How the US-China microchip battle is impacting stocks in the sector

Investors monitor Micron stock ahead of Wall Street opening following detrimental comments from Beijing

microchips  Shares in Micron fall after China bans its chips from key infrastructure projects. Photo: CFOTO/Future Publishing via Getty.
Shares in Micron fell after China banned its microchips from key infrastructure projects. Photo: CFOTO/Future Publishing via Getty

Stocks in the microchip sector continue to be swayed by US-China relations as the two countries battle to remain at the forefront of the market.

On Sunday, Beijing's cyberspace regulator said products made by US memory chip giant Micron Technology (MU) were a national security risk.

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The Cyberspace Administration of China (CAC) subsequently banned the firm's products from key infrastructure projects.

"The review found that Micron's products have serious network security risks, which pose significant security risks to China's critical information infrastructure supply chain, affecting China's national security,” the CAC said in a statement.

Micron stock in focus

In response, the US government said it would work with allies to address what it called "distortions of the memory chip market caused by China's actions".

The comments from China, however, were projected to send Micron (MU) stock down by nearly 5% in the US on Monday, according to pre-market estimates.

On Friday, its shares traded in the green, up 0.89% to 68.17 per share.

Shares up in Micron rivals

Meanwhile, shares in Micron’s biggest industry rivals, Samsung Electronics (005930.KS) and SK Hynix (000660.KS), gained in Seoul, climbing 0.15% and 0.92% respectively.

Chinese chip stocks, including Semiconductor Manufacturing International Corp (0981.HK) and Hua Hong Semiconductor (1347.HK), climbed more than 3% in Hong Kong.

Investors following headlines

In October last year, it was Chinese chip stocks that took a hit after the US announced new export controls that further limited Chinese companies’ access to key technology.

Semiconductor Manufacturing International Corp traded 3% lower, amid a broader market sell-off, while Hua Hong Semiconductor lost nearly 10% off its stock. Shanghai Fudan Microelectronics (1385.HK) stock also declined, plunging by more than 20%.

The volatile share prices show just how sensitive the markets have been to rhetoric, and actions, from both China and the US as microchips continue to play a key role in advanced economies.

However, US president Joe Biden voiced optimism about the China relationship on Sunday at the end of the G7 summit in Japan as he said he expected ties between the two countries “to start to thaw very shortly”.

Nasdaq rally impact

Jameel Ahmad, chief analyst at, said: “US-China relations have become increasingly complicated over the last decade, especially as Washington sees Beijing as a strategic rival on both an economic and political level.

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“This has included the protracted trade war that started more than five years ago and led to the weakest year of global growth in 2019 since the Global Financial Crisis, before the COVID crisis. We still see tit-for-tat measures taken against one another even today, such as China ordering companies to stop buying from Micron.”

Ahmad further noted that the dispute will have a negative impact on the economy and said it could also disrupt the Nasdaq (^IXIC) rally that technology stocks have witnessed in 2023 so far.

Watch: China bans chipmaker Micron from key infrastructure projects as tech row with US escalates

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