On July 5, 2018, a court in China ruled against Micron Technology, Inc., a US semiconductors company based in Boise, Idaho, and in favor of United Microelectronics Corporation (UMC), a Taiwanese company, and its partner, Fujian Jinhua Integrated Circuit Company, a Chinese-based firmed owned by the Fujian provincial government, and prohibited the sale of a certain Micron chips in China.

The lawsuit that resulted in this ruling, which will affect one percent of Micron’s revenues, was the latest step in a campaign that Micron alleges aims to transfer Micron intellectual property to China. China is Micron’s largest customer, accounting for 51 percent of Micron’s net sales in 2017.

China is the world’s largest consumer of semiconductors, and relies on imports to meet 85 percent of its consumption, according to a recent report from the US-China Economic Security and Review Commission. The Chinese government has employed a number of strategies to break China’s dependence on foreign producers, including acquisition of US semiconductor companies, according to the report.

Micron has been subject to a persistent technology acquisition campaign from multiple Chinese actors over the last three years. In a 2018 quarterly statement filed with the US Securities and Exchange Commission, Micron noted:

[W]e face the threat of increasing competition as a result of significant investment in the semiconductor industry by the Chinese government and various state-owned or affiliated entities that is intended to advance China’s stated national policy objectives. The activities by the Chinese government may restrict us from participating in the China market or may prevent us from competing effectively with Chinese companies. This pressure has comprised an attempted acquisition in 2015, recruitment of Micron employees, alleged IP theft by two state-owned firms from 2015 to 2016, direct challenge of Micron’s IP in China, and an on-going antitrust case.

In July 2015, the state-owned Tsinghua Holdings submitted an unsolicited $23 billion takeover bid for Micron. In February 2016, Micron rejected the bid due to concerns that the United States Treasury Department’s Committee on Foreign Investment in the United States (CFIUS) would not clear it. Several Chinese companies subsequently sought to establish partnerships, but Micron turned these offers down because it was concerned about protecting its intellectual property.

This particular bid was one of 32 proposed mergers and acquisitions by Chinese companies targeting the US semiconductor business since 2014, according to the commission report.

According to Micron, during the acquisition negotiations in 2015, Tsinghua recruited Micron employees, in particular Charles Cheichan Kau, then head of a joint venture between Micron and a Taiwanese company, to serve as executive vice president. Micron also alleges that Tsinghua conducted industrial espionage to access Micron’s IP.

Seven former Micron employees have been investigated for allegedly stealing Micron IP and selling it to Chinese state-owned firms. In September 2017, Taiwan prosecutors charged five employees of a Micron subsidiary in Taiwan with theft of trade secrets and sharing them with Tsinghua. The five employees were allegedly paid $6,500 a month for these services and were promised future employment.

The UMC- Fujian Jinhua affair dates back to 2015, when UMC recruited two former Micron employees in Taiwan. In early 2016, UMC entered into a partnership with Fujian Jinhua, under which the latter would pay UMC $400 million for dynamic random-access memory (DRAM) process technology. The Taiwan prosecutors allege UMC provided Micron’s technology to Fujian Jinhua, which is set to begin DRAM manufacturing later this year. In August 2017, Taiwan prosecutors indicted UMC and two former Micron employees for conspiring to steal and misappropriate Micron trade secrets and to deliver those trade secrets to Fujian Jinhua.

In December 2017, Micron sued firm Fujian Jinhua and UMC in a US federal court for trade secret theft and IP infringement. That case is still pending, but apparently sparked the lawsuit in China which resulted in the preliminary injunction prohibiting Micron from selling certain products in China.