China’s Memory Chipmakers Ride AI Boom Into US Crosshairs

BEIJING (GNP): A months-long standoff between Chinese chipmaker CXMT and tech giant Huawei boiled over onto the factory floor in June, according to two people familiar with the matter cited by Reuters. CXMT had been steadily raising prices on Huawei and refused the company’s requests for relief before abruptly pulling engineers from an equipment vendor tied to Huawei out of its Hefei cleanrooms.

CXMT told them to pack up and leave. No warning. They haven’t been let back in since. People at SiCarrier reportedly saw it as fallout from a bigger power struggle between the two firms, even though CXMT and Huawei still do business together elsewhere. None of the three companies responded to Reuters when asked about it.

It’s a small incident, but it says something about where China’s chip industry stands now. CXMT has climbed to become the fourth-biggest memory chipmaker on the planet, DRAM, the stuff that runs phones, laptops, servers. It’s now big enough to charge prices that even Huawei can’t stomach. That’s new. Memory used to be the industry’s low-margin afterthought. CXMT and its counterpart in flash memory, Yangtze Memory Technologies (YMTC), spent years bleeding money, kept alive mostly by government funding.

AI changed that math fast. Data centers need memory chips at a scale nobody quite planned for, and Reuters reports both Chinese firms are now picking their clients rather than chasing them, sometimes charging more than Samsung or SK Hynix, the established South Korean players. CXMT signed a five-year deal with ByteDance this month, worth over $7 billion. Not previously reported. ByteDance hasn’t commented. It comes right after a separate $3 billion-plus agreement CXMT struck with Tencent back in June.

Reuters says this reporting rests on interviews with more than a dozen people, executives, engineers, suppliers, US officials — plus a review of roughly 50 Chinese government policy documents and company filings. CXMT and YMTC are called the “twin stars” of China’s memory sector, and both are racing toward IPOs even as Washington starts paying closer attention.

That attention isn’t casual. The Pentagon has labeled both companies Chinese military firms, tying them to Beijing’s military-civil fusion push — a charge both deny. YMTC is already on the US Entity List, cut off from American suppliers, software, tools. Congress is debating tighter restrictions on both firms now. But four sources tell Reuters the Trump administration is split internally on how hard to push.

Apple, for what it’s worth, wants CXMT kept off the blacklist entirely, it says it needs the supply, even though a US interagency panel already cleared CXMT for Entity List addition last year. Commerce just hasn’t pulled the trigger. Micron wants the opposite: tighter equipment restrictions on both Chinese firms. Apple, Micron, the White House, and the Commerce, Defense and State departments all declined to comment.

None of this has slowed the IPO plans. CXMT launches an $8.6 billion listing in Shanghai on Monday. Six months ago it was sitting on a decade of losses; now it’s booking $7.5 billion in first-quarter revenue, up 719% from last year. YMTC’s leadership, meanwhile, is reportedly pushing internally for a valuation near 1 trillion yuan — about $148 billion. Both companies are backed by China’s state-run Big Fund, plus provincial governments — Anhui for CXMT, Hubei for YMTC — who see them as core to China’s tech self-reliance push.

They’re not staying home either. YMTC launched a consumer memory brand in South Korea in June, moving into space that Samsung, SK Hynix and Micron have mostly abandoned as they chase more advanced chips. CXMT has its eye on the US long-term, though its capacity is stretched thin right now by domestic orders, orders Chinese authorities have reportedly told both firms to prioritize.

That’s expected to loosen up. CXMT is building two new plants, in Shanghai and Hefei, with a third reportedly under discussion, enough to more than double output past 600,000 wafers a month and, per one source, potentially overtake Micron’s capacity by 2030. YMTC has two more factories planned beyond the one finishing this year.

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There’s still one thing neither company can get around: ASML. Both rely on the Dutch firm’s deep ultraviolet lithography machines, and Washington has been leaning on the Netherlands to tighten export rules given the tech’s military relevance and US-origin components. Their rivals get to use ASML’s newer extreme ultraviolet machines — China’s been locked out of those since 2019. CXMT has built its own high-bandwidth memory for AI use, but five sources say it’s still roughly two generations behind.

“If more restrictions are imposed on lithography equipment, that would be the biggest challenge for Chinese memory makers,” said Ray Wang, an analyst at SemiAnalysis, adding China still lags in that part of the supply chain. ASML wouldn’t comment on what future rules might mean. YMTC’s in slightly better shape here, since 2022’s Entity List hit, it’s swapped out about half its equipment for domestic machinery and found new ways to stack memory layers without the advanced tools.

Pricing is where the shift shows up most starkly. Chinese memory used to mean cheap. Not anymore, according to six sources, CXMT has reportedly charged more than Samsung’s roughly $1,240 per unit for comparable 64GB DDR5 server modules, though nobody would give an exact figure. Samsung and SK Hynix declined to comment.

Even domestic buyers are feeling it: several Chinese tech firms have complained to the Ministry of Industry and Information Technology this year, blaming price hikes for delaying their own product launches. The ministry didn’t respond to Reuters but said in April it would crack down on chip hoarding meant to push prices higher, while also keeping state-owned firms from buying memory abroad in the first place.

YMTC’s chairman, Chen Nanxiang, called this back in 2024. He told Chinese state media the industry hadn’t hit explosive growth yet, but that it would, within three to five years. By early this year, as YMTC started turning away clients instead of taking every order, Chen and his team were celebrating, two sources say. He’d called it.