Street is mulling the disclosure Tuesday that Micron Technology's (MU) chips have temporarily been banned in China. UMC has declined to comment on the allegations. Further information regarding these and other risks is included in UMC's filings with the U.S. Securities and Exchange Commission, including its registration statements and reports on Forms F-1, F-3, F-6 and 20-F and 6-K, in each case as amended.

The patent ruling Tuesday in favor of Micron's rivals comes as USA accusations of intellectual-property theft by Chinese businesses and tariff threats increase tensions between Washington and Beijing. Micron's stock fell 5.51% in after-hours trading.

The US memory chip maker, along with South Korean rivals, SK Hynix, Inc. and Samsung Electronics Co. dominate the Chinese chip market.

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Li Yiqiang, a partner at law firm Faegre Baker Daniels, told Reuters that normally, Chinese courts set a very high bar for granting injunctions in complex patent infringement cases, but the trade tensions may have given the court more leeway in this case.

Micron makes big business from selling its products to China. The Fuzhou Court issued this preliminary ruling before allowing Micron an opportunity to present its defense. In fact, Micron derived half of its fiscal 2017 net sales from the country.

Meanwhile, Micron's ban could put pressure on Chinese companies and thus hike up the price on some domestic-made chips, said Wang Yanhui, secretary general of China Mobile Alliance, in an interview with Chinese business newspaper 21st-Century Business Herald.

It also resells flash memory products purchased from other suppliers. Samsung, SK Hynix and Micron have been leading this market by supplying memory semiconductors to home appliance, smartphone and server companies.

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