The Micron case has become a key indicator of whether Beijing is prepared to use economic coercion against a significant US company for the first time.

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In an effort to rally allies to oppose Chinese economic coercion, the White House has asked South Korea to advise its chipmakers not to fill any chip market voids in China if Beijing forbids the sale of chips by Idaho-based Micron.

According to four people familiar with the discussions between the White House and the presidential office in Seoul, the US made the request as President Yoon Suk Yeol prepared to depart on Monday for a state visit to Washington. This month, China launched a national security review into Micron, one of the three market leaders for DRam memory chip, along with Samsung Electronics and SK Hynix of South Korea.

The Chinese Cyberspace Administration’s investigation may result in sanctions, but this is uncertain. But Micron faces significant risks. Mainland According to a person familiar with the situation, 25% of its $30.8 billion in revenue came from China and Hong Kong last year.

President Joe Biden’s tough measures to help stop China from obtaining or producing advanced semiconductors are believed to be the cause of the CAC investigation, according to US officials and business executives.

The Micron case has become a key indicator of whether Beijing is prepared to use economic coercion against a significant US company for the first time.

According to people familiar with the situation, the US has requested Seoul to persuade Samsung Electronics and SK Hynix to refrain from stepping up chip sales to the Chinese market if Micron is prohibited from selling as a result of the investigation.

The White House’s request comes at a delicate time because Yoon will be in the nation’s capital on Monday. Although the US has collaborated with allies to counter China in the Indo-Pacific region’s security domain, this is the first known instance in which it has requested that an ally enlist one of its companies to play a role.

Requests for comment to the South Korean embassy in Washington and Samsung went unanswered. The South Korean government had not requested anything, according to SK Hynix. Micron opted not to respond.

The Biden and Yoon administrations had “historic progress” deepening cooperation on issues of economic and national security, including efforts to protect “leading-edge technologies,” according to the White House, which did not comment on specifics.

According to the US National Security Council, “this includes efforts to coordinate investments in the semiconductor sector, secure critical technologies, and address economic coercion.” “We anticipate that the upcoming state visit will further deepen cooperation on every front,”

How Seoul has responded is unknown. Officials from the US and South Korea are completing the visit. As North Korea raises tensions on the peninsula, they are talking about a variety of topics, including how the US can give South Korea more assurance about “extended deterrence” — the US nuclear shield. Yoon is in an awkward circumstance as a result of the Micron-related request.

In comparison to his left-leaning predecessor Moon Jae-in, he entered office last year on a platform that was widely regarded as being more hawkish on China. He incited Beijing’s wrath last week by charging that China was attempting to alter the status quo regarding Taiwan “by force,” which served as an example of his position.

The US has chafed at US efforts to rally allies behind its economic security agenda, fearing that Samsung and SK Hynix’s competitiveness could be undermined.

However, the US may have some leverage, as it gave South Korean companies with chip fabrication facilities in China waivers to allow them to export from the country market. The commerce department has no update on the situation.

The price of DRam chips, which are used in everything from TVs to phones, dropped by 25% in the first quarter of this year, putting pressure on memory chip manufacturers who are already under pressure from the industry glut. The US government is concerned about “a recent uptick in coercive actions targeting US firms,” Treasury Secretary Janet Yellen stated last week.

The request to Seoul, according to a source with knowledge of the matter, shows that the Biden team was “motivated to ensure that China is not going to be able to use Micron as a lever to influence or effect US policy.”

Mao Ning, a spokesman for China’s foreign ministry, criticised US export restrictions on Monday, charging that they “disrupted the stability of global supply chains” and represented “a serious violation of the principles of market economies and international trade” by Washington. The CAC probe into Micron, according to Mao, was a “usual regulatory measure.”

The US’s request to Seoul serves as a reminder of the fact that some of the deepest rifts between Washington and Beijing are caused by chips. The White House has referred to Yangtze Memory Technologies Co. as a Chinese “national champion” and added the company to its “entity list” in December. As a result, businesses are not allowed to export American technology to the burgeoning Micron rival without a difficult-to-obtain licence.