Taiwan chip-maker UMC has US rival Micron banned from China after IP theft

After Micron charged UMC with stealing tech and trade secrets in 2017, UMC sought the intervention of Chinese courts to damage the US chip-maker

Micron HQ in Boise, Idaho

Micron HQ in Boise, Idaho (AP photo)

TAIPEI (Taiwan News) – In what might be considered another shot in the escalating trade conflict between the U.S. and China, a large U.S. chip manufacturer has been temporarily banned from selling its products in China.

Micron Technology Inc., based in Idaho is the apparent victim in a trade battles involving IP theft and Chinese government collusion, as the company alleges that a Taiwanese company, United Microelectronics (UMC), and its Chinese partner, Fujian Jinhua Integrated Circuit Co., stole its intellectual property and trade secrets. It is now being suspended from operations in China in the wake of leveling accusations at UMC.

Late last year, Micron took legal action in a U.S. court against UMC charging that the Taiwanese company had stolen and copied its design and manufacturing technologies. UMC then took counter action in a Chinese claims court accusing Micron of patent infringement, essentially the same charge.

Unsurprisingly, the Chinese court sided with the Taiwanese UMC, and the US memory chip maker has been served an injunction and will be temporarily banned from selling 26 of its semiconductor products in China, namely DRAM chips and NAND flash memory chips. .

Micron’s products reportedly account for 20 percent of the total market share in China for DRAM chips. According to The Street, there are too many Chinese companies reliant on Micron for supply of their products’ DRAM components, which is why the ban is unlikely to be permanent.

Micron’s sales in China reportedly account for half of Micron’s revenue.

The news comes the same week that the U.S. looks set to impose new tariffs on Chinese products, valued at US$34 billion dollars. However, observers suggest that the Trump administration may already be taking a softer stance on punishing China for unresolved trade deficits.

The recent and sudden reprieve granted to the major Chinese telecom products supplier ZTE Corp., which was also allowed to resume sales in the U.S. this week, might suggest Washington’s attempts to ease relations with China, which has also prepared retaliatory tariffs on U.S. products in equal measure of US$34 billion.

The Street report suggests that Beijing may take a similar approach to the current dispute with Micron, and lift the ban sooner rather than later as a gesture of goodwill in what Beijing certainly hopes will be a quickly resolved trade conflict.

However, nothing is certain as new tariffs will go into effect on Friday, July 6, unless the Trump administration chooses to delay them, or opts for a quick round of negotiations before they are implemented.

Fortune reports that while the U.S. seeks to primarily target electronic devices, and tech industries that undergird China’s “Made in China 2025” initiative, the retaliatory tariffs from Beijing will mainly hit U.S. agriculture.

As for the battles between tech companies over IP and trade secrets, the UMC vs. Micron saga illustrates a clear example of using partisan court systems, like the Fuzhou Intermediate People's Court, as weapons to fix markets against competitors.

As Senators in Washington try to persuade the Trump administration to re-impose penalties on ZTE, the current situation between Micron and UMC will likely factor heavily in discussions moving forward.

As for UMC, Bloomberg states in their article “China has found the perfect patsy to tackle US chip makers” that “it is fortunate that UMC has Beijing’s Made in China 2025 policy, and favorable Chinese courts to help it out.”

U.S. manufacturers should take note of what has happened with Micron, and pay attention to the tactics being employed by Chinese companies and the Chinese government.

Likewise, the Taiwanese government needs to remain vigil, while Taiwan tech companies should keep a close eye on their Chinese partner firms. It is becoming increasingly obvious that stealing trade secrets and technology from competitors, and then shutting them out of the market is a key strategy for Beijing as they try to achieve their “Made in China 2025” campaign goals.