Chinese State-Backed Investors Inject US$7b into YMTC to Propel Local Chip Component Production While US Moves to Produce in Vietnam

In response to mounting geopolitical tensions and US trade restrictions, Yangtze Memory Technologies Corp (YMTC), China’s premier memory chip manufacturer, is taking significant steps to bolster its domestic supply chain. The company received a substantial US$7 billion capital infusion from state-backed investors, including the Big Fund, earlier this year, according to SCMP on September 20, 2023.

Shift in Supplier Dynamics: YMTC is intensifying its collaboration with Chinese semiconductor equipment manufacturers to urgently replace US components in its manufacturing equipment. This strategic shift comes on the heels of the US’s comprehensive partnership with Vietnam, announced during President Joe Biden’s visit to Hanoi earlier this month, which includes plans to build the largest shipyard in Ho Chi Minh City.

Meanwhile, California-based chip manufacturer Intel shares this perspective, pledging a substantial investment of US$1.5 billion to establish an extensive campus located just outside Ho Chi Minh City. (Read More)

Chen Nanxiang, Chairman of YMTC, expressed concerns about the global chip sector’s turbulence due to geopolitical tensions earlier this year. He recommended that suppliers unable to ensure the delivery or normal operation of their equipment should “buy back” those tools from clients, a clear reference to American providers.

Reduced Reliance on American Technologies: US trade restrictions, limiting China’s access to advanced chip-making machinery, have prompted Chinese businesses in the semiconductor supply chain to foster closer collaboration and reduce reliance on American technologies. An illustrative example is Huawei Technologies, China’s telecom giant, which successfully incorporated a 7-nanometre chip in its Mate 60 Pro smartphone despite US sanctions, a feat documented in a teardown report by Canadian research firm TechInsights.

YMTC’s Role in the Global Memory Chip Market: YMTC stands as China’s formidable contender in the international NAND memory chip market, competing with top global manufacturers like Samsung Electronics, SK Hynix, Kioxia Corp, and Micron Technology. The company unveiled its groundbreaking 232-layer 3D NAND chip, the X3-9070, in August 2022, marking a significant technological achievement.

Challenges and Resilience: YMTC faced considerable disruption last October when updated US trade rules not only halted exports of chipmaking equipment to China but also prohibited US personnel from providing maintenance services in the country. As a result, companies like Lam Research and KLA Corp withdrew their staff from YMTC.

In December, YMTC was added to a US trade blacklist, prompting delays in the construction of a second wafer fab in Wuhan and substantial equipment order reductions. However, the company regained its footing in March 2023 with the US$7 billion capital boost from state-backed investors.

Critical Localisation Efforts: YMTC’s collaboration with domestic semiconductor equipment manufacturers aims to produce replacements for crucial components used in its equipment, previously supplied by US firm Lam Research. Many semiconductor equipment parts, including electrostatic chucks, require regular maintenance and replacement.

It should be noted that if China fails to accelerate these localization efforts as planned, it could threaten YMTC’s viability due to a lack of maintenance of equipment and replacement parts, which will lead to a decline in output and prestige. Chinese chip makers may find it difficult to find suppliers who are capable of supplying high-quality technology if not with the United States and Taiwan.

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