Industry Minister Calls U.S. Ban on Jinhua ‘Untenable’

China’s industry minister criticized the U.S. trade ban on Chinese chipmaker Fujian Jinhua Integrated Circuit Co. as “untenable” shortly after the company said it will appeal U.S. sanctions.

The state-owned memory chipmaker was listed by the U.S. Department of Commerce for export control in October, which effectively banned the Chinese company from buying components, software and other technology from the U.S. The ban will force Jinhua to halt production by March, the Financial Times reported this week.

The U.S. sanctions against Jinhua “generalized the concept of national security” to “abuse export control measures,” Miao Wei, China’s minister of industry and information technology, said Tuesday at a regular press briefing.

Miao said “Jinhua is innocent” as it obtained the memory chip technology from its Taiwanese partner United Microelectronics Corp. (UMC), which should take responsibility in the dispute over trade secrets theft.

The Jinhua case marks another clash between the world’s two largest economies, which are embroiled in a trade war centered partly on U.S. accusations that China steals American intellectual property. Washington has taken increasing steps to block Chinese firms from obtaining U.S. technology, especially in the semiconductor space.

Jinhua is one of three domestic memory chipmakers assigned to help China reduce its reliance on some $200 billion of annual semiconductor imports. In May 2016, Jinhua entered a DRAM memory chip cooperation agreement with UMC. Under the deal, UMC would develop the DRAM technology and share it with Jinhua. In return, Jinhua would provide related equipment and fees totaling around $400 million, according to UMC’s annual report filing in 2017.

But in 2017, U.S. memory giant Micron Technology Inc. sued Jinhua and UMC, accusing the companies of stealing proprietary technology. UMC also filed a lawsuit claiming Micron infringed on its patents, which led a Chinese court to suspend some Micron chip sales in China last year.

In October 2018, the U.S. Commerce Department put Jinhua on an export control list. The department accused the company of producing products whose technology most likely originated from the U.S., threatening the long-term economic viability of domestic U.S. suppliers to the country’s military.

The Chinese Commerce Ministry opposed the decision, saying the move interferes with international trade.

In early November, the U.S. Justice Department charged Jinhua, UMC and three former Micron employees with conspiring to steal intellectual property from Micron.

Miao said Tuesday that the disputes between Jinhua and Micron are pure business matters and should be solved through negotiations by the companies. Miao said Jinhua and Micron are in contact, and the Chinese government will look closely but will not interfere in the negotiation.

The minister also called on the U.S. to remove Jinhua from the export control list.

Micron didn’t respond to Caixin’s questions on the matter.

Jinhua said earlier this week that it will file a complaint to be taken off the export control list and demand that U.S. authorities produce proof of the alleged transgressions.

“In the following months, Jinhua is willing to clarify that it doesn’t pose a threat to the national security of the U.S.,” the company said in a statement posted on the corporate website. “The company has abided by U.S. law since the beginning.”

The Financial Times reported Monday that UMC is likely to reach a settlement with the Justice Department involving large fines. UMC in November suspended its research tie with Jinhua.

Last April, ZTE Corp was hit by a similar ban from the U.S., which forced the telecom equipment maker to halt production for months until the ban was lifted in July. ZTE’s larger rival Huawei Technologies Co. is facing nearly two dozen criminal charges including fraud and trade secrets theft, according to two indictments unsealed by the U.S. Justice Department Monday.

Contact reporter Han Wei (weihan@caixin.com)