Chinese Memory Start-Up Caught In Crossfire Of US-China Trade War

Chinese chipmaker Fujian Jinhua Integrated Circuit Co has denied charges of industrial espionage, following criminal charges by the US Justice Department that are part of the US administration’s expanding trade war with China.

In a statement on its website, Fujian Jinhua denied it was involved in stealing technology from Micron, an Idaho-based chip firm that is one of the world’s biggest manufacturers of memory chips.

“Micron regards the development of Fujian Jinhua as a threat and adopts various means to hamper and destroy the development of Fujian Jinhua,” the company said.

It added that it “always attaches great importance to the protection of intellectual property rights”.

Trade ban

Last week the DOJ issued an indictment against Fujian Jinhua, Taiwan’s United Microelectronics Corp and three individuals for conspiring to steal trade secrets from Micron related to research and development into memory storage devices.

The charges followed action earlier in the week by the US administration to cut Fujian Jinhua off from US suppliers, a move that could damage the company’s ability to continue in business.

A similar order against telecoms giant ZTE earlier this year led the company to shut down operations until a deal was reached allowing it to resume buying parts from the US.

Like ZTE, Fujian Jinhua was founded with the goal of creating a domestic industry within China to reduce the country’s dependence upon foreign imports.

In ZTE’s case, the company manufactures telecoms equipment, while Fujian Jinhua was founded in 2016 as part of the “Made in China 2025” plan to reduce imports in other areas.

The company has been working to open a $5.7 billion (£4.38bn) plant in southeastern china for the manufacture of DRAM memory, an area in which it has intended to compete with dominant players including Micron and South Korea’s SK Hynix and Samsung Electronics.

While it has existed only a short time, Fujian Jinhua is backed by existing state-owned Fujian Electronics & Information Co and Junjiang Energy Investment Co., as well as other state funds.

The semiconductor industry is a top priority for China.

In 2016 it introduced the world’s most powerful supercomputer, based on chips entirely manufactured within the country.

But it imported $270bn in semiconductors last year, more than its total imports of crude oil, highlighting its lack of a true large-scale chip industry.

Fujian is one of several Chinese chip firms that are working to enter the global industry for chips that can be used in areas including smartphones and missile guidance systems.

Intellectual property dispute

Micron sued Fujian and UMC in California federal court in December of last year, claiming that as early as 2015 the two companies conspired with former employees of Micron’s Taiwanese affiliate to steal trade secrets and deliver them to UMC, who would then pass them to Jinhua.

Micron alleged at the time that Fujian offered UMC $700m in research and development equipment and fees, as well as co-ownership of the resulting technology.

Jinhua and UMC filed a countersuit against Micron in China in January alleging patent infringement, and in July the court temporarily barred Micron from selling 26 products in the country, including memory chips, memory sticks and hard drives.

Following the export ban against Fujian, Micron said it “strongly supports global fair trade and the protection of intellectual property”.

UMC said it “takes seriously any allegation that it may have violated any laws,” and “fully intends to respond to (the Justice Department’s) allegations accordingly”.

The US administration’s actions represent a massive escalation of the intellectual property dispute into the realm of the ongoing trade conflict between the world’s two biggest economies.

The US has currently put tariffs into place on $250bn of Chinese goods, while China has imposed duties on $110bn of US goods.