Chinese memory, which was once looked down on, has followed us all the way… DRAM’s top 3 system is a ‘threat’

Image of Chinese semiconductors. DALL E

Analysis suggests that China’s aggressive production expansion is behind the recent red light on the outlook for the memory semiconductor industry, including Samsung Electronics. As cheap Chinese DRAM was released into the market, it triggered a price decline, which led to a deterioration in the overall profitability of the industry. In addition, the Chinese memory industry is going beyond a simple volume offensive and is narrowing the technology gap with Korea at a rapid pace.

According to the industry on the 20th, Chinese DRAM manufacturer Changshin Memory Technologies (CXMT) is rapidly increasing its DRAM production capacity from 70,000 units per month in 2022 to 120,000 units per month last year and 200,000 units per month this year. It is predicted that the number will reach 300,000 units per month by the end of next year.

The ‘DRAM powerhouse system’ of Samsung Electronics, SK Hynix, and Micron, which has been established since the 2010s, appears to be shaking. CXMT’s share of global production capacity is expected to reach 12% by the end of this year from 4% in 2022. Next year, the ratio is expected to exceed 15%. Currently, the DRAM production proportions of Samsung Electronics, SK Hynix, and Micron are around 37%, 25%, and 17%, respectively, but CXMT has come close to reaching third place Micron.

CXMT is a new company established in 2016. At the beginning of its establishment, it was assessed that it would take a significant amount of time to catch up with Korean and American companies, but with the full support of the Chinese government, which aims to become self-reliant in semiconductors, it grew into China’s largest DRAM company in a short period of time. It is an open secret that during this process, a large number of employees from Samsung Electronics and SK Hynix were scouted.

In the past, most Chinese information technology (IT) manufacturers used DRAM imported from Korea in their products. CXMT quickly absorbed this domestic demand. Smartphone manufacturers such as Xiaomi and Transian also began installing CXMT’s low-power mobile DRAM ‘LPDDR5‘ since last year.

The pace of technological advancement is also fast. Until the first quarter of last year, 91.9% of CXMT DRAM products were produced using the 19 nanometer process. However, in the second quarter of this year, the proportion of 17 nanometers expanded to 48.1%, and the proportion of 16 nanometers is expected to increase to 35.7% next year. It is known that this company has also begun mass production of high-bandwidth memory (HBM) for artificial intelligence (AI), which is made by stacking DRAM.

CXMT’s main product is ‘DDR4‘, an older DRAM commercialized in 2013. Currently, it is about 5 to 6 years behind the high-performance ‘DDR5’ that Samsung Electronics and SK Hynix are focusing on. However, DDR4 is still widely used in consumer IT products such as PCs, smartphones, and home appliances, and the price of general-purpose DRAM is trending downward due to CXMT’s volume offensive. When Samsung Electronics announced its third quarter performance on the 8th, it issued a separate explanatory material saying, “Performance declined due to the influence of the supply of legacy (old) products from Chinese memory companies.”

A view of the headquarters of Chinese DRAM company CXMT. Provided by CXMT

China’s progress is also notable in NAND flash, another axis of memory. Yangzi Memory Technologies (YMTC), a Chinese NAND manufacturer, has begun mass production of 232-layer NAND for the first time in the world in 2022. The technology gap between Korean and Chinese companies for NAND is narrower than for DRAM.

However, there are counter-arguments that it is too early to overestimate the impact of Chinese memory. Most companies are still responding to domestic demand, so it will take time to achieve global competitiveness. Kim Rok-ho, a researcher at Hana Securities, said, “It is highly likely that the DRAM market for low-end smartphones and PCs in China has been encroached upon by the increase in CXMT production over the past two years.” He added, “Additional risks (from the perspective of the domestic memory industry) will be limited in the future.” did it