US considers cracking down on memory chip makers in China

WASHINGTON, Aug 1 (Reuters) – The United States is considering limiting shipments of American chipmaking equipment to memory chipmakers in China, including Yangtze Memory Technologies Co Ltd (YMTC), according to four people familiar with the matter. as part of an attempt to stop China’s semiconductor sector from advancing and protecting American companies.

If the administration of President Joe Biden proceeds with the move, it could also hurt South Korean memory chip giants Samsung Electronics Co Ltd (005930.KS) and SK Hynix Inc (000660.KS), the sources said, adding They spoke on condition of anonymity. Samsung has two large factories in China, while SK Hynix Inc is buying Intel Corp’s (INTC.O) NAND flash memory chip manufacturing business in China.

The crackdown, if passed, would involve banning the shipment of US chipmaking equipment to factories in China that make advanced NAND chips.

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It would mark the first US offer through export controls to target Chinese production of memory chips without specialized military applications, representing a broader view of US national security, according to export control experts.

The move would also seek to protect the only US memory chip producer, Western Digital Corp. and Micron Technology Inc. which together account for about a quarter of the NAND chip market.

NAND chips store data in devices like smartphones and personal computers and in data centers for companies like Amazon (AMZN.O), Facebook, and Google (GOOGL.O). The number of gigabytes of data a phone or laptop can hold is determined by how many NAND chips it includes and how advanced they are.

Under the action being considered, US officials would ban the export to China of tools used to make NAND chips with more than 128 layers, according to two of the sources. LAM Research Corp (LRCX.O) and Applied Materials (AMAT.O), both based in Silicon Valley, are the main providers of such tools.

All sources described that the administration’s consideration of the matter is in the early stages, with no proposed regulation yet being drafted.

When asked to comment on the potential move, a spokesman for the Commerce Department, which oversees export controls, did not discuss the potential restrictions, but noted that “the Biden administration is focused on harming (China’s) efforts to manufacture advanced semiconductors to address significant national security risks. to the United States.”

FAST GROWING COMPANY

Memory chips from South Korean semiconductor supplier SK Hynix are seen on a computer circuit board in this illustration picture taken February 25, 2022. REUTERS/Florence Lo/Illustration/File Photo

YMTC, founded in 2016, is a rising power in NAND chip manufacturing. Micron and Western Digital are under pressure from YMTC’s low prices, as the White House wrote in a June 2021 report. YMTC’s expansion and low-price offerings present “a direct threat” to Micron and Western Digital, according to The report. The report described YMTC as China’s “national champion” and the recipient of some $24 billion in Chinese subsidies.

YMTC, already under investigation by the Commerce Department over whether it violated US export controls by selling chips to Chinese telecommunications company Huawei, is in talks with Apple Inc (AAPL.O) to supply chips from flash memory to the leading US smartphone maker, according to a report by Bloomberg.

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

PROCEEDINGS OF THE CONGRESS

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 the Biden administration is also considering restrictions on shipments to China of tools to make advanced logic chips, in order to cripple China’s largest chipmaker, SMIC (0981.HK). read more

The US Congress last week passed legislation aimed at helping the US compete with China by investing billions of dollars in domestic chip production. read more

Chipmakers taking money under the measure would be barred from building or expanding manufacturing of certain advanced chips, including advanced memory chips at a level to be determined by the administration, in countries like China. read more

According to Walt Coon of consultancy Yole Intelligence, YMTC accounts for about 5% of global NAND flash memory chip production, nearly double what it was a year ago. Western Digital stands at around 13% and Micron at 11%. Coon said that YMTC would be greatly affected by restrictions such as those contemplated by the Biden administration.

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

NAND chip production in China grew to more than 23% of the global total this year from less than 14% in 2019, while production in the United States fell from 2.3% to 1.6% over the same period, showed Yole data. For US companies, almost all of their chip production takes place abroad.

It was unclear what impact the potential restrictions might have on other players in China. Intel, which has a contract to manage operations at the factory it is selling to SK Hynix in China, is already producing 144-layer memory chips at the Chinese site, according to an Intel press release.

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Information from Alexandra Alper and Karen Freifeld; Additional reporting by Stephen Nellis; Edited by Chris Sanders and Will Dunham

Our standards: the Thomson Reuters Trust Principles.

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