The AI boom has led to a surge in demand and product prices, enabling Chinese storage chip manufacturers to shift from “seeking orders” to “choosing customers,” actively seeking more pricing power. However, the uncertainty of China’s chip industry’s future is exacerbated by the strengthening of intellectual property protection in the United States and technological gaps with the West.
According to Reuters citing sources on Friday (July 24), in recent months, Chinese memory chip manufacturer “Changxin Storage Technology Co., Ltd.” (CXMT) has continuously raised supply prices for Huawei and has maintained a firm stance even after multiple requests from Huawei to lower prices.
As a result, the relationship between the “industry newcomer” memory chip manufacturers striving to seize pricing power buoyed by the AI craze and the “established giant” Huawei unavoidably becomes tense. The conflict between the two sides surfaced in June.
It was revealed that at that time, in CXMT’s core R&D factory in Hefei, Anhui Province, several engineers from equipment supplier “SiCarrier,” closely associated with Huawei, were abruptly ordered by CXMT to stop work immediately, pack up their tools, and leave the factory without any prior warning or explanation, and were not allowed to return thereafter.
Senior officials at “SiCarrier” concluded that the conflict was a result of the escalating struggle between CXMT and Huawei.
According to Reuters, such contradictions are further intensifying. Several Chinese companies that need to procure memory chips have complained to the Ministry of Industry and Information Technology of China about the rapid price hikes by “Changxin Storage” and “Yangtze Memory” (YMTC) focusing on flash memory. The Ministry had announced in April that it would crack down on hoarding and price manipulation.
With the surge in demand driven by the construction of global AI data centers, the memory chips manufactured by “Changxin Storage” and “Yangtze Memory,” originally with thin profits, have become highly sought-after commodities.
Four informed sources cited by Reuters pointed out that Chinese memory manufacturers can now select customers for supply and have taken the lead in determining pricing. The quoted price of some products by CXMT is even higher than Samsung and SK Hynix, but demand still exceeds supply.
Changxin Storage recently signed a supply agreement with ByteDance for over $7 billion, valid for five years. Earlier in June, it also reached a collaboration agreement with Tencent for over $3 billion.
Meanwhile, as tensions between Beijing and Washington escalate, both “Changxin Storage” and “Yangtze Memory” have been identified by the Pentagon as enterprises with connections to the Chinese military.
Moreover, “Yangtze Memory” has been included in the Commerce Department’s Entity List, limiting its access to U.S.-origin equipment and technology.
Media reports indicate that there are differing opinions within the U.S. government on further sanctions against the two companies, with Apple seeking to prevent CXMT from being blacklisted due to its reliance on Chinese memory supply. Micron, on the other hand, continues to lobby Congress to enhance restrictions on the two Chinese firms, especially concerning the export of advanced manufacturing equipment.
Despite their growing influence, the two Chinese companies are still constrained by the ban on ASML’s advanced extreme ultraviolet lithography equipment. They have been unable to obtain high-end equipment since 2019, and it is believed that advanced wideband memory technology still lags behind Western competitors by two generations.
Analyst Ray Wang from research firm SemiAnalysis indicates that the inability to access advanced equipment remains the biggest Achilles’ heel of China’s memory industry.
In the face of geopolitical influences and power struggles in the industry, both “Changxin Storage” and “Yangtze Memory” continue their march towards going public.
Changxin Storage is set to be listed on the Shanghai market on July 27, following an $8.6 billion initial public offering. Its first-quarter revenue reached $7.5 billion, a 719% year-on-year increase, turning around decades of losses in just six months.
Yangtze Memory is also preparing for an IPO, with internal evaluations estimating a target valuation of up to 1 trillion Chinese yuan (approximately $148 billion).
Both companies have received support from China’s official semiconductor investment fund, the “Big Fund,” and local governments.