Sino-US Semiconductor Giants Reach Significant Settlement - What Are the Implications of Micron Technology's Global Settlement Agreement with Fujian Jinhua Integrated Circuit Co., Ltd.?

The interests of American capitalists are not entirely aligned with the interests of the United States of America. This is something that we must understand deeply.

No matter how much the decline of China is overstated, the reality of its status as the world’s second-largest economy is undeniable. Containing such a colossal entity is costly, even for a power like the United States. Sometimes, it even necessitates sacrifice. Without the spirit of sacrifice, how can we even talk about containing China?

In 2023, China indeed made some breakthroughs in the field of technology, but from a broader historical perspective, the United States' accumulation is still present, and its advantages remain. If American society could unite, if it possessed a strong spirit of nationalism, what it should do now is not only to refuse reconciliation with Chinese companies but also to continue increasing sanctions, persisting in a strategy of inflicting “800 units of damage on the enemy at the cost of 1,000 to oneself.”

Before the victory is decided, we must not speak of giving up easily. Those claims that “China is now beyond containment, and American interests must not be harmed” are all treacherous words. In times of war, lining them up for execution would not be considered excessive.

How much did the British Empire invest in defeating Napoleon’s France? How much did it invest in defeating Kaiser Wilhelm II? How much did it invest in defeating Nazi Germany? However, unlike other major capitalist countries, the United States has not fully completed its national identity; it cannot raise the powerful flag of “nationalism.” Apart from the military-industrial complex, almost all large capitalists view the United States merely as a vessel for incubating wealth. When it suits their interests, capitalists extol the virtues of America, proclaiming “God Bless America”; when it does not, they engage in private collusion, selling out America for glory.

Take, for example, Micron Technology. In May this year, our country’s Cybersecurity Review Office conducted a cybersecurity review of Micron’s products sold in China according to the law. The review discovered that its products posed serious security risks, posing significant threats to the supply chain of our country’s critical information infrastructure, affecting national security. Based on these findings, China halted the procurement of Micron’s products by operators of critical information infrastructure.

China’s stance is clear

Discussing the Complete Timeline:

February 2016, Fujian Jinhua was established.

May 2016, Taiwan’s United Microelectronics Corporation (UMC) announced it would develop DRAM process technology on behalf of Jinhua, responsible for the technical development without entering the DRAM industry or investing in Jinhua. Jinhua paid technical royalties, and the resulting DRAM technology achievements would be jointly owned by both parties.

Three former Micron executives subsequently transferred to UMC.

December 2017, Micron filed a civil lawsuit against UMC and Jinhua in California, alleging infringement of Micron’s DRAM patents. Micron claimed that UMC had stolen its intellectual property through Micron’s Taiwan-based employees and delivered it to Fujian Jinhua.

January 2018, Fujian Jinhua and UMC filed a lawsuit against Micron for product infringement in Fuzhou Intermediate People’s Court, including several Micron solid-state drive products, and sought CNY 196 million in damages.

October 20, 2018, Fujian Jinhua began trial production.

On October 29, 2018, the U.S. Department of Commerce added Fujian Jinhua to the Entity List of the Export Administration Regulations, citing threats to national security. The next day, all U.S. chip equipment manufacturers' personnel in Fujian Jinhua were withdrawn, all equipment installation and process debugging were terminated, and all chip equipment orders not yet shipped were suspended. Fujian Jinhua’s factory was forced to cease operations.

October 2020, UMC reached a settlement agreement with the U.S. Department of Justice on a criminal case involving trade secrets, paying a $60 million fine.

In 2021, UMC and Micron announced a settlement. UMC reached a guilty plea agreement with U.S. prosecutors, dropping charges of economic espionage and conspiracy, but the Fujian Jinhua case remained unresolved.

March 2023, China’s Cyberspace Administration conducted a network security review of Micron products. In May, China prohibited operators of critical infrastructure from using chips manufactured by Micron. Approximately one-fourth of Micron’s global revenue comes from China and Hong Kong.

On December 24, 2023, U.S. storage giant Micron announced a global settlement with Fujian Jinhua (JHICC).

A Micron Technology spokesperson announced in an email that both companies had reached a global settlement agreement, withdrawing their lawsuits against each other.

However, to date, despite its efforts to recover, Fujian Jinhua has suffered incalculable economic losses and damage to its reputation, and it remains on the Entity List.

The settlement means that after years of relentless pressure on Fujian Jinhua, Micron Technology has finally relented, but it was also forced to settle due to pressure from China.

Firstly, Micron Technology is no ordinary company; it is one of the world’s largest manufacturers of semiconductor storage and imaging products, alongside South Korea’s Samsung and SK Hynix. Moreover, Micron Technology has earned substantial profits from China, with its mainland China revenue in 2022 reaching approximately $3.3 billion. At its peak, especially in 2018, Micron’s business revenue in mainland China amounted to $17.357 billion, with Micron Technology’s share of revenue from mainland China reaching as high as 57%.

Secondly, Micron Technology’s image in China has been tarnished, and one of the key reasons is its suppression of Chinese chip companies, exemplified by the patent dispute with Fujian Jinhua Integrated Circuit Co., Ltd.

In summary, the United States has harbored ill intentions towards us for a long time, and we must strive for self-improvement! Dealing with American companies requires the courage to stand up, in order to gain opportunities for survival and development.

The capitalist is a real-life example of a paper tiger.

In May of this year, China ceased using Micron chips in critical infrastructure. As a result, Micron’s business was significantly impacted, with a double-digit percentage loss in profits.

In June, Micron immediately announced the introduction of state-of-the-art high-performance packaging and testing equipment in Xi’an.

In December, Micron Technology reached a settlement with Fujian Jinhua. In order to safeguard its interests, Micron apologized to the Chinese authorities.

Amid sanctions, Huawei is quietly building a domestic semiconductor supply chain. Fujian Jinhua, a factory that was shut down by the United States sanctions a few years ago, has quietly resumed production with investment from Huawei.

If the U.S. government’s suppression is akin to bombing with state-of-the-art fighter jets, then Huawei’s counterattack is undoubtedly guerrilla warfare. Nomura Securities' analysis is that no one understands better than Huawei how to operate under the U.S. blacklist.

U.S. sanctions have awakened China’s semiconductor industry. In Washington’s view, since it is not possible to target only the Chinese military, the only choice is to target the entire China. At this point, we have no choice but to move forward.

The road ahead is long and arduous, but with determination, we will overcome it.

Many people are not very familiar with Fujian Jinhua Integrated Circuit Co., Ltd. Fujian Jinhua was established in 2016 with joint investments from Fujian Electronics Information Group, Jinjiang Energy Investment Group, and others. It is a company specializing in the manufacturing of Dynamic Random-Access Memory (DRAM) memory in cooperation with Taiwan’s United Microelectronics Corporation (UMC).

DRAM, known to all, is the computer’s crucial component due to its fast read-write speed. The DRAM industry has long been dominated by three companies from two countries: South Korea and the United States. The three companies are Samsung and SK Hynix from South Korea, and Micron from the United States. Previously, Chinese users were constantly troubled by these three companies, and any fires or floods would cause memory prices to skyrocket. Memory chips had become a scarce commodity, and due to our lack of technology, we could only be at their mercy.

The establishment of Fujian Jinhua was, in fact, a charge led by the nation into the DRAM industry.

Now, let’s introduce the litigation between Micron and Jinhua:

At the inception of Fujian Jinhua, they signed a technical cooperation agreement with UMC, entrusting UMC to develop 32-nanometer DRAM-related technology. The technology achievements were to be shared by both parties. Once the overall technology was completed, it would be transferred to Fujian Jinhua for mass production.

UMC is a wafer foundry company that provides advanced process technology and wafer manufacturing services, producing chips for various major applications in the IC industry. UMC is a leader in the global semiconductor wafer manufacturing industry, second only to TSMC and Samsung, and slightly ahead of Mainland China’s SMIC. Like SMIC, UMC also recruits talent worldwide. After the agreement between Jinhua and UMC, three senior Micron executives resigned and joined UMC, including Chen Zhengkun, who was then the Senior Vice President of UMC and later served as the General Manager of Fujian Jinhua.

In December 2017, Micron filed a lawsuit against Fujian Jinhua and UMC in the United States, alleging that UMC had stolen its intellectual property, including key DRAM technology, through Micron’s Taiwan employees and delivered it to Fujian Jinhua. Fujian Jinhua, in turn, counter-sued Micron in January 2018, seeking an immediate injunction to stop Micron’s infringement of Jinhua’s patents and claiming CNY 196 million in damages. That same year, the U.S. Department of Commerce placed Fujian Jinhua on the Export Control Entity List, citing national security reasons.

In October 2020, UMC reached a settlement with the U.S. Department of Justice. The U.S. Department of Justice dropped its charges against UMC, and UMC admitted to violating a trade secret and agreed to pay a $60 million fine. In November 2021, UMC reached a settlement with Micron, with both parties withdrawing their lawsuits, and UMC agreeing to pay an undisclosed settlement amount to Micron. United Microelectronics Corporation also announced the decision to suspend technology development for Jinhua, severely constraining Jinhua’s and even China’s storage chip development.

Jinhua’s plans have remained only on paper.

In May 2023, citing national security reasons, China banned operators of critical information infrastructure from purchasing products from the American storage chip manufacturer Micron. This had a significant impact on Micron.

Mainland China and Hong Kong account for a quarter of Micron’s global total revenue. Micron disclosed that due to the Chinese ban, the company faced the risk of halving its revenue from the Chinese market, which was a bitter pill for Micron to swallow.

The litigation between Micron Technology and Jinhua, including later involvement by governmental authorities from both China and the United States, is just a microcosm of the China-U.S. tech war. In recent years, the competition between China and the United States in the field of technology has intensified, especially in semiconductors. Due to the competition for technological advantage and market share, trade frictions and sanctions between the two countries have escalated. Companies like ZTE, Huawei, SMIC, and Hisilicon, among others, have been heavily targeted by the United States. The United States is actively trying to prevent China from challenging its technological dominance.

The intense competition between China and the United States has not benefited either side; instead, it has led to a lose-lose situation. Sensible individuals in both China and the United States have recognized this issue and are currently attempting to ease tensions in the economic and technological spheres. On December 21st, Boeing delivered a Boeing 787 Dreamliner to China’s Juneyao Airlines, marking the first direct delivery of a commercial aircraft from Boeing to a Chinese airline in four years.

In Boeing’s inventory of approximately 220 aircraft, 85 of them are 737 MAX models already built but not delivered to China, and among the undelivered 60 Boeing 787 aircraft, 12 are intended for China. The delivery of the Boeing 787 may pave the way for the resumption of Boeing 737 MAX deliveries. According to reports, Boeing has received approval from China’s aviation regulatory authority and is preparing to deliver the 737 MAX.

The global settlement agreement between Micron Technology and Fujian Jinhua signifies that the competition between the two countries in the semiconductor field is not irreconcilable. Through dialogue and cooperation, both China and the United States can find ways to resolve disputes, promote mutual development, and the reconciliation between Micron and Fujian Jinhua is just a ripple in the tide of improving China-U.S. relations.

The United States should also understand that whether it is a tech war or a trade war, all obstructive means are like a mantis trying to stop a chariot; China’s rise cannot be stopped by anyone.

It should be noted that on May 21st of this year, in the conclusion of the network security review conducted by the Office of Cybersecurity Review on Micron’s sales of products in China, Micron’s products sold in China did not pass the network security review :

According to laws and regulations such as the “Cybersecurity Law,” operators of critical information infrastructure in our country should cease purchasing products from Micron. This is the first case of a “not passed” network security review since the implementation of laws and regulations such as the “Cybersecurity Law.”

In fact, this war has been going on for quite a while.

In February 2016 , Fujian Jinhua was established, and in May, it signed a technical cooperation agreement with Taiwan’s United Microelectronics Corporation (UMC) to develop DRAM-related process technology.

On July 16, 2016 , the Fujian Jinhua Integrated Circuit Memory production line project, a cooperative project between Jinhua Integrated Circuit and United Microelectronics Corporation, began construction:

The project is located in the Quanzhou Jinjiang Integrated Circuit Industrial Park, with a total planned area of 594 acres and an initial investment of 37 billion RMB. The construction includes wafer manufacturing and supporting industrial chain, with an expected production scale of 60,000 12-inch advanced process memory wafers per month by September 2018, filling the gap in China’s mainstream memory field.

In December 2017 , Micron Technology filed lawsuits in Taiwan, China, and the United States, alleging that several former employees had leaked Micron’s Dynamic Random-Access Memory (DRAM) related trade secrets to UMC when UMC was collaborating with Fujian Jinhua on the development of 32nm DRAM processes. Micron believed that the DRAM chip technology developed in collaboration between UMC and Jinhua was stolen by former Micron employees who had left Micron and joined UMC, thus infringing on Micron’s intellectual property.

In January 2018 , Jinhua, dissatisfied with Micron Technology’s accusations, counter-sued Micron Technology in the Fuzhou Intermediate People’s Court, requesting the court to order Micron to stop infringing on its patents and to compensate 196 million RMB. The products mentioned in the lawsuit as related to infringement were Micron’s Crucial MX300 2.5-inch SSD 525GB solid-state drive and Crucial DDR4 2133 8GB laptop memory module. The company’s statement read:

Deliberate attempts by international oligarchs to create technological blockades and even make groundless accusations against domestic emerging enterprises, in an attempt to continue to maintain a monopoly control pattern, have seriously violated the principles of a market economy and hindered the implementation of national strategies. As a newcomer to the memory industry, Jinhua has always attached great importance to the protection of intellectual property rights and will continue to actively defend its own rights and interests, resolutely taking various legal measures against any behavior that may infringe on Jinhua’s patents.

On May 15, 2018 , the State Administration for Market Regulation of China notified Micron that it was investigating potential collusion and other anticompetitive practices by Chinese DRAM suppliers. On May 31, 2018, the State Administration for Market Regulation conducted unannounced inspections of Micron’s sales offices in Beijing, Shanghai, and Shenzhen as part of the investigation.

In early July 2018 , the Fuzhou Intermediate People’s Court ruled that Micron Semiconductor (Shanghai) Co., Ltd. should immediately stop selling and importing more than a dozen Crucial SSDs, memory modules, and related chips and remove promotional advertisements, purchase links, and other information related to the above-mentioned products from its website. At the same time, Micron Semiconductor (Xi’an) Co., Ltd. was ordered to immediately stop the manufacture, sale, and import of several memory products.

On October 29, 2018 , the U.S. Department of Commerce announced that it was adding Fujian Jinhua Integrated Circuit Co., Ltd. to its Entity List, restricting exports to the company, citing that the company’s newly added storage chip production capacity would threaten the survival of U.S. suppliers providing such chips to the military.

On January 10, 2019 , Jinhua pleaded not guilty in U.S. regional courts.

On January 25, 2019 , Jinhua Integrated Circuit submitted a letter to the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), stating that the company was prepared to file a formal appeal to have its name removed from the U.S. Department of Commerce Entity List.

On June 12, 2020 , the Taichung District Court in Taiwan sentenced three UMC employees to 5.5, 4.5, and 6.5 years in prison and fined UMC NT$100 million. Micron’s 3D NAND products were accused of infringing eight U.S. patents. The complaint sought injunctions, damages, attorney’s fees, and other expenses.

In November 2021 , Micron announced a global settlement agreement with United Microelectronics Corporation, with the latter making a one-time payment to Micron of an undisclosed amount.

On January 27, 2022 , Taiwan’s Intellectual Property and Commercial Court overturned the original judgment, acquitting the three employees and sentencing them to one year probation and six months probation. UMC was fined NT$20 million.

On February 15, 2022 , China’s “Cybersecurity Review Measures” came into effect.

On March 31, 2023 , the Office of Cybersecurity Review conducted a network security review of Micron’s products sold in China in accordance with the “Cybersecurity Review Measures.”

In June 2023 , Micron Technology warned that approximately a quarter of its global revenue came from mainland China and Hong Kong. Subsequently, Micron pledged an additional CNY 4.3 billion (USD 602 million) in investment to build its semiconductor packaging plant in Xi’an.

On November 9, 2023 , Yangtze Memory Technologies Co., Ltd. (“Yangtze Memory”) filed a patent infringement lawsuit against Micron Technology and its subsidiaries in the Northern District of California, United States. The complaint alleges that some of our 3D NAND products infringe on eight U.S. patents. The complaint seeks injunctions, damages, attorney’s fees, and other expenses.

In November 2023 , Sanjay Mehrotra, President and CEO of Micron, met with China’s Minister of Commerce in Beijing to discuss Micron’s business development in China and the previously announced plans to increase investment in the operation of its Xi’an factory. Micron Technology is also exploring STEM education and development opportunities for underprivileged children in China and donating to flood-affected areas in China.

On December 24, 2023 , media reported that Micron Technology had reached a global settlement agreement with Fujian Jinhua Integrated Circuit Co., Ltd.

---

The key point to watch for in this matter is whether the Office of Cybersecurity Review will re-implement a network security review of Micron’s products sold in China.

Boasting at the Drop of a Hat

Rolling Eyes with a Card at the Throat

How can the Huangsa people, who hold a donut in their hand and carry a $5760 speech therapy bill on their back, still boast?

Semiconductors are at the core of the new tech cold war between China and the United States. The actions of relevant companies also serve as an indicator. This can be seen as a microcosm of the phase of easing and warming in Sino-US relations in the core battlefield.

However, the positioning of the semiconductor field as a core area with a ‘small courtyard and high walls’ will not change. Various export controls, technology blockades, and decoupling intensifications will remain long-term trends.

And this long-term trend will further imbalance Sino-US trade (supply and demand on both sides). If China wants to buy something that the United States does not allow, it can only reduce the trade deficit (for the United States) by transferring the industrial chain, the so-called ‘decoupling.’ This is the vicious circle of the economic war in the new cold war.

Reflected in the macroeconomic aspect, the apparent economic problems faced by China and the United States are completely opposite. The United States faces high inflation (although it has temporarily eased, it still faces great pressure compared to the average inflation rate target of 2% in the past years), while China faces the risk of deflation. But in reality, the problems faced by both countries are two sides of the same coin, and to some extent, they are the core reasons for the current economic dilemmas of both countries.

“At the end of the day, ‘price increase’ is a supply and demand problem. When supply falls short of demand, prices rise. If there are problems in the industrial and supply chains, the supply side will be affected, and even if it tightens, it may not be able to suppress inflation. This is the problem currently faced by the West, which is also at odds with the world’s number one industrial country and the top three resource countries, engaging in ‘decoupling’ and seriously affecting its supply side.

Conversely, if ‘supply exceeds demand,’ there is no basis for price increases. China currently faces a clear problem of shrinking demand, both in external demand and domestic demand. Externally, it is the ‘decoupling’ of the new cold war. The same thing leads to inflation in the West and deflation in China. Internally, it is the seriously damaged balance sheet over the past few years, affecting the creation of new jobs, income growth, and the willingness of ‘old money’ to expand credit.

From a historical and realistic perspective, the most ideal and efficient win-win solution for both China and the United States to fundamentally overcome their current economic dilemmas is still to return to the G2 framework of the past, the so-called ‘China-US couple theory,’ to empower each other on the demand and supply sides. However, in the current atmosphere of the new cold war, especially the US’s obstinate ‘decoupling’ path, that ‘beautiful old times’ may permanently remain in the past.

Looking ahead, it is highly likely that China and the United States will only experience a phase of easing, which will not affect the gradually distancing tone (in the foreseeable future). China will strengthen its internal circulation and develop the ‘Belt and Road’ market to reduce its dependence on the European and American markets, while the United States will reconstruct its supply chain with various exclusive clauses customized for China.

‘Divorce’ is inevitable, and of course, divorce has a cost. The two major economies of China and the United States will continue to bear the cost of ‘divorce’ - the disorder and pains of separating supply and demand and restructuring.

And the ‘small courtyard and high walls’ style of technology export control may become increasingly stringent.

Jinhua still surviving is quite miraculous. However, I feel that the so-called judicial settlement is just a formality, which essentially means that Micron is not suing you anymore, but it doesn’t mean that the United States will remove Jinhua from the export control list.

Cooperation leads to mutual success! Technology requires a profitable market, and the market requires technological development.

In recent years, the U.S. blockade of our chip-related technology is nothing new. As a significant part of our work involves high-performance computing and requires GPUs, the clusters we had before were built by Huawei, with good prices and services. Last year, when it came time to upgrade the clusters, Huawei faced significant difficulties in this business. The underlying reasons are well known. So, the impact on us has been clearly felt, and you’ve probably seen similar news related to smartphones.

This larger background also has a negative impact on U.S. companies, such as Micron Technology, as mentioned in the title. The origins of this issue can be traced back to around 2017 when Micron Technology accused Fujian Jinhua of DRAM chip technology theft. Meanwhile, the United States has consistently cooperated with allies to prevent China from accessing the latest chips. On our side, due to concerns about network security and other issues, we have prohibited Micron Technology’s chips from entering our critical areas. For Micron Technology, the ban is said to affect more than 10% of its global revenue.

After all, approximately one-fourth of its global revenue comes from mainland China and Hong Kong.

So, this news is a positive development in the context of the U.S. blockade of Chinese semiconductor and chip technology over an extended period.

Furthermore, Micron’s commitment to reinvest 4.3 billion RMB in building its semiconductor packaging plant in China also expresses a willingness to improve relations. Let’s hope this sets a good precedent for future cooperation and mutual benefit. Moreover, what’s even more crucial is that our technology continues to catch up. True technology lies in our own hands; otherwise, it’s just imported goods subject to others' control.

At a macro level, the global settlement between semiconductor companies in China and the United States signals a departure from the confrontational state in the semiconductor industry.

On the surface, it appears to be a civil lawsuit between Micron Technology and Fujian Jinhua on a global scale, but behind it lies the struggle between the semiconductor industries of China and the United States.

The timeline is roughly as follows:

1. On December 11, 2017, Micron Technology sued Taiwan’s UMC and Fujian Jinhua in California, USA, alleging that they had stolen its memory chip technology.
2. On January 22, 2018, Fujian Jinhua filed a lawsuit against Micron Technology for infringement in Fuzhou Intermediate People’s Court.
3. On October 29, 2018, the U.S. Department of Commerce announced that it had placed Fujian Jinhua on the Entity List.
4. On November 1, 2018, the U.S. Department of Justice formally sued Fujian Jinhua and UMC, accusing them of conspiring to steal trade secrets from Micron Technology, a U.S. semiconductor giant.
5. In October 2020, UMC announced a settlement with the U.S. Department of Justice.
6. In January 2021, UMC and Micron Technology announced a global settlement agreement on a series of lawsuits, which would withdraw related civil lawsuits.
7. On March 31, 2023, the Cyberspace Administration of China announced that, in accordance with the National Security Law of the People’s Republic of China and the Cybersecurity Law of the People’s Republic of China, it would conduct a cybersecurity review of Micron’s products sold in China under the Cybersecurity Review Measures.
8. In December 2023, Fujian Jinhua reached a global settlement with Micron Technology.

From the above timeline, it can be seen that the national rivalry behind the civil lawsuit on the surface is the driving force. This settlement can be seen as a positive start to ending the restrictive competition that has lasted for over five years in the semiconductor industry. The long-suppressed semiconductor industry is expected to bottom out and rebound.

The current power comparison between China and the United States, at least in economic terms, has become very close to the US-Soviet Cold War era. Leaving aside whether China will soon replace the United States as the world’s largest economy, the current situation is quite clear: the two countries have deeply integrated into various industries. They are interconnected, with each relying on the other for mutual benefit. Whether it’s decoupling or confrontation, the ultimate result can only be mutual harm, rather than easily forcing the other side to yield or eliminating each other.

Therefore, verbal and even partial substantive confrontations may serve as a gesture to appease domestic political forces and public opinion when necessary, but if used as a long-term national policy, it would be very foolish.

The conflict between Micron Technology and Fujian Jinhua Integrated Circuit Co., Ltd. originated in 2016 when the latter signed a technical cooperation agreement with Taiwan’s UMC on the 32-nanometer DRAM related process technology. Three senior executives from Micron Technology resigned and joined UMC as a result. Subsequently, in 2017, Micron Technology sued UMC and Fujian Jinhua, alleging that these two companies were involved in stealing Micron Technology’s trade secrets. Afterward, Micron Technology initiated lawsuits in multiple locations worldwide, demanding accountability for the alleged infringement by UMC and Fujian Jinhua, while Fujian Jinhua sued Micron Technology for alleged infringement of products sold in China. The two parties engaged in repeated legal battles. As China-U.S. relations cooled after the pandemic, the commercial conflict between them intensified.

In 2021, Taiwan’s UMC and Micron Technology announced a settlement, and the U.S. prosecutors agreed to drop charges against UMC, including economic espionage. Just a few days ago, Micron Technology reached a global settlement agreement with Fujian Jinhua, withdrawing lawsuits against each other worldwide, officially ending the six-year confrontation. This is a very positive signal and a wise choice for both sides. Instead of wasting a significant amount of human and material resources on mutual attacks, it is better to set aside past conflicts and focus on future cooperation and mutual benefit.

In fact, the U.S.-China trade war serves the political interests of the authorities and the economic interests of a small number of companies. For most American businesses, the high trade barriers will result in the loss of vast consumer markets and raw material supply markets. For instance, not long ago, China imposed export controls on critical chip raw materials, which will inevitably force American companies to incur higher costs in seeking new suppliers.

In the current global economic downturn, long-term trade barriers are not conducive to the healthy development of all enterprises. They will trap economies into a ‘zero-sum game’ rather than focusing on creating a sustainable development model that generates ‘more cakes’ for everyone.

China needs American technology, and American companies need China’s market. This is a natural and long-standing phenomenon of mutual complementarity. From the perspective of advancing human productivity and improving development efficiency, there is no basis for both sides to engage in a trade war. However, small interest groups often prioritize political and short-term economic interests over human interests and long-term economic interests. Regardless of who wins or loses in the end, it is impeding the process of human development.

Under sustained trade confrontation, the calls from American companies for the removal of restrictions will grow stronger because the interests of the vast majority, if not all, of these companies are at odds with the goals of the U.S. government and the Federal Reserve. Prolonged trade confrontation will only erode their profits. If the opposing side achieves technological breakthroughs during this time, American companies will immediately lose a significant market share.

As early as two years ago, Micron Technology and Taiwan’s UMC announced a settlement under the influence of the U.S. prosecutors. Although this also carried a strong political color, it genuinely reflected a high degree of alignment in their interests. Prolonged confrontation is not beneficial to their respective developments.

Today, the reconciliation between Micron Technology and Fujian Jinhua undoubtedly sends a positive signal. This is not only conducive to the development of the semiconductor industry but also to breaking the ice in the U.S.-China trade war.

If this event can spark a chain reaction, optimistically speaking, in the next two years, trade barriers between the U.S. and China could be completely removed, and the world economy may enter the next positive cycle. From the perspective of economic recovery, this is more effective than any monetary or fiscal policy from both sides.

The settlement of the intellectual property lawsuit between Micron Technology and Fujian Jinhua Integrated Circuit Co., Ltd. marks a significant development in the semiconductor industry and will have various further implications:

Positive growth for both companies: The settlement is seen as a positive step for the future development of both Micron and Fujian Jinhua. By resolving their disputes, both companies can focus on the development and innovation in their respective fields.

Micron’s commitment to the Chinese market: This move demonstrates Micron’s continued commitment to the Chinese market. In 2022, approximately 11% of Micron’s global sales (30.8 billion USD) came from mainland China. The settlement, along with Micron’s recent investments in China, underscores the company’s intent to strengthen its presence and business in the Chinese market.

Impact on Micron’s China operations: Prior to this settlement, the Chinese government had restricted Micron’s chips from entering critical infrastructure due to cybersecurity concerns. With the resolution of the lawsuit, Micron’s business prospects in China may improve.

Potential job opportunities and investments: Micron has expressed its intention to make significant investments in its chip packaging plant located in Xi’an, Shaanxi Province. This investment could create new job opportunities and stimulate local economic development.

Impact on the global semiconductor industry: The resolution of this lawsuit may have broader implications for the global semiconductor industry, especially in the context of ongoing tensions in U.S.-China relations and trade issues.

Impact on China’s storage chip industry: This settlement is also good news for China’s storage chip industry. Fujian Jinhua is an important player in China’s memory chip sector, and this development could have a positive impact on the production of memory chips in China.

Market size and growth: There are forecasts indicating that by 2023, the market size for storage chips in China will reach approximately 650 billion RMB (about 91 billion USD), and the industry will experience significant growth and opportunities.

Micron Technology’s losses for this year are quite severe.

Micron reported operating expenses of $9.38 billion in the fourth quarter of the 2023 fiscal year, a year-on-year decrease of 16.2%. The operating expense ratio continues to decline, dropping to 23.4%.

Despite narrowing performance losses, the gross margin remains in negative territory, which means it is a company operating at a loss.

On the other hand, Fujian Jinhua is a normally operating company.

However, there is no need to have any illusions about Fujian Jinhua. In 2018, the company also sued Micron Technology to prohibit the sale of memory products in China.

The Fuzhou Intermediate People’s Court today (July 3, 2018) ruled that Micron Semiconductor (Shanghai) Co., Ltd. immediately stop selling and importing more than a dozen Crucial solid-state drives, memory modules, and related chips, and delete its website’s promotional advertisements, purchase links, and other information about the above products.

Foreign companies generally do not initiate intellectual property lawsuits in China because they cannot win, regardless of whether they are in the right or not. If China attaches great importance to protecting intellectual property, there wouldn’t be so many counterfeit Apple products and watches in Huaqiangbei.

Peter Schiff has subtly expressed this concept in “The Little Book of Bull Moves in Bear Markets.”

For Micron Technology, it means either giving up the mainland Chinese market or protecting itself. To win the Chinese market, it must follow China’s rules of the game. Regardless of how Fujian Jinhua behaves, a intermediate court is enough to stop Micron Technology, and the U.S.-China situation is different. This doesn’t mean that the United States is afraid of China, let alone that the U.S. government wants to reconcile with China. This only represents Micron Technology’s stance, as most American companies continue to watch the U.S.-China conflict with a cold eye.

News should be seen in context,

Previously, the United States initiated a trade war and imposed chip sanctions.

Then the Chinese government conducted a network security review of Micron, which frightened Micron.

Micron actively sought self-help, lobbying the U.S. Congress on one hand, increasing investment in China on the other, and visiting China to seek forgiveness.

Then, the United States banned Chinese semiconductors from entering the U.S. market.

Now, Micron and Chinese semiconductor companies have reached a so-called global settlement. Fujian Jinhua has no foreign markets, which means that Micron is putting aside patent disputes and is ready to compete in the Chinese market. Making money is always the top priority.

Did someone find this confusing?

They will fight for as long as it takes, until they achieve complete victory!

Chronology

1. In 2016, Taiwan’s United Microelectronics Corporation (UMC) signed a technology cooperation agreement with Fujian Jinhua Integrated Circuit Co., Ltd., including assistance in developing 32-nanometer DRAM-related process technology.
2. After signing the agreement, three executives from Micron Technology resigned and joined UMC.
3. In 2017, Micron Technology filed a lawsuit against UMC and Fujian Jinhua, accusing both companies of stealing its trade secrets.
4. Over the years, Micron Technology has filed infringement lawsuits against UMC and Fujian Jinhua worldwide. Meanwhile, Fujian Jinhua sued Micron Technology for alleged infringement of products sold in China.
5. In 2021, UMC and Micron Technology announced a settlement, and the U.S. Department of Justice agreed to drop charges against UMC.
6. On December 24, 23, a Micron Technology spokesperson announced in an email that Micron Technology and Fujian Jinhua had reached a global settlement agreement, dropping all previous lawsuits against each other worldwide.

Micron Technology

Micron Technology, a well-known company, is a U.S.-based semiconductor company primarily engaged in the production of various types of memory and storage products, including DRAM and NAND flash. During the U.S.-China tech war, Micron Technology, as part of the U.S. tech industry, was affected by Chinese policies and market conditions.

Data from the 2022 annual report shows that Micron’s revenue in mainland China was $3.311 billion, a year-on-year increase of 34.8%, accounting for 10.76% of the total revenue. Once, mainland China was also a major market for Micron, accounting for over 50% of its revenue, but it has now dropped to around 10%.

According to Jibang Consulting, in the fourth quarter of 2022, Samsung, SK Hynix, and Micron had market shares of 45.1%, 27.7%, and 23.0%, respectively, accounting for approximately 96% of the market. In the NAND Flash vendor revenue rankings, Micron ranked fifth with a market share of 12.3%, with the top five companies, including Samsung, Kioxia, SK Group, Western Digital, and Micron, accounting for about 97% of the market.

Fujian Jinhua

Fujian Jinhua Integrated Circuit Co., Ltd. is a Chinese state-owned enterprise specializing in semiconductor research and manufacturing, particularly the production of DRAM memory chips. The company aims to enhance China’s self-reliance in the semiconductor field and reduce its dependence on foreign technology.

In 2017, Micron Technology accused Fujian Jinhua of stealing its trade secrets and filed a lawsuit in U.S. courts. Subsequently, the U.S. Department of Commerce imposed an export ban on Fujian Jinhua, prohibiting U.S. companies from selling technology and products to Fujian Jinhua. This significantly affected Fujian Jinhua’s production and research activities.

How Micron Technology Began

Micron Technology didn’t start out as a tech giant. In the DRAM market, Intel and Mostek were the two major players. Intel once held 82.9% of the global market share, and Mostek reached 85%. However, after Mostek was acquired, Micron was founded by its former employees and became a representative of the United States in the storage field in 1985 after Intel exited.

Throughout the 1980s, Japanese companies dominated the storage market, and Micron struggled to break through. To survive, they attempted various businesses, including manufacturing personal computers, entering the 3D accelerator chip market, and launching a CMOS imaging department, but none were successful.

Micron achieved its current global market position through acquisitions and collaborations, including acquisitions of companies like Numonyx and Elpida. Numonyx brought DRAM technology and a 46nm process, while Micron acquired 25nm DRAM technology from Elpida. This made Micron one of the top three giants in the DRAM market, alongside Samsung and SK Hynix.

Micron’s Sanctions on China

Starting in 2018, Micron submitted more than 170 lobbying documents to the U.S. government, with most of them targeting Chinese companies. These documents covered topics such as trade protection, intellectual property disputes, Chinese competition threats, and matters related to technology research, chip manufacturing, and commercial espionage, with over two-thirds involving Chinese companies.

The most impactful lobbying effort was when Micron persuaded the U.S. Department of Justice to sue Chen Zhengkun, the general manager of Fujian Jinhua, and two former Micron engineers, for alleged theft of trade secrets. Micron accused them of stealing secrets, which eventually led to the U.S. Department of Justice issuing an arrest warrant for Chen Zhengkun.

This incident highlighted Micron’s lobbying capabilities and the U.S.’s long-arm jurisdiction. Unlike past victories against competitors through market means, Micron chose to use government administrative power to target its opponents, a rather underhanded approach. What’s worse is that the arrest warrant for Chen Zhengkun set a precedent for the U.S. to exercise long-arm jurisdiction over foreign competitors under domestic law, with an impact comparable to inciting the arrest of Huawei’s Meng Wanzhou in Canada.

Correspondingly, Micron cut off supplies to Huawei. On May 16, 2019, the day after the Huawei incident, Micron immediately announced the suspension of supplies to Huawei. Although supplies were resumed over a month later, it was essentially a reluctant move. Since then, Micron’s products have not been used in Huawei’s high-end smartphones, replaced by SK Hynix and domestic storage products.

Final Review by Our Side

In May, we were reviewed, and in June, Micron Technology announced plans to invest more than RMB 4.3 billion in its factory in Xi’an over the next few years.

Why Micron Settled

Continuous Decline in Business in China

In the second quarter of fiscal year 2023, Micron’s revenue was $3.69 billion, a year-on-year decrease of approximately 53%, with a loss of $2.31 billion, including inventory losses of more than $1.4 billion.

Continued Losses in the Third Quarter

In the third quarter of fiscal year 2023, Micron’s revenue was $3.752 billion, a year-on-year decrease of approximately 56.58%, with a loss of $1.896 billion.

** The Impact of the Settlement Depends on

Explanation of U.S. Internal Dynamics

It should be noted that the United States is not a monolithic entity. Many people tend to think that the actions of the U.S. government represent the will of U.S. capital, but the United States is not a homogenous entity internally; everyone has their own interests. For U.S. capital, core economic interests remain the most significant concern, and everything else serves this purpose. Even if presidential candidates make statements about “anti-China” policies to gain votes, U.S. capital is not so naive – who doesn’t want to make money.

The Story of Micron Technology and Fujian Jinhua

The story of Micron Technology and Fujian Jinhua dates back to 2016 when three executives from Micron Technology resigned and joined UMC. At the same time, Taiwan’s UMC signed a technology cooperation agreement with Fujian Jinhua Integrated Circuit Co., Ltd. for joint chip development. Micron Technology, upon realizing that its executives had moved to a competitor, filed separate lawsuits against UMC and Fujian Jinhua in 2017, alleging the theft of trade secrets.

In 2021, UMC and Micron Technology announced a settlement, and by the end of 2023, Micron Technology reached a global settlement agreement with Fujian Jinhua, indicating that Micron Technology dropped its lawsuits against these two companies. Furthermore, Micron Technology began to increase its investment in China, showing a continuous expansion of its investment intentions.

The Significance of High-End Chip Development

High-end chips have always been a severe technological constraint in China’s tech industry, starting from the infamous “Hanxin” chip fabrication scandal. Chip technology entered the public eye due to this scandal. High-end chips play a crucial role in various fields, and breaking through the blockade of high-end chip technology would be a significant boost to China’s technological and overall capabilities. Therefore, the importance of technological development in the chip sector is exceptionally high, and its significance for the nation is enormous.

In fact, there has never been a concept of independent innovation in the development of the global semiconductor industry. Due to cost and other issues, technologies have shifted from the United States/Europe to East Asia - South Korea, Japan, and Taiwan, China. Initial foundational innovations often originated from corporate laboratories or universities. Once technological barriers are established, breaking through with “independent innovation” becomes an impractical dream. In this era of fierce competition, when others are building airplanes, if you are still pondering the basic principles of bicycle construction, when will your product hit the market?

Returning to Micron and Fujian Jinhua, the situation is similar. Although it’s a dispute between Fujian Jinhua and Micron, it cannot be separated from the involvement of Taiwan’s semiconductor company, UMC (United Microelectronics Corporation). UMC played a role in facilitating the “technology transfer” to Fujian Jinhua, which ultimately led to Fujian Jinhua’s entanglement with Micron.

Let’s go back to 2016:

In February 2016, Fujian Jinhua Integrated Circuit Co., Ltd. was established, with plans to invest over $5 billion in building a memory factory. UMC (United Microelectronics Corporation) was responsible for providing technical support, with an initial monthly production capacity of 60,000 wafers.

The general manager of Fujian Jinhua was Chen Zhengkun, who had previously served as the general manager of the Powerchip Memory Product Business Group and Ruijing. After Ruijing was acquired by Micron, he became the general manager of Micron Taiwan. Later, he joined UMC as a senior vice president.

When asked why he joined UMC and collaborated on memory technology research and development in mainland China, Chen Zhengkun passionately said: The impact of Micron’s acquisition of Ruijing was significant for him. Independent development of memory technology had always been his dream, and he hoped this dream could blossom in Fujian Jinhua.

_After UMC and Fujian Jinhua signed an agreement to assist in developing 32-nanometer memory process technology, three senior executives from Micron Taiwan joined UMC and took away some technical information. Micron regarded this as an infringement of its intellectual property. The memory industry has developed globally for decades, with continuous advancements in process technology, spanning architecture, processes, design, interfaces, testing, and systems. Many patents exist, with the vast majority controlled by Samsung Electronics, SK Hynix, and Micron. Market newcomers without access to legitimate technology sources simply cannot bypass these barriers. This is why technology innovation is not about starting from scratch. The global semiconductor industry transfer has always been driven by “legal authorized transfer.” It’s just that the line between what is legal and what is not is fine. When both parties reach a patent authorization agreement, it’s fine as long as the price is right. If one party asks for too much or is unreasonable, then it’s impossible to proceed.

In 2017:

Micron filed a lawsuit against Fujian Jinhua and UMC in the U.S. Federal Court in California, claiming that they stole intellectual property. According to the U.S. claims, even one engineer stole over 900 technical documents. However, this lawsuit was dismissed by the California court on the grounds that Fujian Jinhua’s products were not sold in the United States.

By 2018:

Fujian Jinhua and UMC initiated a lawsuit against Micron in Fuzhou, accusing Micron of infringing on Fujian Jinhua’s patents in memory and flash. In July of the same year, it was ruled that “the immediate suspension of sales of 26 products, such as solid-state hard drives,” took effect. Micron had annual sales of over $10 billion in China, accounting for more than 50% of its total sales, while its revenue in the United States was only about 10%.

So, over the past two years, it has essentially been a typical patent dispute. The final outcome will likely be cross-licensing agreements between the two parties. However, at this point, President Trump initiated a tech war. The U.S. Department of Commerce placed Fujian Jinhua on the “Entity List,” claiming it violated U.S. national security, prohibiting Fujian Jinhua from obtaining equipment and materials from U.S. suppliers. Familiar, right? It’s not just Huawei being suppressed; Fujian Jinhua faced the same situation. Similarly, the U.S. also arrested three American employees of Fujian Jinhua.

By 2019, Fujian Jinhua was essentially at a standstill.

In 2020, Fujian Jinhua’s partner, UMC, was convicted in Taiwan of stealing Micron’s trade secrets, and some employees were wanted by the United States. In the same year, in October, UMC and Micron reached a settlement for about $20 million.

By 2023:

The Cyberspace Administration of China issued an announcement, announcing a network security review of products sold by U.S. Micron Corporation in China to safeguard national security, ensure the security of the supply chain for key information infrastructure, and prevent product problems from causing cybersecurity risks. On the same day, Micron’s stock price plummeted.

In November of the same year:

According to the website of the Ministry of Commerce, on November 1st, Sanjay Mehrotra, CEO of Micron Technology, met with the Minister of Commerce of China. Micron intends to increase its investment in China.

In December of the same year:

Micron and Fujian Jinhua reached a settlement.

It’s just a pity that we don’t know the current situation of Fujian Jinhua and whether it still has the energy to pursue further business development.

Note: The italicized portions of this text are quotations from Mr. Yu Sheng’s “Chip Wars."

With Micron leading the way, we believe that the leather-clad swordsman, Old Huang, will follow suit. After all, we hold a 20% market share compared to Old Huang. Let’s patiently await Old Huang’s 48GB VRAM 5090 release. Priced at less than 10,000 RMB.