A proposed program that would limit the ability of U.S. companies to ship technology to China could end up hurting Idaho companies such as Micron.
“The Trump administration is weighing new trade restrictions on China that would limit the use of American chip-making equipment, as it seeks to cut off Chinese access to key semiconductor technology, according to people familiar with the plan,” reported Asa Fitch and Bob Davis in the Wall Street Journal on Feb. 17.
Such restrictions would limit the ability of U.S. companies to sell to Huawei, a major Chinese manufacturer that is also one of Micron’s bigger customers.
What does Micron say?
Micron’s not really talking.
“We are aware of reports that the U.S. Department of Commerce is considering additional controls on shipments of foreign-made products to Huawei,” said a Micron spokesman in an email message. “As a U.S.-based company with a global footprint, Micron respects and complies with all laws and regulations in the U.S. and other countries where we operate. We will continue to monitor the situation and communicate as needed.”
U.S. government officials are slated to meet Feb. 28 to discuss the reduction in the threshold and potential wider restrictions on manufacturing of chips for Chinese customers, which could also include the expansion of a U.S. export ban to include more Chinese companies, according to the Journal.
Victim of a global economy
“The sad thing about the Trade War is that the world economy turned global a few decades ago, so today it’s really hard to say what’s U.S. technology and what isn’t,” said Jim Handy, a veteran Micron analyst and general director of Objective Analysis, based in Los Gatos, California, in an email message. “A lot of Micron’s technology, for example, has been developed in Taiwan and Japan. The companies that make the tools to produce DRAM are based in Japan, The Netherlands, Germany and the U.S. For both chips and chip-making tools, a ban to restrict U.S. technology from going to China is likely to have a small impact that could be equally as negative for U.S. firms as it is for companies in China.”
Exactly what the effect could be, though, Handy couldn’t say.
“It would be really wonderful if the current administration conferred with companies like Micron and asked how to help, but that’s not what’s being done,” he said. “Micron knows what’s best for Micron. The administration can only guess, and it hasn’t been doing such a hot job so far. So Micron’s executives have to watch and wait and worry about what happens next.”
Such a ban could also affect companies such as Lam Research, the Wall Street Journal wrote. While the company is based in Santa Clara, California, it also has a Meridian office.
This isn’t the first time the U.S. government has limited sales to Chinese companies such as Huawei. In the third quarter of 2019, the company was also slammed when President Donald Trump limited transactions with Huawei, which analysts on a Micron earnings call said had amounted to about 13% of the company’s business during the previous quarter. While Micron had been able to resume shipping some products to Huawei, the amount was likely to be less for the foreseeable future, Micron CEO Sanjay Mehrotra said on the call, but he wouldn’t provide specifics.
In addition, Micron wrote down about $40 million of inventory related to Huawei, CFO David Zinsner said on that earnings call. Without the Huawei situation, Micron would have reached the higher end of its guidance, he said.
In its most recent quarter, which reported in December, Micron saw fiscal first-quarter earnings of $491 million, with net income of 43 cents per share. Earnings, adjusted for one-time gains and costs, came to 48 cents per share. The results met Wall Street expectations. The chipmaker posted revenue of $5.14 billion in the period, exceeding Street forecasts.