US set to limit exports of chipmaking gear to Chinese firms

The United States is set to crack down on non-military Chinese chip production for the first time by limiting shipments of American devices to memory chip makers in the country.

Is considering imposing import controls on memory chip makers in China, including the US Yangtze Memory Technologies Co. Ltd (YMTC)Part of a bid to halt progress in China’s semiconductor sector and protect American companies, according to four people familiar with the matter.

If President Joe Biden’s administration goes ahead with the move, it could also hurt South Korean memory chip giants Samsung Electronics Co Ltd and SK Hynix Inc, the sources said on condition of anonymity.

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

If approved, the action would include halting shipments of US chipmaking equipment to factories making advanced NAND chips in China.

The move only seeks to protect US memory chip producers, Western Digital Corp and Micron Technology Inc., which together represent about a quarter of the NAND chips market.

NAND chips store data in devices such as smartphones and personal computers, and in data centers such as Amazon, Facebook and Google. The number of gigabytes of data a phone or laptop can hold is determined by how many NAND chips are included and how advanced they are.

According to two sources, as part of the action, US officials will ban the export of equipment to China to make NAND chips with more than 128 layers. LAM Research Corp. and Applied Materials, both based in Silicon Valley, are the primary suppliers of such equipment.

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All sources have described the administration’s view on the matter as being at an early stage, with no proposed rules yet to be formulated.

Micron, Western Digital Under Pressure

Asked to comment on a possible move, a spokeswoman for the Department of Commerce, which oversees export controls, did not discuss possible sanctions, but said “the Biden administration is focused on spoiling. [China‚Äôs] Efforts to manufacture advanced semiconductors to address significant national security risks to the United States.”

YMTC, established in 2016, is an emerging force in the manufacturing of NAND chips. micron and Western Digital YMTC are under pressure from lower prices, as the White House wrote in its June 2021 report.

YMTC’s expansion and lower price offerings present a “direct threat” to Micron and Western Digital, the report said. The report describes the YMTC as China’s “national champion” and a recipient of some $24 billion in Chinese subsidies.

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

Tensions between China and the United States over the tech sector deepened under Biden’s predecessor Donald Trump, and have continued ever since. Reuters reported on July 8 that Biden’s administration is also considering a ban on shipments of equipment to China to make advanced logic chips, seeking to hamstring China’s largest chip maker, SMIC.

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

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nand flash memory chip production

Under this measure, chipmakers taking money will be banned from manufacturing or expanding certain advanced chips, including advanced memory chips, at levels set by the administration in countries including China.

According to Walt Koon of the consulting firm yole intelligence, YMTC accounts for about 5% of the worldwide NAND flash memory chip production, which is almost double compared to a year ago. Western Digital stands at around 13% and Micron at 11%. Coon said the YMTC would be deeply hurt by the sanctions that Biden’s administration is considering.

“If they were stuck on 128, I don’t know how they would really have a way forward,” Coon said.

Yole’s data shows that production of NAND chips in China has increased by more than 23% of the worldwide total this year, down from 14% in 2019, while production in the United States declined from 2.3% to 1.6% Is. For US companies, almost all of their chip production is done overseas.

It was unclear what effect the potential sanctions might have on other players in China. Intel, which holds a contract in China to manage operations at a factory that sells SK Hynix, is already producing memory chips with 144 layers at the Chinese site, according to an Intel press release.

  • Reuters with additional editing by Sean O’Mayer

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