Tech war: major Micron client in China retracts Shanghai IPO application three days before Beijing opened cybersecurity investigation into US firm

Solid-state drive maker Memblaze ditched its Shanghai IPO in late March, just three days before memory chip supplier Micron was investigated by Beijing
The firm was said to have also spent tens of millions of US dollars to stock up on Micron chips under ‘no-refund’ terms, according to sources

Semiconductors

Che Panin Beijing

Published: 10:00pm, 26 May 2023

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Chinese solid-state drive (SSD) maker Beijing Memblaze Technology Co, a major buyer of memory chips from Micron Technology, retracted its Shanghai public listing in late March, just days before Beijing opened a cybersecurity investigation into the US company.

While there is no evidence that directly links the aborted initial public offering of Memblaze to Micron, the Chinese firm’s move to ditch its listing was in proximity – three days – to the US firm being put under investigation by the Cyber Security Review Office under the Cyberspace Administration of China (CAC) on national security grounds.

Storage solutions provider Memblaze, which makes enterprise-class SSDs, was said to have also spent tens of millions of US dollars to stock up on Micron memory chips under “no-refund” terms, according to people familiar with the situation.

Those moves by Memblaze reflect how Beijing’s actions against Micron, including the de facto ban on the domestic sale of its products, could impact some local companies.

Beijing Memblaze Technology Co produces enterprise-class solid-state drives, like its PBlaze6 6930 Series that has a user capacity of 30.72 terabytes. Photo: Handout

China’s top server makers, including Inspur Group and Lenovo Group, have asked suppliers to suspend shipments of modules containing memory chips made by Micron, according to a South China Morning Post report on Friday, citing a supplier with knowledge of the situation.

A media representative of Memblaze declined to comment on Friday, while the company did not immediately respond to emailed requests for comment.

Micron also did not immediately respond to a request for comment on Friday.

The CAC’s Cyber Security Review Office said on Sunday that Micron failed its review, which led to the ban on sales of the US firm’s products to China’s critical information infrastructure operators. These include a wide range of entities from telecommunications network operators to banks and water utilities.

02:05

China imposes restrictions on US chip maker Micron, escalating tech war

Founded in 2011, Memblaze buys DRAM and NAND chips from foreign memory chip suppliers to package them into its SSDs. The Beijing-based firm did not disclose the name of its top supplier in its prospectus, but other information in the document shows its close ties to Micron.

Memblaze board member Yuan Rong previously worked for Micron in Shanghai as a lead engineer between 2008 and 2011, according to the prospectus. Zhang Zhiqing, a supervisor at Memblaze, served at Micron as an engineer between 2009 and 2011, followed by a shorter tenure between 2015 and 2016.

Micron Semiconductor Asia, a subsidiary of the US firm, spent 660,000 yuan (US$93,286) in May 2021 to acquire a 1.37 per cent stake in Memblaze, months before the Chinese storage devices maker applied for an IPO on the tech-heavy, Nasdaq-like Star Market, according to public records on a Chinese company registry website and filings from the Shanghai Stock Exchange.

Micron’s path from China business partner to alleged cybersecurity threat

Following the Micron sales ban, investors in related businesses in China are now in search of answers on how this development could affect them.

Shenzhen Longsys Electronics, one of Micron’s largest clients on the mainland, responded to investors’ inquiries this week by assuring that its operations are “normal and compliant with the laws”.

China has been one of Micron’s major markets, contributing about 11 per cent to the company’s US$30.8 billion total revenue in 2022. The US firm expects to post low to high single-digit losses as a result of the ban.