The United States considers cracking down on memory chip makers in China

WASHINGTON, Aug.1 (Reuters) – The United States is considering limiting shipments of American chip-making equipment to memory chip makers in China, including Yangtze Memory Technologies Co Ltd (YMTC), according to four people. who are familiar with the matter, part of an attempt to stop China’s semiconductor industry advances and protects US companies.

If President Joe Biden’s administration proceeds with the move, it could also damage South Korean memory chip giants Samsung Electronics Co Ltd (005930.KS) and SK Hynix Inc (000660.KS), the sources said, speaking on condition of anonymity. Samsung has two large factories in China while SK Hynix Inc is purchasing Intel Corp’s (INTC.O) NAND flash memory chip manufacturing business in China.

The crackdown, if approved, would result in a halt to the shipment of US chip manufacturing equipment to factories in China that produce advanced NAND chips.

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It would mark the first U.S. offer through export controls to target Chinese production of memory chips without specialized military applications, representing a broader view of U.S. national security, according to export control experts.

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

NAND chips store data in devices such as smartphones and personal computers and in data centers such as Amazon (AMZN.O), Facebook and Google (GOOGL.O). How many gigabytes of data a phone or laptop can hold is determined by how many NAND chips it includes and how advanced they are.

Under the action under consideration, US officials would ban the export to China of tools used to produce NAND chips with more than 128 layers, according to two of the sources. LAM Research Corp (LRCX.O) and Applied Materials (AMAT.O), both based in Silicon Valley, are the main suppliers of these tools.

All sources have described the administration’s examination of the matter as in the early stages, with no proposals for regulation yet being drawn up.

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


Memory chips from South Korean semiconductor supplier SK Hynix are seen on a computer circuit board in this illustrative photo taken on February 25, 2022. REUTERS / Florence Lo / Illustration / File Photo

YMTC, founded in 2016, is an emerging powerhouse in NAND chip manufacturing. Micron and Western Digital are under pressure from YMTC’s low prices, the White House wrote in a June 2021 report. YMTC’s expansion and low-priced offerings pose “a direct threat” to Micron and Western Digital, it says. that relationship. The report described YMTC as China’s “national champion” and the recipient of approximately $ 24 billion in Chinese subsidies.

YMTC, previously investigated by the Department of Commerce for breaching U.S. export controls by selling chips to Chinese telecom company Huawei, is in talks with Apple Inc (AAPL.O) to supply flash memory chips to the leading U.S. smartphone maker, according to a Bloomberg report.

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


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

Last week, the US Congress passed legislation to help the US compete with China by investing billions of dollars in domestic chip manufacturing. Read more

Chip makers taking money under the measure would be banned from building or expanding production for some advanced chips, including government-determined memory chips, in countries including China. Read more

According to Walt Coon of the consulting firm Yole Intelligence, YMTC accounts for about 5% of the world production of NAND flash memory chips, almost double compared to a year ago. Western Digital stands at around 13% and Micron at 11%. Coon said YMTC would be severely damaged by restrictions such as those Biden’s administration is contemplating.

“If they were stuck at 128, I don’t know how they would really have a path to follow,” Coon said.

NAND chip production in China grew to over 23% of the world total this year from less than 14% in 2019, while production in the United States decreased from 2.3% to 1.6% over the same period. , according to Yole data. For American companies, almost all chip production is done overseas.

It is unclear what impact the potential restrictions might have on other players in China. Intel, which holds a contract to manage operations at the plant it is selling to SK Hynix in China, is already manufacturing 144-layer memory chips at its Chinese headquarters, according to an Intel press release.

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Reportage 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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