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US memory chip giant Micron, Blacklisted by Beijing, to Pump $600 Million Into China Expansion
US memory chip giant Micron Technology said it plans to invest 4.3 billion yuan (US$602 million) to upgrade its chip packaging plant in Xian, a decision that comes just four weeks after Beijing imposed a partial ban on its products being sold in China.
In a statement published on its official WeChat account on Friday, Micron said it would acquire the operations of its outsourcing partner Powertech Technology, and add new buildings to the site to “better meet Chinese customers’ demand”.
Micron CEO Sanjay Mehrotra said in the statement, which was only in Chinese, that the plan shows the firm’s commitment to its China operations and the local team. Betty Wu Mingxia, the recently appointed general manager of Micron China, said the deal would allow the US company to directly manage all chip packaging and testing operations.
Upon completion of the deal, which is expected to take a year and is subject to regulatory approval in China, Micron’s total payroll in the country will increase to 4,500, by adding 1,200 workers from Powertech, Micron said.
Taiwan-listed Powertech said the acquisition price would be based upon the book value of its operations, which ranges from US$50 million to US$60 million.
Micron’s plan to expand its Xian plant comes after the China Administration of Cybersecurity (CAC) barred critical information infrastructure providers from buying Micron’s products, citing national security risks. The CAC launched a probe into Micron’s products in late March, a move seen as China’s reprisal against US sanctions on its technology firms.
Beijing’s ban could see a hit to Micron’s revenue in the single digits, the company’s management has said, as China contributes about 11 per cent of Micron’s global sales. After Beijing’s ruling, China’s top server makers, including Inspur Group and Lenovo Group, asked their suppliers to suspend shipments of modules containing chips made by the US company, the South China Morning Post reported earlier.
China’s ban also has geopolitical implications, as Washington has reportedly asked Seoul to dissuade South Korean chip makers from filling any market gaps in China.
Meanwhile, Micron’s US$600 million spending in Xian pales in comparison with its plans in Japan, where the company said it would invest US$3.6 billion over the next few years in next-generation memory chip fabs.
However, packaging and testing are relatively low-end and low-margin operations compared with wafer fabrication. In 2014, Micron reached an outsourcing deal with Powertech for chip packaging and testing at the Xian plant, under which Micron owns the land and buildings while the Taiwan firm owned the equipment and provided the workers.
The outsourcing deal ended in April 2022, but both sides agreed to renew it on a quarterly basis, according to Powertech last year. Micron’s acquisition will allow Powertech to cash out from the Xian operations.
Powertech chairman DK Tsai was quoted by Taiwanese media earlier this year as saying Taiwanese semiconductor companies are considering pulling out of mainland China due to geopolitical tensions.
www.reuters.com
Investment by biggest U.S. maker of memory chips comes about a month after major Chinese firms were banned from buying its products
June 16, 2023 3:31 am ETUS memory chip giant Micron Technology said it plans to invest 4.3 billion yuan (US$602 million) to upgrade its chip packaging plant in Xian, a decision that comes just four weeks after Beijing imposed a partial ban on its products being sold in China.
In a statement published on its official WeChat account on Friday, Micron said it would acquire the operations of its outsourcing partner Powertech Technology, and add new buildings to the site to “better meet Chinese customers’ demand”.
Micron CEO Sanjay Mehrotra said in the statement, which was only in Chinese, that the plan shows the firm’s commitment to its China operations and the local team. Betty Wu Mingxia, the recently appointed general manager of Micron China, said the deal would allow the US company to directly manage all chip packaging and testing operations.
Upon completion of the deal, which is expected to take a year and is subject to regulatory approval in China, Micron’s total payroll in the country will increase to 4,500, by adding 1,200 workers from Powertech, Micron said.
Taiwan-listed Powertech said the acquisition price would be based upon the book value of its operations, which ranges from US$50 million to US$60 million.
Micron’s plan to expand its Xian plant comes after the China Administration of Cybersecurity (CAC) barred critical information infrastructure providers from buying Micron’s products, citing national security risks. The CAC launched a probe into Micron’s products in late March, a move seen as China’s reprisal against US sanctions on its technology firms.
Beijing’s ban could see a hit to Micron’s revenue in the single digits, the company’s management has said, as China contributes about 11 per cent of Micron’s global sales. After Beijing’s ruling, China’s top server makers, including Inspur Group and Lenovo Group, asked their suppliers to suspend shipments of modules containing chips made by the US company, the South China Morning Post reported earlier.
China’s ban also has geopolitical implications, as Washington has reportedly asked Seoul to dissuade South Korean chip makers from filling any market gaps in China.
Meanwhile, Micron’s US$600 million spending in Xian pales in comparison with its plans in Japan, where the company said it would invest US$3.6 billion over the next few years in next-generation memory chip fabs.
However, packaging and testing are relatively low-end and low-margin operations compared with wafer fabrication. In 2014, Micron reached an outsourcing deal with Powertech for chip packaging and testing at the Xian plant, under which Micron owns the land and buildings while the Taiwan firm owned the equipment and provided the workers.
The outsourcing deal ended in April 2022, but both sides agreed to renew it on a quarterly basis, according to Powertech last year. Micron’s acquisition will allow Powertech to cash out from the Xian operations.
Powertech chairman DK Tsai was quoted by Taiwanese media earlier this year as saying Taiwanese semiconductor companies are considering pulling out of mainland China due to geopolitical tensions.
Micron says it is committed to China, invests $602 million in plant
U.S. memory chipmaker Micron said on Friday it was committed to China and would invest 4.3 billion yuan ($603 million) over the next few years in its chip packaging facility in the Chinese city of Xian.
www.reuters.com
