China pouring billions into new memory chip production

China pouring billions into new memory chip production

China’s ChangXin Memory Technologies (CXMT) and Yangtze Memory Technologies Co Ltd (YMTC) have raised billions of dollars in new capital to finance the continued expansion of their memory chip operations in defiance of US sanctions on the sector.

CXMT has reportedly received 39 billion yuan (US$5.4 billion) in funds to complete the construction of a new DRAM factory whose total cost is expected to exceed four times that amount.

YMTC, China’s heavily-sanctioned NAND flash memory maker, has also apparently raised several billion dollars to develop and purchase alternatives to the US, Japanese and European equipment it is currently denied under US-led sanctions. YMTC’s capital raising follows $7 billion in financing announced last year.

The state-run China Integrated Circuit Industry Investment Fund is a key source of funding for both semiconductor firms. The capital raising reports are consistent with China’s efforts to build a more autonomous semiconductor industry in response to US sanctions that seek to cripple the crucial industry.

CXMT is China’s largest DRAM maker and fourth-largest supplier of DRAM in China after South Korea’s Samsung Electronics and SK Hynix, and Japan’s Micron Technology.

Established in 2016, CXMT is headquartered in the city of Hefei and has factories there and in Beijing. CXMT’s customers include makers of mobile phones, computers, servers, consumer devices and Internet of Things-related equipment.

The US Commerce Department has not yet put CXMT on its Entity List, though until July of this year, US export restrictions on US production equipment caused delays in its new factory’s construction. After a clarification of the regulations in CXMT’s favor, it is back on track with mass production expected to begin by 2026.

CXMT is now ramping up what it calls a 17nm process but what industry analysts say is actually closer to 19nm and therefore outside the 18nm boundary set by US sanctions. CXMT’s technology is believed to be three or four generations behind Samsung, SK Hynix and Micron.

CXMT is one of China’s leading manufacturers of DRAM memory chips. Photo: CXMT

YMTC is the leading Chinese maker of NAND flash memory. Also established in 2016, its headquarters and factories are located in Wuhan.

To the surprise of most observers and its competitors, YMTC developed its own unique 3D NAND architecture called Xtacking. Put into mass production in 2019, the technology turned out to be good enough for Apple to consider using YMTC’s NAND flash memory chips in the iPhone.

That set alarm bells ringing in Washington, DC, and under intense political pressure Apple abandoned plans to use YMTC chips in October 2022. Two months later, the Chinese company was added to the Entity List.

Deliveries of equipment from key US suppliers including Applied Materials, Lam Research and KLA were stopped, as were service and support of machines already installed. Engineers with US citizenship were forced to resign from the company.

That all caused YMTC’s operations to grind to a halt, forcing it to fall back on its own resources. Recovery from the sanctions hit has reportedly been slow.

YMTC was put on the Entity List shortly after launching its fourth generation 3D NAND flash product, a 232-layer chip that set a new record for data storage density.

Far beyond the 128-layer limit set by the Commerce Department, it poses a serious challenge to NAND flash industry leaders Samsung, Kioxia, SK Hynix and Micron.

YMTC supplies 3D NAND flash memory to makers of embedded memory and consumer and enterprise solid state drives (SSDs) used in mobile devices, consumer electronics, computers, servers and data centers.

Recently, TechInsights reported that it had found YMTC’s latest 232-layer NAND flash chips in SSDs. In a blog entitled “China Does It Again: A NAND Memory Market First,” the market research company wrote:

“TechInsights has discovered the world’s most advanced 3D NAND memory chip in a consumer device, and in a surprise technology leap, it comes from YMTC – China’s top 3D NAND manufacturer. 3D NAND memory is an essential component for high-performance computing (HPC) such as artificial intelligence (AI) and machine-learning. 3D NAND memory represents the bleeding edge of memory chip design, and is critical for high-performance, high-bandwidth computing such as AI…

“Like the innovation revealed by TechInsights in the Huawei Mate 60 Pro’s HiSilicon Kirin 9000s processor (which used SMIC 7nm (N+2) process), evidence is mounting that China’s momentum to overcome trade restrictions and build its own domestic semiconductor supply chain is more successful than expected.”

Both CXMT and YMTC are working with Chinese equipment makers, which are developing a complete range of machines to replace imported equipment, sanctioned or not. These include lithography (SMEE), photoresist processing (Kingsemi), deposition (Naura), etching (AMEC, Naura), chemical-mechanical planarization (Hwatsing, Sizone), cleaning (ACM, Naura) and inspection (Skyverse).

One Chinese industry source told Reuters “Before the sanctions, top Chinese foundries would use a small amount of machines from Chinese suppliers, but they would really only experiment with new equipment when they would add new capacity. Now, foundries are testing out Chinese-made equipment for every foreign machine they own and if they find that it meets their needs, they replace all of them. They want as few foreign machines as feasible.”

This appears to be true for Chinese memory chip makers and other integrated device manufacturers (IDMs) that, unlike foundries, design their own products as well. How much progress they can make and how quickly remains to be seen.

In 2022, China accounted for about 30% of global DRAM sales and 33% of global NAND flash memory sales, according to Yole technology market research. China’s self-sufficiency in memory chips is estimated at no more than 15%, but Samsung and SK Hynix have huge NAND flash memory and DRAM factories in the country.

China relies on South Korea’s Samsung for NAND and DRAM production Image: Asia Times Files / AFP

In October, the US Commerce Department granted the two Korean companies “validated end-user” status, which allows them to ship US semiconductor production equipment to their factories in China indefinitely without an export license.

This should ensure that China has a sufficient supply of memory chips while keeping the competitive pressure on CXMT and YMTC.

On November 9, YMTC filed a lawsuit against Micron Technologies in the US District Court for the Northern District of California for allegedly infringing on its patents related to the design, manufacture and operation of its 3D NAND flash memory technology.

In a statement, YMTC said, “We are confident that this matter will be resolved swiftly.” It will be interesting to see how it will be resolved.

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