Chinese chip maker Yangtze Memory Technologies Corp (YMTC) is planning to use domestic equipment to make advanced flash memory chips after it was put on a U.S. trade blacklist last year, according to industry sources. If successful, the strategy would represent a breakthrough in China’s efforts to become self-sufficient in semiconductor production after the country was denied access to advanced chip making tools over Washington’s concerns that the technology would end up in the hands of the Chinese military. Last year, Wuhan-based YMTC had been on track to challenge memory chip leaders Samsung Electronics, SK Hynix and Micron Technology with its flagship 232-layer X3-9070 3D NAND flash chip, but its prospects for mass production were thrown into doubt after U.S. equipment suppliers KLA and Lam Research had to halt sales and service to YMTC in compliance with Washington’s updated export controls.
Industry sources in China’s chip equipment industry, who declined to be named due to sensitivity of the matter, told the South China Morning Post that YMTC has doubled down on efforts to work with Chinese suppliers to help manufacture its Xtacking 3.0 architecture-based chips, and that progress has been made in a top secret project code-named Wudangshan, after a sacred Taoist mountain in the company’s home province of Hubei.
One source said the project intended to use Chinese equipment only and that YMTC has placed big orders with domestic equipment suppliers, including Beijing-based Naura Technology Group, a leading Chinese maker of etching tools, which are also the primary product line of U.S.-based Lam Research. The source added that YMTC has even asked its domestic suppliers to remove logos and other identifying marks from equipment, to mitigate risk of sanctions being imposed by the U.S. on its suppliers. YMTC and Naura did not respond to a request for comment. State-backed YMTC, which is not listed publicly, is not obliged to disclose its financial results or business performance.
Industry experts point out that there are still “choke points” in China’s chip manufacturing supply chain. For example, no viable domestic Chinese alternatives exist for the metrology tools supplied by U.S. equipment maker KLA, or for lithography systems available from Dutch company ASML and Japanese vendors such as Nikon and Canon. It is not immediately clear whether the new project is based in Wuhan, YMTC’s home city, or how the company will deal with equipment supply choke points. “We are trying to find choke-point solution companies to invest in,” said a Beijing-based investor at a recent venture capital event focusing on new-energy vehicles and semiconductor-related companies. “China is trying to solve these choke points one by one.” The ramped up sourcing of Chinese equipment comes after YMTC received UISD7 billion in fresh funding from its state-backed investors, including the National Integrated Circuit Industry Investment Fund, known as the “Big Fund”. YMTC is China’s best hope of competing in the global market for 3D NAND chips, a type of non-volatile flash memory. YMTC’s global market share in the NAND sector is estimated to be about 6%, the South China Morning Post reports.
In another example of China resisting U.S.-imposed sanctions, Huawei Technologies replaced an ERP system supplied by Oracle by its own MetaERP system. The company was prohibited by the U.S. government from buying Oracle's latest update three years ago. Ren Zhengfei, Founder of Huawei, also said that Huawei now has self-controlled ERP thanks to the support of its partners. “We are still lagging behind in software today, but will we be strong one day? Maybe,” Ren said. Huawei now plans to sell its MetaERP system to China's large state-owned companies. The market size of China’s ERP industry is expected to reach CNY68.2 billion by 2027, up from CNY38.5 billion in 2021, as companies from a wider range of sectors embrace digital technologies to boost operational efficiency, market research company Insight and Info forecast.
