Published: Sat, July 07, 2018
Markets | By Otis Pena

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

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

Then, UMC counterpunched. In January this year, UMC filed a lawsuit against Micron in the court of Fuzhou City, China, demanding 270 million yuan (US$40.5 million) in compensation, claiming that Micron infringed upon its DRAM technology patents.

Founded in 1980 as a spin-out from from the government-led Industrial Technology Research Institute (ITRI) and Taiwan's first semiconductor company, United Microelectronics Corporation (UMC) is no stranger to lawsuits alleging intellectual property infringement: The company was sued by Nintendo in the 90s for producing chips for counterfeit game cartridges, and settled in 1994.

Beijing has made the semiconductor sector a key priority under its "Made in China 2025" strategy, which has shifted up a gear after a US ban on sales to Chinese phone maker ZTE Corp (000063.SZ) underscored China's lack of domestic chips.

"It certainly appears semiconductors could move to the prime-time in negotiations between the Trump Administration and China", Evercore ISI analyst C.J. Muse said.

Micron official Joel Poppen was quoted in a release thus: "Micron is disappointed with the ruling by the Fuzhou Intermediate People's Court". "Near-term this could favor non-US chipmakers vs".

Semiconductor stocks tumbled on Tuesday, pressured after Micron Technology was temporarily blocked from selling some of its memory chips in China.

On Tuesday, UMC announced that the Fuzhou Intermediate People's Court of the People's Republic of China (PRC) issued a preliminary injunction against Micron Semiconductor (Xi'an) and Micron Semiconductor (Shanghai), enjoining Micron from offering to sell, and selling in the PRC 26 DRAM and NAND-related items, including certain solid-state hard drives and memory sticks in China.

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The company expects quarterly revenue to be within the previously guided range of $8.0 billion to $8.4 billion.

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.

It also comes 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.

As China accounted for about 50 percent of Micron's revenue in 2017, the ruling sent Micron shares plunging by 5.5 percent on Wall Street overnight.

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

In Taipei, shares of Nanya Technology Corp., a close business partner of Micron, had fallen 0.61 percent to NT$81.30 as of 11:42 a.m., Wednesday.

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