China’s Memory Chip Makers: A New Era of Power and Scrutiny

China’s memory chip makers have emerged as major players in the global market, driven by the country’s ambitious AI development plans. ChangXin Memory Technologies (CXMT) and Yangtze Memory Technologies Corp (YMTC) have risen to become the world’s fourth and fifth-largest memory chip makers, respectively.

Source: s.yimg.com

A Power Struggle in the Making

The two companies have been locked in a power struggle with their biggest client, Huawei, a Chinese technology giant. According to sources, CXMT had been hiking prices on Huawei, which led to a standoff on the factory floor in June. The confrontation was seen as a result of the power struggle between CXMT and Huawei.

CXMT’s pricing power has been a major factor in its rise to prominence. The company has been able to dictate prices to its clients, including Huawei, and has even been charging more than its South Korean rivals, Samsung and SK Hynix. This has led to a scramble for supply, with Chinese buyers forced to pay ever-higher prices for memory chips.

A New Era of Dominance

The Chinese memory chip makers have been on a tear, with CXMT signing a five-year agreement with ByteDance, TikTok’s Chinese owner, worth more than $7 billion. YMTC, on the other hand, has been expanding its presence in the global market, launching its consumer memory storage brand in South Korea in June.

Both companies have been supported by the Big Fund, a Chinese state-backed semiconductor investment vehicle. They have also received support from local and provincial governments, including Anhui province for CXMT and Hubei province for YMTC.

Chinese officials view the companies as strategic infrastructure central to Beijing’s drive for technological self-reliance. The companies are now taking the fight to their rivals’ doorsteps, with YMTC planning to expand its manufacturing capacity to serve both China and overseas markets as soon as 2027.

U.S. Scrutiny and Restrictions

The Chinese memory chip makers’ growing dominance has put them on a collision course with Washington. The Pentagon has designated both firms as Chinese military companies for their role in aiding China’s military-civil fusion strategy. YMTC is already on the U.S. Entity List, a designation that has restricted its access to U.S.-origin suppliers, software, and tools used in memory-chip production.

Congress is debating restrictions that would further curb both companies’ access to chipmaking equipment. Apple has argued that it needs Chinese memory and has sought assurances that CXMT won’t be placed on the Entity List. Micron, the Chinese firms’ main Western competitor, has pushed U.S. lawmakers to enact further restrictions on CXMT and YMTC, including curbing their access to chipmaking equipment.

A New Era of Competition

The Chinese memory chip makers’ growing dominance has led to a new era of competition in the global market. The companies are now taking the fight to their rivals’ doorsteps, with YMTC planning to expand its manufacturing capacity to serve both China and overseas markets as soon as 2027.

The companies face constraints, however, including their reliance on deep ultraviolet lithography machines from Dutch giant ASML. The Dutch government has faced U.S. pressure to restrict sales of advanced lithography equipment to Chinese companies because of the machines’ importance in producing cutting-edge semiconductors with potential military applications and because the machines contain U.S. technology.

The Chinese memory makers’ Korean and American competitors make DRAM chips using ASML’s more-advanced extreme ultraviolet lithography machines. China has been barred from obtaining those machines since the Dutch government began withholding export licenses in 2019.