China’s Micron Ban: A Tacit Admission of Domestic Manufacturing Proficiency?

The news surrounding China’s decision to ban its domestic companies from using semiconductor company Micron’s 3D-NAND memory chips and other products has died down somewhat since first reports in April. Chips themselves are ubiquitous not only in our daily lives, but across the entire spectrum of military systems ranging from command and control to UAVs and ISR. This owes largely to their robustness, high capacity and resistance to shocks and vibrations.

Now that the dust has settled on the announcement, it’s worth taking a moment to reflect on this move – the first of its kind by the Chinese authorities. Specifically, we should return to the episode and examine the strategic implications of such a move in the full context of the ongoing war between the US and China over access to advanced technologies.

Taking a leaf out of the late, great Colin S Gray’s strategy library, we should return to the Micron ban with a mind to observing strategic thought and behaviour in context. The move can be interpreted in a far less reactionary manner if we reconsider it in the broader context of China’s strategic ambitions, policies and ongoing technological evolution.

This exercise permits us to ask a timely question: are we observing another act of political tit-for-tat from the trade war playbook? Or are we actually observing a tacit admission by the Chinese authorities that they believe they now possess a ‘good enough’ domestic alternative to Micron’s products?

But before attempting to contextualise what we’re observing, we should begin with what we’ve observed. Let us look at the facts, as we see them, with varying degrees of veracity:

• 7 October 2022: the US Department of Commerce imposed the most stringent restrictions yet on the export of advanced semiconductor technology to China, citing the need ‘to limit China’s ability to develop and produce advanced node semiconductors … [and] … to restrict access to the software and hardware needed to design and manufacture high-end semiconductors’ including NAND flash chips with more than 128 layers – Micron’s speciality.
• 2 March 2023: China announced that its ‘big fund’ for investment in integrated circuit technologies plans to inject $1.9 billion into Yangtze Memory Technologies Corp (YMTC), the country’s largest domestic memory chip manufacturer.
• 23 April 2023: reports emerged that YMTC is making progress producing advanced 3D-NAND chips with locally sourced equipment.
• 21 May 2023: the Cybersecurity Review Office under the Cyberspace Administration of China (CAC) declared that Micron Technology failed a cybersecurity review and is therefore prohibited from supplying Chinese customers with its wares – including its 3D-NAND chips.

Public statements made by both US and Chinese officials were largely cloaked in language now synonymous with the US–China trade war. For example, on 22 May, Chinese commentators characterised the decision as Beijing ‘taking the sword’ to Micron. They go on to describe it as the strongest retaliation yet against US sanctions from the previous October. On 23 May, the US Department of Commerce responded with a press release stating that it ‘firmly opposes restrictions [by CAC] that have no basis in fact’, adding that it is one in a recent series of ‘raids’ against US companies.

Having drawn some degree of situational awareness from the reported events and surrounding statements, we must now turn our attention to the explanation. This forces one to ask whether, based on events and statements, we’re observing strategic behaviour or tactical acts in a game of trade war chess.

Referring back to Gray’s argument, strategic behaviour can be defined as ‘behaviour relevant to the threat or use of force for political purposes’. The Micron ban in this context is obviously below the threshold of the lethal use of force. It does, however, constitute an aggressive use of economic means as a mode of retaliation for a similar act conducted by an adversary.

We can break this down into three parts: first, ideals; second, evidence of ideas; and third, behaviour that manifests the previous two.

Ideals in this context can be verified with reference to China’s two landmark industrial policies – ‘Made in China 2025’ and the Military-Civil Fusion Strategy. In particular, the ‘Made in China 2025’ policy document explicitly acknowledges that they are ‘highly dependent on foreign countries’ for ‘key and core technologies (关键核心技术) and high-end equipment’.

This dependency, therefore, is a key chokepoint in the stated aspiration to develop an ‘intelligentized’ fighting force capable of being a world military power by 2049. When taken together we can observe a clear aspiration, or ideal, that describes a scenario in which China is no longer dependent on the US or elsewhere for its advanced semiconductor technology.

We’re equally able to point to evidence of these ideas in action through our acknowledgment of the country’s $45 billion ‘big fund’, the National Integrated Circuit Fund, and the National Military-Civil Integration Fund. Both are state-led financial vehicles tasked with channelling resources to actors in critical sectors, such as YMTC.

Having accounted for the Chinese ideal and evidence of its manifestation, we can re-contextualise the Micron ban with a new sense of perspective. Here the link between the SCMP’s report on 23 April and CAC’s decision on 21 May becomes critical. Looking at the chain of events retrospectively gives a degree of plausibility to the idea that the SCMP’s report has a likely degree of truth to it.

And indeed, this is largely supported by progress already observed in 2020 regarding Chinese companies advancing their proficiency in the development of 3D-NAND chips comparable to those built by vendors like Micron and Samsung.

In light of this, there are key questions to which logic dictates the answers in support of this theory. Firstly, why did China not immediately retaliate against the decision by the US Department of Commerce if it feels confident in escalation? Secondly, why, in a highly controlled information space such as China, did news ‘leak’ to the media that YMTC had successfully produced 3D-NAND chips with wholly local equipment? Lastly, and perhaps most importantly, why did China only now take the unprecedented move to ban a US vendor like Micron?

The conclusion: perhaps China is ready to quietly let the world – and its major rival – know that it is making progress in achieving its strategic technological aims.

This is, of course, one plausible explanation for the chain of events we’ve witnessed in this episode. But it is perhaps one plausible explanation with the least evidence contrary to it when one accounts for situational awareness, explanation of the facts, estimation of China’s proficiency in this area and the strategic notice it provided through its industrial policies.

The views expressed in this Commentary are the author’s, and do not represent those of RUSI or any other institution.

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