China’s memory chip makers ride AI boom to new power — and U.S. scrutiny

The geopolitical tussle hasn’t slowed the Chinese chipmakers’ march toward public listings. CXMT, which will launch its $8.6 billion IPO in Shanghai on Monday, has erased a decade of losses in six months, booking $7.5 billion in revenue for the first quarter — a 719% increase from a year earlier. As YMTC prepares for its own IPO, some executives are pushing internally for a 1 trillion yuan ($148 billion) valuation target, according to two people. Both firms are 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. The provincial authorities and the investment fund didn’t respond to requests for comment. Chinese officials view the companies as strategic infrastructure central to Beijing's drive for technological self-reliance, corporate filings and policy documents show. Now, the chipmakers are taking the fight to their rivals' doorsteps. YMTC entered the South Korean market in June, launching its consumer memory storage brand and exploiting a gap left by Samsung, SK Hynix, and Micron of the U.S., which have shifted away from that segment to focus on more-advanced chips. CXMT aims to break into the U.S. in the long term, according to three sources, but its capacity is stretched by heavy domestic demand. Chinese authorities have asked CXMT and YMTC to prioritize supply to domestic firms, three other people told Reuters. But the chipmakers also plan to expand manufacturing capacity, which could allow them to serve both China and overseas markets as soon as 2027, when new fabrication plants come online. CXMT is building two new plants in Shanghai and Hefei and is in talks with local authorities elsewhere about a third, according to three sources. Those projects would more than double production capacity to more than 600,000 wafers per month. If all goes to plan, CXMT’s capacity would overtake Micron by 2030, one of the people said. Reuters reported in April that YMTC plans two more factories, in addition to one due to be completed this year. Despite their growing dominance, the Chinese memory makers face constraints. Both companies rely on deep ultraviolet lithography machines — used to print the tiny circuits that make chips — from Dutch giant ASML ASML.AS. 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. While CXMT has produced its own high-bandwidth memory, an ultrafast format that is crucial for AI, five sources said it remains two generations, or several years, behind its rivals. "If more restrictions are imposed on lithography equipment, that would be the biggest challenge for Chinese memory makers," said Ray Wang, an analyst who focuses on memory and AI supply chains at research firm SemiAnalysis. "China remains quite behind in that part of the equipment supply chain compared to other tool segments." ASML declined to comment on the potential impact of any future export regulations. YMTC is more insulated than CXMT from such a scenario. Since its addition to the U.S. Entity List in 2022, YMTC has replaced around half of its equipment with domestic machinery and developed new techniques to stack memory layers using less-advanced tools, according to two people. Chinese memory chips were long seen by foreign executives as cheaper alternatives to Western and South Korean products. But that is no longer the case, six people told Reuters. In recent weeks, CXMT has charged more than Samsung's roughly $1,240-per-unit price for comparable 64-gigabyte DDR5 server memory modules, two of these people said. They wouldn’t disclose the precise CXMT price. Samsung didn’t respond to questions. SK Hynix also declined to comment. Several Chinese electronics and tech firms complained to China’s Ministry of Industry and Information Technology this year about price increases by CXMT and YMTC, blaming the hikes for delaying product launches, according to two people. The sources declined to identify the companies that lodged the complaints. The ministry, which didn’t respond to questions for this story, said in April that it would crack down on memory-chip hoarding aimed at driving up prices. The government has also steered demand to domestic chip suppliers. Chinese state-owned firms are restricted from buying from foreign memory makers, according to two sources. The supply deal between CXMT and ByteDance followed an agreement between the chipmaker and Tencent in June worth over $3 billion. Tencent didn’t respond to a request for comment. At YMTC, Chairman Chen Nanxiang had forecast this moment. He told Chinese state media in 2024 that "while the industry had not yet reached explosive growth, that day would come within three to five years." By early this year, as the company began picking and choosing clients for the first time, Chen and his leadership team were celebrating, according to two sources. The boom he predicted had arrived. ($1 = 6.7697 Chinese yuan renminbi) SINGAPORE, July 24 (Reuters) - For months, Chinese chip manufacturer ChangXin Memory Technologies (CXMT) had been hiking prices on Huawei, one of the country’s biggest technology companies. The chipmaker held firm when Huawei demanded relief from the escalating costs, according to two people familiar with the matter. The standoff came to a head on CXMT’s factory floor in June. A group of engineers from a chipmaking-equipment vendor with deep strategic ties to Huawei had been working in the cleanrooms at CXMT’s core research and development zone in Hefei, Anhui province. Without warning, CXMT ordered the engineers, who had been helping with equipment maintenance, to pack their tools and leave the factory floor immediately, the two sources said. Executives at the Huawei-connected equipment vendor, SiCarrier, concluded the confrontation was the result of the power struggle between CXMT and Huawei, the people told Reuters. The companies still do business but the engineers haven’t been allowed back into the R&D zone, the two people said. CXMT, Huawei and SiCarrier didn’t respond to questions about the incident. The clash illustrates the changing dynamics of China’s semiconductor industry. CXMT has risen to become the world’s fourth-biggest maker of memory, including the DRAM variety used in smartphones, laptops and servers. Now, the company is powerful enough to charge prices even Huawei can’t stomach. Memory chips that help devices run apps and store files were once a low-margin business. CXMT and its flash-memory counterpart, Yangtze Memory Technologies Corp, or YMTC, spent years relying on government funding and racking up losses. But the global buildout of AI data centers has transformed the humble components into one of the world's most sought-after products, sparking battles over pricing and a scramble for supply. The Chinese memory makers are now picking clients and dictating prices, four people familiar with the matter told Reuters. In some cases, they are charging more than their larger South Korean rivals, Samsung 005930.KS and SK Hynix 000660.KS, as skyrocketing demand for memory chips forces Chinese buyers to pay ever-higher prices. CXMT this month signed a five-year agreement with ByteDance, TikTok’s Chinese owner, worth more than $7 billion, three people familiar with the arrangement told Reuters. ByteDance didn’t respond to a request for comment about the deal, which hasn’t been reported previously. This account of how CXMT and YMTC are wielding their newfound clout is based on interviews with more than a dozen people, including executives, engineers, suppliers and U.S. officials, and a Reuters review of 50 Chinese government policy documents and company disclosures. It reveals new details on their pricing power, strategies and dealmaking as both companies – known in China as the “twin stars” of memory – race toward blockbuster IPOs. Neither chipmaker responded to requests for comment about their pricing, strategy, and growing U.S. scrutiny of their market power. The Chinese companies’ grip on chip supply is putting them on a collision course with Washington. The Pentagon has designated both firms as Chinese military companies for what it says is their role in aiding China’s military-civil fusion strategy — a charge they deny. 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. But the Trump administration is divided on whether to crack down on them, according to four people familiar with the discussions. Apple AAPL.O has argued that it needs Chinese memory and has sought assurances that CXMT won't be placed on the Entity List, two of these people said. CXMT was approved by a U.S. interagency committee last year for addition to the trade blacklist, which the Commerce Department oversees, but officials have held off, Reuters reported last month. 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. Apple and Micron didn’t reply to questions about the discussions. The White House and the departments of Commerce, Defense, and State also didn’t respond to requests for comment.

China’s memory chip makers ride AI boom to new power — and U.S. scrutiny

IPO plans accelerate even as China pushes domestic supply

Equipment limits remain a constraint, but prices keep climbing

CXMT’s pricing power rises as AI demand tightens memory supply

Washington weighs more restrictions as Apple and Micron raise concerns

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