YMTC set for chip comeback despite US export controls

Yangtze Memory Technologies Corp, China’s largest memory-chip maker, will begin production at a new plant as early as next year, boosting Beijing’s attempts to achieve self-sufficiency for its semiconductor industry in the face of crippling US export controls.

Washington’s export curbs imposed last October on the equipment needed to make advanced chips had initially frozen the construction and kitting out of the leading-edge fabrication plant being built alongside the chipmaker’s existing fab, in the city of Wuhan in central China.

However, YMTC has been testing locally made tools over a long period and is now confident enough to rely more on domestic suppliers for replacements, according to people with direct knowledge of the situation. The new plant is now expected to be online in the second half of 2024.

The company’s apparent success in reducing its reliance on US and other foreign chip equipment makers represents a blow to Washington’s hopes of export controls being able to slow China’s progress significantly in making advanced chips.

YMTC had set ambitious targets for equipment from local vendors, including Naura Technology and Advanced Micro-Fabrication Equipment, said three people familiar with the matter.

“YMTC has taken on the important and difficult task this year to de-Americanise the chip production line,” said an analyst close to the company, who requested anonymity.

YMTC, Naura and AMEC did not respond to requests for comment.

The opening of the new fab in the latter part of 2024 would help it regain competitiveness with Samsung and Micron, its main rivals in Korea and the US respectively. YMTC had about a 5 per cent global market share in memory chips in 2021, up sharply from 1 per cent in 2020, according to research firm Yole Development.

Management has also assured production engineers it will be able to source key chip manufacturing tools from Dutch equipment maker ASML, using older models not covered by a new US-Japan-Netherlands trilateral agreement on restricting exports, according to three company engineers.

It will fill the remaining empty slots on the production line by reinstalling equipment from US suppliers taken from the older fab, where it is downsizing production, according to the engineers.

“It is not cost-effective for YMTC to retreat to backward chip production when its competitors are pushing the envelope with more advanced products,” said Linghao Bao, an analyst at research firm Trivium China.

With Beijing seeing the company as playing a key role in its development of a domestic semiconductor industry, the government is helping with additional funding for the restructuring of its production lines and new equipment testing.

Company records updated in February show that since the new export controls kicked in, YMTC has received $7bn from government-led investment vehicles, including the main National Integrated Circuit Industry Investment Fund, or “Big Fund” as it is known.

“The company is China’s best card in memory chips on the table. The government will not allow them to give up quickly,” said a manager at one of YMTC’s state-backed investors.

YMTC was caught out last October by restrictions that affected its main memory products. Its Wuhan foundry had reportedly been supplying Huawei and a deal to supply Apple with memory chips for the iPhone was suspended. So was the construction of the new plant and about 70 per cent of equipment orders made with Naura were cancelled, according to YMTC employees.

Staff were also laid off at the time, but YMTC has since come back with new orders for Naura in the first quarter of 2023, according to an executive at the equipment supplier who did not wish to be named.

The acid test of the new fab’s capabilities will come when it tries to move beyond its initial production of 128-layer 3D Nand flash memory — around two generations behind that of global leaders Samsung, SK Hynix and Micron — to cutting-edge 196-layer and 232-layer chips.

“We sorted out the layout of the production strategy to complete the expansion in the short term, but the new fab’s capacity and the long-term plans will depend on what we can accomplish without US technology,” said a manager-level engineer at YMTC.