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Chinese Court forbids Micron from selling its chips in China

Micron Technology (MU) announced that Fuzhou Intermediate People’s Court in China has forbidden the company from selling its products in China. Micron’s rival United Microelectronics Corp (NYSE: UMC) reported about the court’s decision on July 3. Today, Micron stated that this ban would result in about 1% fall in its revenue for the fourth quarter. However, Micron expects revenue to come in the previously stated range of $8.0 to $8.4 billion.

Responding to the Chinese Court’s decision, Micron’s SVP of Legal Affairs Joel Poppen said, “Micron is disappointed with the ruling by the Fuzhou Intermediate People’s Court. We strongly believe that the patents are invalid and that Micron’s products do not infringe the patents. The Fuzhou Court issued this preliminary ruling before allowing Micron an opportunity to present its defense.”

Micron's Q3 2018 earnings
Micron Technology Q3 2018 Earnings Infographic

Micron stated in its recent quarterly filing that the complaints filed by UMC and its partner Fujian Jinhua Integrated Circuit Co earlier this year sought an order requiring Micron to pay damages of 90 million Chinese yuan and 98 million Chinese yuan, respectively. Also, the company had mentioned in the filing that there is a risk of restriction or prevention from the Chinese government for the company to perform in the China market.

Micron said that it will ask the Fuzhou Court to revise the decision. Earlier, the Idaho-based semiconductor giant had alleged that the Taiwanese company UMC cooperated with Fujian Jinhua to steal Micron’s intellectual property rights and this lawsuit is still in progress.

Related: Why semiconductor stocks tumbled?

Even though the company doesn’t report its revenue on a geographical basis, reports say that nearly half of Micron’s revenue comes from China. With the US-China trade war tensions hitting the semiconductor industry already, this ban resulted in Micron’s stock falling about 5% during the extended hours of trading on Tuesday. However, when the market opened today shares of the company were up about 2%, reflecting investors’ confidence in Micron.

The shares of Micron’s peers which fell on Tuesday, including Advanced Micro Devices (AMD), Nvidia (NVDA), Applied Materials (AMAT), Qualcomm (QCOM) and Intel (INTL) were all up during today’s morning session.

Related: Chipmakers thrive on bullish outlook; Micron stock hits 18-year high


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