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Chinese memory chip production reaches 5% of world total

Mass-production of memory chips will begin in 2020 as Beijing aims for tech self-sufficiency

Beijing’s drive for technological self-sufficiency is on the brink of a major milestone with the country’s nascent chip industry on target to manufacture around 5 per cent of the world’s memory chips from virtually zero last year by the end of 2020, sources familiar with the issue told Nikkei Asian Review.

Beijing, which has rendered artificial intelligence a geopolitical goal, has been pouring billions of dollars over the past few years to develop a competitive semiconductor industry. Since Washington’s restriction on China using some U.S. products, such as memory chips that can be used in military and security hardware, the effort has acquired additional momentum.

Yangtze Memory Technologies Co., which produces NAND flash memory chips, expects to triple production to 60,000 wafers a month, or 5 per cent of the world’s output, by the end of next year at its new $24 billion plant in Wuhan, which began in 2016. Meanwhile, at its $8 billion plant in Hefei, ChangXin Memory Technologies plans to quadruple supply of DRAM chips to 40,000 wafers a month, or 3 per cent of world DRAM capacity.

For each type of chip, the current global output of NAND flash and DRAM chips, which China has not previously produced, is about 1.3 million wafers per month. U.S., South Korean and Japanese manufacturers such as Samsung Electronics, SK Hynix, Micron and Kioxia, previously known as Toshiba Memory, control these industries.

“Both Chinese ventures are in small-scale production now, but the performance is increasing,” said a person familiar with both projects ‘ development. “They are all expanding production from now through next year for sure.” Yangtze Memory declined to comment on output levels, just saying it started producing 64-layer NAND flash memory chips in September and would increase production according to company plans, without specifying what those plans are. The memory of ChangXin refused to comment.

NAND flash chips, a $56 billion annual industry, and DRAM chips, a $95 billion sector, are main storage modules used in a variety of devices from smartphones and data centre servers to self-driving cars.

Reports said orders for NAND flash chips from Yangtze Memory had already been issued from some leading international and domestic companies including Lenovo, who are preparing to mount the chips for local use and export in their computers.

Asked for comment, Yangtze Memory said it was anticipating its chips to be used for different applications. “As a global innovative memory product provider, Yangtze Memory’s goal is to serve the global market,” the company said.

“It’s a breakthrough for China,” a Lite-On Technology executive said, establishing a joint venture with the parent company of Yangtze Memory, Tsinghua Unigroup.

“Yangtze Memory’s shipments may look like small peanuts compared to larger players like Samsung Electronics, SK Hynix and Toshiba[ now Kioxia]. But China is a real threat because its concept of making profits is different from others.” That differing vision became apparent last week when accumulated financial losses at Tsinghua Unigroup prompted the state-backed chip manufacturer to issue a state.

Losses in the group, which counts the alma mater of President Xi Jinping at Tsinghua University as a core shareholder, increased in the first half of the year to 3.2 billion yuan ($460 million), up from a loss of 631 million yuan in 2018.

“The next 12 months will be crucial,” said Mark Li, Bernstein Research’s seasoned semiconductor analyst. “When these storage devices are readily available on the market, people will be able to check that they infringe the intellectual property of other market leaders.” An additional challenge is the continuing competitive competition between the U.S. and China.

Washington also placed more than 200 Chinese companies and organisations on an international blacklist prohibiting their use of U.S. technologies, although this week Huawei, the world’s largest telecommunications equipment company, received another 90-day waiver that enabled U.S. companies for unique, restricted collaborations with Huawei and its non-U.S. subsidiaries.

Advanced Micro Devices, however, can no longer license new technology to its state-controlled Chinese joint venture partner Tianjin Haiguang Advanced Technology Investment, which was blacklisted in the U.S. in June.

Fujian Jinhua Integrated Circuit, another Chinese DRAM chipmaker, has almost gone out of business since it was cut off from American vendors over claims that the U.S. semiconductor company Micron Technology had violated intellectual property last year.

“There are many challenges and uncertainties ahead for these Chinese newcomers, but its government will support them strongly as they have a key mission to cut the country’s dependence on foreign technology,” said Arisa Liu, a semi-conductor analyst at the Taiwan Institute of Economic Research. “Now, it will take about three years for these Chinese entrants to start to close the technology gap with market leaders.”

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