As per four people with knowledge of the situation, the United States is considering restricting shipments of American chipmaking equipment to memory chip manufacturers in China, including Yangtze Memory Technologies Co Ltd (YMTC), in an effort to halt China’s advancements in the semiconductor industry and protect American companies.
Based on the individuals, who spoke on the basis of anonymity, if President Joe Biden’s administration moves forward with the decision, it could also impact South Korean memory chip giants Samsung Electronics Co Ltd and SK Hynix Inc. While SK Hynix Inc. is purchasing Intel Corp.’s Chinese NAND flash memory chip manufacturing operations, Samsung owns two sizable factories in the country.
Acting on Chinese Memory Chip
If the restriction is authorized, advanced NAND chip companies in China will not be able to receive American chipmaking equipment. According to export control specialists, it would be the first attempt by the United States to use export controls to target Chinese memory chip manufacturers without specific military purposes, reflecting a broader understanding of American national security.
The action would also aim to defend Western Digital Corp. and Micron Technology Inc., the sole memory chip manufacturers in the United States, who collectively account for about a quarter of the NAND chip market.
NAND chips are used to store data in devices like smartphones, laptops, and data centers for companies like Amazon, Facebook, and Google. The number of NAND chips and their level of sophistication affect how many gigabytes of data a phone or laptop can store.
As per two of the sources, under the proposed move, American officials would prohibit the export to China of equipment needed to manufacture NAND chips with more than 128 layers. The two largest providers of such tools are Applied Materials and LAM Research Corp, both of which are situated in Silicon Valley.
According to every source, the administration is only beginning to consider the issue and has not yet created any suggested regulations. When asked about potential restrictions, a representative of the Commerce Department, which oversees export controls, said that the Biden administration is focused on thwarting (China’s) efforts to produce advanced semiconductors in order to confront substantial threats to national security towards the United States.
YMTC: Origin and Growth
YMTC, which was established in 2016, is a growing force in the NAND chip industry. According to a study released by the White House in June 2021, YMTC’s low prices are putting pressure on Micron and Western Digital.
According to that assessment, YMTC’s growth and affordable products pose a direct challenge to Micron and Western Digital. According to the article, YMTC is China’s national champion and has received almost $24 billion in subsidies from China.
As per the sources, we also came to know that YMTC is in discussions with Apple Inc. to provide the leading U.S. smartphone manufacturer with flash memory chips. YMTC is already under investigation by the Commerce Department over whether it violated American export laws by selling chips to the Chinese telecoms company Huawei.
Micron, SK Hynix, and LAM Research Corp. declined to comment on American policies. Requests for comment from Western Digital Corp., Applied Materials Inc., YMTC, and Samsung did not receive an instant response.
About the Congress Acts
Under Biden’s predecessor Donald Trump, tense relations between China and the United States over the internet industry grew worse and have remained so ever since. In an effort to constrain China’s biggest chipmaker, SMIC, Biden’s administration is also mulling limitations on the shipping of tools to produce sophisticated logic circuits to China, according to Reuters on July 8.
Last week, the U.S. Congress passed measures that will help the country compete with China by pouring billions of dollars into local chip manufacturing. The legislation would bar chipmakers who accept payments from setting up or increasing manufacturing for specific advanced chips, including sophisticated memory chips at a level to be decided by the administration, in nations like China.
Walt Coon of the consulting firm Yole Intelligence claims that YMTC produces nearly twice as many NAND flash memory chips as it did a year ago, or roughly 5% of the world’s total production. Approximately 13 percent belong to Western Digital, and 11 percent to Micron.
According to Coon, restrictions like those that Biden’s administration is considering would be extremely detrimental to YMTC. I’m not sure how they would actually have a path forward if they were locked at 128.
Yole statistics showed that while production in the United States declined from 2.3 percent to 1.6 percent over the same period, production in China increased from around 14 percent of the global total in 2019 to over 23 percent this year. Nearly majority of the chip production for American businesses is done abroad.
Whatever effect the prospective restrictions may have on other players in China was not immediately evident. According to a press statement from Intel, the Chinese facility is already generating memory chips with 144 layers. Intel also has an agreement to manage operations in the factory it is selling to SK Hynix in China.
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