Micron says China ban unfair but won't hurt revenue

Micron Stock Drops On China Court Ruling To Ban Its Memory Chips

Micron Stock Drops On China Court Ruling To Ban Its Memory Chips

The preliminary injunction from the Fuzhou Intermediate People's Court prohibits Micron from selling in China 26 DRAM and NAND-related items, including certain solid-state hard drives and memory sticks.

UMC filed its complaint against Micron in January, saying the USA firm had infringed on three of its patents covering its SSD, graphics memory card and DDR4 SDRAM products.

The Fuzhou City Court of China issued a preliminary injunction order of ban on the sale of Micron products in China. It predicted this will not affect its outlook for the August-ending fiscal Q4 of $8 billion to $8.4 billion.

As of 11:42 a.m., shares of UMC had gained 0.56 percent to NT$18.05 (US$0.58), with 81.87 million shares changing hands, outperforming the broader market index, which was down 0.12 percent at 10,702.91. UMC and Micron have gone back and forth in the courts, alleging various intellectual property violations.

According to UMC, the ruling on Tuesday by the Chinese court showed it has initially judged Micron to have stolen technology from the Taiwanese company.

The U.S. case brought by Micron sprang out of a criminal indictment in August of 2017 in Taiwan brought against UMC as well as one of its partners Fujian Jinhua Integrated.

It comes amid an escalating trade spat between Washington and Beijing over tariffs and also as China investigates Micron and its South Korean rivals over price fixing allegations, amid a surge in prices of dynamic random access memory (DRAM) chips.

The company's shares, which fell 5.5 percent on Tuesday following a report on the ban, rose 3.8 percent to $53.48 in premarket trading.

Analysts believe the ban is largely symbolic as hurting the USA chipmaker would end up creating more pain for local Chinese firms who would have to rely on Korean firms Samsung Electronics and SK Hynix, pushing up memory chip prices. "I think there is room for the stock to continue to go higher". The affected products make up slightly more than 1% of Micron's annualized revenues.

However, today Micron reiterated its quarterly sales guidance, emphasizing that the injunction would only impact its overall sales by 1%.

The Micron ban could be a major opportunity for other global chipmakers to step in.

China is escalating the trade war with the USA while making an announcement of a ban on the sale of products of Micron, a United States semiconductor company, in China.

However, sources close to the company say it is now drafting a response to the ruling by the Fuzhou Intermediate People's Court of the People's Republic of China.

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