Micron sees just 1 percent hit on revenue from China ban

(Reuters) – Micron Technology Inc said on Thursday a temporary Chinese ban on a patent infringement lawsuit against the U.S. chipmaker would hurt its fourth-quarter revenue by just 1 percent, stemming concerns of a bigger impact.

FILE PHOTO: FILE PHOTO: The logo of U.S. memory chip maker MicronTechnology is pictured at their booth at an industrial fair in Frankfurt, Germany, July 14, 2015. REUTERS/Kai Pfaffenbach/File Photo/File Photo

The company’s shares, which fell 5.5 percent on Tuesday following a report on the ban, rose 3.8 percent to $53.48 in premarket trading.

The company also confirmed in a statement for the first time two of its units had been temporarily banned from selling some memory chips and solid state drives in China, following a complaint from rivals United Microelectronics Corporation (UMC) and Fujian Jinhua Integrated Circuit Co.

The lawsuit followed Micron’s complaint in December against Chinese government-backed Fujian and UMC in a California court alleging misappropriation of its trade secrets and other misconduct.

The ruling by the Fuzhou Court comes amid trade tensions between Washington and China over wide ranging issues including intellectual property. The United States is set to impose tariffs on $34 billion worth of goods from China on July 6.

China has been trying to build its own semiconductor industry as part of its “Made in China 2025” strategy and lower dependency on foreign companies. Several Chinese government-backed entities have poured billions in research and to buy companies with a trove of chip patents.

“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. “Near-term this could favor non-US chipmakers vs. US chipmakers.”

Micron said it will comply with the ruling, while requesting the Fuzhou Court to reconsider or stay its decision.

“The Fuzhou Court issued this preliminary ruling before allowing Micron an opportunity to present its defense,” said Joel Poppen, Micron’s general counsel.The U.S. chipmaker owns thousands of memory chip patents and is one of the world’s largest suppliers of NAND and DRAM chips that are found in a wide array of electronic gadgets.

The products impacted by the ban are the ones that Micron sells through retail outlets and represents a small portion of the chipmaker’s revenue, Morgan Stanley analysts said in a client note.

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

Micron had earlier claimed that UMC – which is scaling up its China business and plans to list it in Shanghai – had poached key its employees to help Fujian improve its technology.

UMC, a foundry that does not make mainstream memory products, has not commented on the poaching allegations and the case is still being heard.

“We find it almost laughable that UMC and Fujian are suing Micron for intellectual property theft,” Muse said.

Reporting by Sonam Rai and Supantha Mukherjee in Bengaluru; Editing by Arun Koyyur

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