UMC secures injunction against Micron chips in China

Roman Schwartz
July 7, 2018

The Street is mulling the disclosure Tuesday that Micron Technology's (MU) chips have temporarily been banned in China. Its other top markets, the United States (about 13 percent) and Taiwan (about 12 percent), make up a much smaller share.

United Microelectronics Corporation (UMC) and Jinhua sought the sales ban, alleging that Micron violated its patent rights in China.

The ruling, which was disclosed by UMC and its Chinese partner, slammed shares of Idaho-based Micron, which gets half of its revenue from China.

UMC also requested the court to order potential defendants to stop manufacturing, processing, importing, and selling the allegedly infringing products. It also asked that all inventory be destroyed and applied for compensation.

'UMC is pleased with today's decision, ' crows Jason Wang, co-president of UMC.

The firm's estimate that the ban imposed by a Chinese court in a patent infringement lawsuit would weaken quarterly revenue by just 1 percent drove its shares as much as 3.6 percent higher and lifted stocks of other USA chipmakers.

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Micron said it has not been served with an injunction and would not comment further until it has received and reviewed court documentation.

The two chipmakers have been at loggerheads since December previous year when Micron filed a civil lawsuit in the state of California, accusing UMC of secret infringement of intellectual property related to its DRAM chips.

Analysts believe the ban is largely symbolic as hurting the US 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. "So they have to import anyway", Greg Roh, an analyst at Hyundai Motor Securities, told Reuters in an interview. The ban applies to its subsidiaries Micron Semiconductor (Xi'an) Co Ltd and Micron Semiconductor (Shanghai) Co Ltd.

China is the largest importer of memory products, consuming 20 percent of the world's DRAM, as it has yet to build up its nascent chip industry.

Micron Technology offers Micron-branded products as well as Crucial-branded notebook DRAM modules and SSD.

"The Fuzhou Court issued this preliminary ruling before allowing Micron an opportunity to present its defense", said Joel Poppen, Micron's general counsel. These Chinese companies would all need to find another supplier to meet their demand. This is bound to influence the company's revenue performance, which would directly benefit its competitors including Samsung, SK Hynix, as well as Innotron (Hefei Chang Xin) and JHICC who are expected to enter the market formally in 2019.

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