TAIPEI -- In just five years and in the face of mounting U.S. restrictions, China's share of the global memory chip market has gone from virtually zero to 5% -- and industry insiders say it could double this year alone in a challenge to global leaders Samsung Electronics, SK Hynix and Micron.
Much of that growth is down to ChangXin Memory Technologies. After two years of expanding capacity in Beijing and Hefei, where it is based, CXMT can now produce commercially viable dynamic random access memory (DRAM) chips, a vital component in just about every type of electronic device. It is also working to produce high-bandwidth memory (HBM) chips for AI computing.
CXMT's successful production of DRAM, largely for budget and midrange smartphones, represents a victory for China in its long battle to break the hold that South Korean and U.S. players have had on the memory chip sector. But achieving domestic aims is starting to impact the global supply-demand balance of a notoriously volatile market.
While Washington began restricting China's purchases of advanced DRAM chipmaking machines in 2022, this only strengthened Beijing's resolve to become self-reliant. Looking purely at wafer capacity, CXMT could produce the equivalent of around 10% of the global DRAM chip output for 2024, industry executives and analysts told Nikkei Asia. Because of lower production quality, its actual market share was much lower, they said, but added that it is set to continue increasing.
Fujian Jinhua Integrated Circuit Co. (FJICC), a Chinese chipmaker blacklisted by the U.S. back in 2018, has, with the help of Huawei Technologies, been producing small batches of lower-grade DRAM for consumer electronics, sources briefed on the matter said. SwaySure, another Huawei-backed DRAM chipmaker, was added to the U.S. blacklist in December last year. It, too, has been working on making DRAM and is also researching stacking technologies for HBM.
The market presence of these players, while small, is still significant.
"Any increase of DRAM supplies by new players can pressure existing players and affect the global market, even if it's only a few percentage points," said Brady Wang, a veteran tech analyst with Counterpoint Research.
Considering capacity, production quality and actual market impact, the combined market share of all Chinese players could surge to 10% this year, up from 5% last year, said Ellie Wang, a tech analyst with TrendForce.
While DRAM is widely used in smartphones, computers and other consumer electronics, it is also considered a commodity. Once performance requirements are met, these chips are interchangeable and do not rely on unique, proprietary features. This makes the DRAM market highly volatile and extremely sensitive to economic conditions and changes in supply and demand.
New suppliers emerging in China have significant local advantages.
"Chinese device and electronics makers will very likely prioritize adopting these local supplies once they become available," Counterpoint's Wang said. "If their global market share is around 5% to 10%, their share within China could be substantially higher," the analyst said.
Micron CEO Sanjay Mehrotra acknowledged Chinese competition in a recent earnings briefing but stressed that it is mainly in the "lower end of the consumer market, primarily in China." Micron, he added, will shift its focus toward higher-grade and higher-performing DRAM chips, such as those used in data centers. About 10% of Micron's revenue in fiscal 2025 comes from the segment directly competing with Chinese players.
President Lee Pei-Ing of Nanya Technology, the world's fifth-largest DRAM maker, said the company's revenue from China has fallen since last year not only because of China's "local for local" drive and competition from CXMT but because of the overall economic slowdown. He said competition from CXMT currently comes from low-power DRAMs for smartphones.
"We still hope to serve China customers who want to sell to overseas markets at a time when their demand gradually rebounds, and we also hope to explore more customers that aim to have non-China production partners," Lee said.
Both Samsung and SK Hynix declined to comment on their Chinese rivals. CXMT did not respond to requests for comment.
Industry sources say the two companies recognize Chinese makers' capability in legacy products but are not too concerned because they themselves are focusing on more lucrative markets.
"Samsung does not see them as a threat because legacy products do not make much money," said an industry source familiar with the company's memory chip strategy asking not to be named. "Samsung focuses on high-capacity products, including HBM."
Another industry source said SK Hynix also prioritizes high-value products such as HBM and enterprise solid-state drives.
CXMT has successfully produced LPDDR4 and DDR4, older generations of DRAM that are used in entry-level to midrange smartphones, computers and tablets. It has started providing a small batch of LPDDR5, the grade that has been used in premium handsets like the iPhone and Samsung Galaxy S and Z series since around 2020. Higher-grade DRAM offers faster data retrieval and transfer speeds and improved energy efficiency. Advances in DRAM over the years have been less pronounced compared to processor chips, potentially giving China an opportunity to catch up.
Geopolitics could be a hurdle, however. CXMT was not included on the U.S. trade blacklist when Washington launched its latest round of export controls in December, though the U.S. Defense Department did flag the company as being linked to the Chinese military, a designation that could potentially affect its partnerships and collaborations in global markets.
"CXMT has made technological breakthroughs in recent years and performed well in the mid-to-low-end memory chips used in products like smartphones, notebook computers and desktop computers in the home market," said an executive with a supplier to CXMT and Micron. "Starting with its higher-end LPDDR5 later this year, it is expected that foreign players like Samsung, SK Hynix and Micron will feel more pressure."
A key advantage for China in developing its DRAM industry is a massive domestic market. Chinese companies dominate the global smartphone market, with a share of over 58.5%, according to Omdia. Chinese TV makers control more than 40% of the global market, data from Trendforce showed, while its computer makers have some 30%.
In some cases, CXMT can offer prices that are 20% to 30% lower than leading global players, a chip industry executive told Nikkei Asia. "Even if it's not in all projects, this type of price discount could already pressure market leaders," the executive said. "In the past few years, it started to affect smaller Taiwanese players, and now it has started to challenge top global players."
In addition to lower prices, Chinese companies and agencies can often receive government subsidies if they buy more locally made chips, providing another advantage over foreign suppliers, analysts and industry executives said.
"Due to government support, they have not yet built up a high cost structure and therefore can be quite competitive," an executive of a memory chip substrate supplier told Nikkei Asia. However, CXMT and its peers are spending generously to poach experienced employees from foreign substrate suppliers. "Over time, their cost structure will increase," the executive added.
Multiple industry executives told Nikkei Asia that CXMT's success can be attributed in part to talent from South Korea, Japan and Taiwan. In one high-profile case, South Korean prosecutors in 2023 issued an arrest warrant for a former Samsung employee for allegedly handing over DRAM-related information to CXMT. Inotera Technologies, a Taiwanese DRAM maker that later merged with Micron in 2016, had hundreds of employees who went to work for multiple China chipmakers, including CXMT. The late Yukio Sakamoto, former president of Japanese DRAM chipmaker Elpida Memory, took key executive roles at CXMT and SwaySure when both companies were started.
Wang, the TrendForce analyst, said the price for legacy DRAM chips has been relatively soft in the past few quarters and that weakness could continue for at least a couple more quarters. "The most susceptible market segment is DRAM for mid-to-low-end products," she said. "We do see Chinese players start sending samples for higher-grade DRAMs for higher-end smartphones and also higher-grade products for servers, but that could take a bit longer for customers' verifications."
"Currently, Chinese DRAM makers' clients are still concentrated in the domestic market and [are] Chinese companies, Wang said. "Venturing overseas and foreign clients are not their priority now."
DRAM was one of the early battlefields in the U.S.-China tech struggle. Chinese DRAM chipmaker JHICC was abruptly blacklisted by Washington in 2018 before it had even started to mass produce DRAM over the allegations that it had stolen Micron's trade secrets.
Micron, meanwhile, was subjected to an inspection by the Chinese government in 2023 over alleged security risks of its memory products. The leading American memory chipmaker announced months later that it would invest 4.3 billion yuan ($590 million) at its Xi'an complex for chip packaging over the next few years.
SK Hynix has a large DRAM production capacity in the Chinese city of Wuxi, while Samsung has significant NAND flash production in Xi'an. The two South Korean companies have obtained U.S. waivers to import advanced chip production tools into China amid Washington's curb on China's semiconductor advancement. However, as they are also receiving funds from the Chips Act to invest in the U.S., which carries restrictions against major expansions in China without Washington's approval.
Additional reporting by Kim Jaewon in Seoul