A Chinese court just retaliated against Boise's Micron. Here's why, and what it means

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Micron is spending $32 million to build a three-story building this year on its Boise campus to house 1,200 workers, including more than 300 research engineers now housed in a "trailer park" in a Micron parking lot.
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Micron is spending $32 million to build a three-story building this year on its Boise campus to house 1,200 workers, including more than 300 research engineers now housed in a "trailer park" in a Micron parking lot.

A Chinese court has struck back at Boise's Micron Technology Inc., which alleges its trade secrets have been stolen to benefit an emerging Chinese memory manufacturer.

The court in the Fujian province notified Micron on Thursday that it had temporarily barred Micron's Chinese subsidiaries from making, selling or importing certain memory modules and solid-state drives. Those sales account for slightly more than 1 percent of Micron's worldwide revenues, the company said in a statement.

Micron said the ruling is retaliation both for criminal indictments filed by Taiwanese authorities late last year against a Taiwanese company and for a lawsuit Micron filed in December in federal court in California.

Prosecutors say the Taiwanese company, United Microelectronics Corp., or UMC, hired Micron employees who brought stolen trade secrets for the company to use in a partnership with the emerging mainland Chinese chip maker, Fujian Jinhua Integrated Circuit Co., or Jinhua. Jinhua is backed by the Fujian provincial government.

"The Fuzhou Court issues this preliminary ruling before allowing Micron an opportunity to present its defense," said Joel Poppen, Micron's senior vice president of legal affairs, general counsel and corporate secretary. "This ruling and other actions by the Fuzhou Court are inconsistent with providing a fair hearing through appropriate legal processes and procedures."

UMC and Jinhua responded to the prosecution and the lawsuit by filing lawsuits of their own in January. Micron alleges that the patents UMC and Jinhua allege Micron infringed involve technologies that were previously developed and patented in other countries by other tech companies. Micron said it doesn't use them.

Micron is walking a fine line: It continues to beef up operations in Taiwan — it has transferred a few hundred Boise jobs there — and it has customers and an assembly and test-manufacturing plant in mainland China. It wants to keep working with the Chinese government without sharing its key technologies.

"The central government of China has often stated that the rights of foreign companies are fairly and equally protected in China," Micron said. "Micron believes the ruling issued by the Fuzhou Court in Fujian Province is inconsistent with this proclaimed policy."

Micron said it will ask the court to reconsider or stay its preliminary injunction.

Micron said the hit it will take in sales won't be big enough to require revision to its previously estimated sales in its current quarter of $8 billion to $8.4 billion. The company is the Treasure Valley's largest for-profit employer, with about 6,700 employees, mostly on its Federal Way campus in Southeast Boise.

China's aim may not really be to bar shipments of Micron's chips, said Kevin Cassidy, an analyst at Stifel Nicolaus, a brokerage and investment banker. Instead, the ruling may be part of a strategy to push Micron into a partnership with Chinese semiconductor makers, which could speed China's chip-industry development.

Meanwhile, Micron and its Korean rivals are still facing an investigation by a Chinese antitrust regulator. A Taiwan technology newspaper reported in June that Micron and two Korean memory makers, Samsung Electronics and SK Hynix, could face possible fines up to $8 billion over alleged price fixing.

All three companies have enjoyed robust sales and profits as their industry has consolidated and demand for memory has climbed. Together, they account for about 90 percent of the world's dynamic random-access memory sales. Their products are essential to everything from supercomputers to smartphones.

The legal disputes have fueled concern that Micron has become a pawn in a broader trade dispute between China and the U.S. President Donald Trump has railed against Chinese companies for allegedly stealing U.S. companies' intellectual property.

China is the world's largest market for semiconductors, yet isn't home to even one of the top 10 producers. Beijing wants to change that and has set aside billions of dollars to bolster local companies.

Ian King is a technology reporter for Bloomberg. David Staats: 208-377-6417, @davidstaats