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China’s Yangtze Memory takes on rivals with new chip plant

Chinese memory chip maker Yangtze Memory Technologies plans to put a second factory online in its home city of Wuhan as early as the end of this year, sources familiar with the matter say, in a move that could further narrow the company’s technology and output gap. . with world leaders such as Samsung from South Korea and Micron Technology from the US.

The company, also known as YMTC, is set to expand production after a growth spurt that has placed it on the semiconductor world map and delivered remarkable success in Beijing’s effort to reduce China’s reliance on imported chips.

The original factory is nearing capacity, producing 100,000 wafers per month by the end of 2021, two people told Nikkei Asia.

YMTC had a global market share of nearly 5 percent last year, according to analysts and industry estimates. It has become the world’s sixth largest manufacturer of Nand flash memories behind Samsung, SK Hynix, Kioxia, Western Digital and Micron, and the only one from China.

About 40 percent of the output is currently 128-layer 3D Nand flash memory, the most advanced yet produced by a Chinese chipmaker. But that’s one or two generations behind global leaders Samsung, SK Hynix and Micron. The rest of YMTC’s output is from older 64-layer 3D Nand flash memory.

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This article belongs to Nikkei Asia, a global publication offering a uniquely Asian perspective on politics, economics, business and international affairs. Our own correspondents and external commentators from around the world share their views on Asia, while our Asia300 section provides in-depth coverage of 300 of the largest and fastest-growing publicly traded companies from 11 economies outside of Japan.

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The new factory would build primarily 128-layer flash memory at first, and could later switch to even more advanced chips, such as 196-layer or 232-layer 3D Nand flash memory, assuming development runs smoothly in 2023 and 2024.

Apple has been testing YMTC’s flash memory products since last year and could place an initial order in “limited quantities” as early as this year, two people familiar with the matter told Nikkei Asia. The US tech giant has been talking to the Chinese chipmaker since 2018 in hopes of finding a cost-effective source of storage components.

Closing a deal with Apple would be a milestone and highlight the quality of Yangtze Memory’s chips, industry executives say. Apple’s Chinese suppliers, including those from Hong Kong, already outnumber those from Taiwan, making China the largest supplier of suppliers to the US company, according to a Nikkei Asia analysis. Apple also has close ties to several Chinese electronics manufacturers, including Luxshare, Goertek and BYD.

The success of Yangtze Memory is also seen as a victory for China as the world’s second largest economy strives to localize semiconductor manufacturing and build industrial champions. Yangtze Memory is backed by the China Integrated Circuit Industry Investment Fund, the main financing vehicle for chip investments in Beijing. And YMTC is optimistic about its growth prospects, increasing its investment budget from $24 billion in 2016 to the equivalent of $32.8 billion this year.

The Chinese chipmaker is currently installing equipment at the new chip factory, an important step before it goes into production. The plant will eventually have twice the capacity of the first, said several people who were briefed. The total capacity of the two plants will reach 300,000 wafers per month and could help YMTC expand its market share to more than 10 percent worldwide.

The company is split into two parallel teams made up of hundreds of top engineers tasked with developing 196-layer and 232-layer flash memory, one of the people said. The goal is to overtake foreign rivals.

The most advanced products on the market, which Samsung, Micron and SK Hynix have all managed to produce, are 176-layer 3D Nand flash memory chips. They are now racing to create chips that consist of more than 200 layers. Kioxia and Western Digital said they will be making 162-layer 3D Nand flash memory by the end of the year.

The more layers a flash memory chip has, the more advanced the chips are — and the more difficult they are to develop and manufacture commercially. Nand flash memory is an essential storage component used in a variety of electronic devices, from smartphones and PCs to data center servers and connected cars.

Most YMTC flash memory is currently used to make consumer-grade solid-state drives (SSDs), primarily for the Chinese market. Its customers include leading storage manufacturers Lenovo, Longsys and Kimtigo from China, as well as Adata from Taiwan. YMTC has also introduced its own brand, ZhiTai, to sell SSDs directly to consumers.

The share of the global flash memory market has risen rapidly from 1.3% in 2019, when the 64-layer Nand flash memory first went into production, according to Counterpoint Research, which believes it will account for nearly 6 percent of the market by 2023. could conquer, up 4.8 percent in 2021.

Brady Wang, an analyst at Counterpoint, told Nikkei Asia that Yangtze Memory had already been working on its technology before the company was formally launched in 2016. It had demonstrated its capabilities and gradually became a viable global player after years of effort, Wang said. It had also more than doubled its payroll in four years, to about 8,000 employees today.

“It recruits a lot of engineers and veterans from Chinese backgrounds, but used to work for multinational technology and chip companies,” Wang said. “However, managing a factory is different from managing multiple factories on a large scale. It remains to be seen whether it [can] successfully ramp up production.”

Political tensions between the US and China are also increasing uncertainty for Chinese companies like YMTC, Wang said.

Washington has slowed the advance of China’s semiconductor industry by adding the country’s largest chipmaker, Semiconductor Manufacturing International Co, and telecom equipment group Huawei, to a trade blacklist to limit their use of US technology. Yangtze Memory is one of the most aggressive companies in continuing to develop chip making equipment domestically, but it continues to maintain good relationships with US and other foreign suppliers to ensure its expansion plans are realized.

YMTC declined to comment on this story.

A version of this article was first published by Nikkei Asia on June 23, 2022. ©2022 Nikkei Inc. All rights reserved.

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