US planning a crackdown on memory chip makers in China: Report

In an effortto halt China's semiconductor sector advance and protect its own companies, the United States is considering limiting shipments of American chipmaking equipment to memory chip makers in China. This includes Yangtze Memory Technologies Co Ltd (YMTC). At least four people familiar with the development told Reuters that if President Joe Biden's administration proceeds with the move, it could also hurt South Korean memory chip juggernauts Samsung Electronics Co Ltd and SK Hynix Inc.

Samsung has two big factories in China while SK Hynix Inc is buying Intel Corp's NAND flash memory chips manufacturing business in China.

The crackdown, if approved, would mean barring the shipment of U.S. chipmaking equipment to factories in China that manufacture advanced NAND chips.

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

The decision will also seek to protect the only U.S. memory chip producers, Western Digital Corp and Micron Technology Inc. The two companies together represent about a quarter of the NAND chips market.

NAND chips store data in devices such as smartphones and personal computers and at data centers for giants like Amazon, Facebook and Google.

How many gigabytes of data a phone or laptop can hold depends on how many NAND chips it has and how advanced they are.
The reported move would ban the export of tools to China used to make NAND chips with more than 128 layers, two of the sources told Reuters.

LAM Research Corp and Applied Materials, both based in Silicon Valley, are the primary suppliers of such tools.

However, the sources added that the administration's consideration of the matter is still in the early stages, with no proposed regulations yet drafted.

A spokesperson for the Commerce Department, which oversees export controls, did not directly talk about the issue, but noted that "the Biden administration is focused on impairing (China's) efforts to manufacture advanced semiconductors to address significant national security risks to the United States."

YMTC, founded in 2016, is a rising power in manufacturing NAND chips. A White House report released in June 2021 had said that both Micron and Western Digital are under pressure from YMTC's low prices.

YMTC's expansion and low-price offerings present "a direct threat" to Micron and Western Digital, that report said. The report further said that YMTC is China’s "national champion" and receives around $24 billion in Chinese subsidies.

YMTC is under investigation by the Commerce Department over whether it violated U.S. export controls by selling chips to Chinese telecoms company Huawei.

It is now in talks with Apple Inc to supply the top U.S. smartphone maker with flash memory chips, according to a Bloomberg report.

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

Tension between China and U.S. in the tech sector deepened under Biden's predecessor Donald Trump and have continued since.

Reuters reported on July 8 that the Biden administration is considering restrictions on shipments of tools to make advanced logic chips to China . It reportedly aims to hamstring China's largest chipmaker, SMIC.

The U.S. Congress last week approved legislation aimed at helping the United States compete with China by investing billions of dollars in domestic chip production.

Chipmakers that take money under the measure would be prohibited from building or expanding manufacturing for certain advanced chips, including advanced memory chips at a level to be determined by the administration, in countries including China.

According to Walt Coon of the consulting firm Yole Intelligence, YMTC accounts for about 5 per centof worldwide NAND flash memory chip production, almost double from a year ago. Western Digital stands at about 13 per cent and Micron 11 per cent. Coon said YMTC would be greatly hurt by restrictions like those that Biden's administration is contemplating.

"If they were stuck at 128, I don't know how they would really have a path forward," Coon said.

Production of NAND chips in China has grown to more than 23 per centof the worldwide total this year from under 14 per centin 2019, while production in the United States has decreased from 2.3 per centto 1.6 per centover the same period, according to Yole data.

For the American companies, nearly all of their chip production is done overseas.

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