Vital technology component could be the next industry to grapple with abundance from Asian country
Memory Chip Market Recovery Faces a Wild Card from China
The recovery of the memory chip market could face disruption from China’s increasing production capacity, but this threat is not imminent. Memory-chip giants like SK Hynix, Micron Technology, and Samsung have experienced significant stock price volatility since midyear, driven in part by strong demand for high-performance chips used in artificial intelligence. However, despite China’s aggressive expansion, particularly through ChangXin Memory Technologies (CXMT), Chinese chipmakers currently lag behind in production efficiency and technology, especially in DRAM manufacturing. CXMT’s capacity rose from 4% to 11% of global supply in 2023, with expectations of reaching 16% by 2024. However, its lower bit density and yield keep its immediate impact limited to lower-end legacy chips.
China’s Long-Term Potential and Risks to Global Players
China’s push into memory chips is fueled by significant capital investment and geopolitical motivations, as worsening relations with the West create an incentive for Chinese companies to use domestic chips. CXMT currently faces a technological gap of six to eight years compared to industry leaders, but Beijing’s backing could accelerate its development. Export controls may slow this progress, but as China accounts for roughly 25% of global DRAM demand, its increasing self-reliance could eventually force U.S. and Korean firms to cut production or offload excess supply on the global market. For now, the “big three” (Samsung, SK Hynix, and Micron) remain dominant, but they must remain vigilant of China’s growing presence.
My Take
While China’s memory chip makers are still behind in technology and efficiency, their rapid expansion could present a significant challenge in the future. Investors should closely monitor this evolving landscape, as China’s push for self-reliance could reshape the global memory-chip market.
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Link to article:
https://www.wsj.com/tech/threat-of-chinese-overcapacity-looms-over-memory-chips-993fc70a
Credit: Wall Street Journal