The United States is considering cracking down on memory chip makers in China

WASHINGTON (Reuters) – The United States is considering restricting shipments of US chip-making equipment to memory chip makers in China, including Yangtze Memory Technologies Co Ltd (YMTC), four people familiar with the matter said. China’s semiconductor sector is advancing and protecting American companies.

The sources, who spoke on condition of anonymity, said that if the administration of President Joe Biden continues the move, it could also harm South Korean memory chip giant Samsung Electronics Co Ltd (005930.KS) and SK Hynix Inc (000660.KS). Samsung owns two major manufacturers in China while SK Hynix Inc buys China’s Intel Corp (INTC.O) NAND flash memory chip maker.

If approved, the campaign would include preventing US chipmaking equipment from being shipped to factories in China that make advanced NAND chips.

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It would be the first US offer through export controls to target Chinese production of memory chips without specialized military applications, representing a more holistic view of US national security, according to export control experts.

The move would also seek to protect the two US memory chip producers, Western Digital Corp (WDC.O) and Micron Technology Inc (MU.O), which together account for about a quarter of the NAND chip market.

NAND chips store data in devices such as smartphones and personal computers and in data centers for the likes of Amazon (AMZN.O), Facebook and Google (GOOGL.O). The number of gigabytes of data a phone or laptop can hold is determined by the number of NAND chips it contains and how advanced it is.

Under the measure under consideration, US officials are banning the export to China of tools used to make NAND chips with more than 128 layers, according to two of the sources. LAM Research Corp. (LRCX.O) and Applied Materials (AMAT.O), both located in Silicon Valley, are the primary suppliers of these tools.

All sources described the management’s consideration of the matter as being in the early stages, with no proposed regulations yet.

Asked for comment on the potential move, a spokesperson for the Commerce Department, which oversees export controls, did not discuss the potential restrictions but noted that “the Biden administration is focused on weakening (China’s) efforts to manufacture advanced semiconductors to address significant national security risks to the United States.” .”

fast growing company

Memory chips by South Korean semiconductor supplier SK Hynix are seen on a computer circuit board in this illustrative photo taken on February 25, 2022. REUTERS/Florence Law/Illustration/file image

Founded in 2016, YMTC is a rising force in the manufacture of NAND chips. Micron and Western Digital are under pressure from lower YMTC prices, the White House wrote in a June 2021 report. That report said YMTC’s expansion and lower-priced offerings pose a “direct threat” to Micron and Western Digital. The report described YMTC as “China’s national champion” and received about $24 billion in Chinese subsidies.

YMTC, which is already under investigation by the Commerce Department over whether it violated US export controls by selling chips to Chinese telecom company Huawei, is in talks with Apple Inc (AAPL.O) to supply the largest US smartphone maker with flash memory chips, According to a Bloomberg report.

LAM Research Corp, SK Hynix and Micron declined to comment on US policy. Samsung, Applied Materials Inc, YMTC and Western Digital Corp did not immediately respond to requests for comment.

Congressional Actions

Tensions between China and the United States over the tech sector deepened under Biden’s predecessor Donald Trump and have continued ever since. Reuters reported on July 8 that the Biden administration is also considering restrictions on shipments to China of tools for making advanced logic chips, in an effort to cripple China’s largest chip maker, SMIC (0981HK). Read more

Last week, the US Congress approved a law to help the US compete with China by investing billions of dollars in domestic chip production. Read more

Chip makers taking money under this measure are prohibited from building or expanding manufacturing of some advanced chips, including advanced memory chips at a level determined by the administration, in countries including China. Read more

According to Walt Coon of consulting firm Yole Intelligence, YMTC accounts for about 5% of worldwide NAND flash memory chip production, nearly double what it was a year ago. Western Digital stands at around 13% and Micron 11%. Kohn said the YMTC would be hit hard by restrictions like those the Biden administration is considering.

“If they’re stuck at 128, I don’t know how they’ll really have a way forward,” Kuhn said.

Yole data showed that production of NAND chips in China grew to more than 23% of the global total this year from less than 14% in 2019, while production in the United States fell from 2.3% to 1.6% over the same period. For American companies, almost all chips are produced abroad.

It was not clear how much the potential restrictions would affect other players in China. Intel, which maintains a contract to manage operations at the plant it sells to SK Hynix in China, is producing memory chips with 144 layers at the Chinese site, according to an Intel press release.

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(Reporting by Alexandra Alper and Karen Freifeld) Additional reporting by Stephen Nellis. Editing by Chris Sanders and Will Dunham

Our Standards: Thomson Reuters Trust Principles.

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