China's Semiconductor Rise Eyes Apple Supply Chain, Undeterred by US Sanctions

As Apple finds it difficult to meet the price demands of Samsung Electronics and SK Hynix, it is considering China's CXMT and YMTC as potential alternatives. This opens up the possibility for Apple to equip iPhones with Chinese-made memory, which could lead to sales restrictions in the United States.

Professor Kwon Seok-joon emphasized Apple's changing supply chain strategy, stating, “So, what Apple is looking for now is CXMT. Apple would probably even use YMTC's SSDs.”

Chinese memory company CXMT, after being delisted from the sanctions list in February of this year, is understood to have been re-included on the US government's sanctions list since June. This demonstrates the unstable market situation Chinese companies face amidst the US-China technological hegemony competition.

Professor Kwon Seok-joon revealed the situation of CXMT's re-entry into sanctions, stating, “The important thing is that it appears CXMT has been on the US government's sanctions list since June of this year.”

The US government is reportedly considering legislation that would mandate a certain percentage of memory used in AI data centers and advanced IT devices to be domestically produced. This strategy is interpreted as an effort to encourage semiconductor production within the US and reduce reliance on specific countries.

Professor Kwon Seok-joon explained, “If the US were to legislate that a certain percentage of memory going into AI data centers or advanced IT devices made in the US must be domestically produced,” adding that if this scenario materializes, it could negatively impact suppliers through increased costs and reduced operational efficiency.

The entry of the Chinese memory industry into Apple's supply chain signifies official certification in the global market. This suggests a risk of accelerated global dissemination of Chinese-made memory, which has previously been confined to the Chinese domestic market, through Apple.

Professor Kwon Seok-joon expressed concerns about Chinese companies' global market entry, stating, “Now, this memory will officially receive a star, in a sense, in the global market. It will earn the star of being an Apple supplier, and now they will start presenting their credentials to all markets with this.”

YMTC's NAND flash stacking technology expertise could potentially help resolve CXMT's HBM technology bottleneck. This suggests that the true purpose of the subsidiary YMTC established last year was to develop HBM technology through collaboration with CXMT.

With improved performance of Chinese equipment manufacturers, YMTC's technological prowess is gradually narrowing the gap with Samsung Electronics and SK Hynix. Such technological cooperation could become a significant turning point for China's self-reliance in memory technology.

Huawei is reportedly actively encouraging technological cooperation between YMTC and CXMT to secure HBM for AI data centers. This is interpreted as an attempt by the Chinese government to resolve HBM production bottlenecks by top-down mandatory adjustment of technological standards and roles between companies.

Professor Kwon Seok-joon revealed, “While we cannot ignore the intention that the subsidiary YMTC established last year was for YMTC to directly produce DRAM, in fact, the most pressing matter for Huawei and who else would be involved? Of course, the Chinese government. From their perspective, HBM is currently a bottleneck.” He mentioned the possibility of direct intervention by the Chinese government. The attempt to combine CXMT's DRAM technology and YMTC's stacking technology appears to be central to China's HBM self-sufficiency strategy.

As horizontal miniaturization of existing DRAM reaches its limits, a transition to 3D DRAM is anticipated to be inevitable. In this process, YMTC's single-wafer-based hundreds-of-layers stacking and etching technology could play a crucial role in 3D DRAM manufacturing.

Professor Kwon Seok-joon emphasized the potential of YMTC's technology, stating, “After that, DRAM will also inevitably transition to 3D DRAM. In the process of moving to 3D DRAM, where electrodes and dielectrics must be alternately stacked and wiring created on a single wafer, YMTC's single-wafer-based hundreds-of-layers stacking will clearly be utilized in some form.”

While this technology is not an immediate threat, it could become a key variable in the semiconductor market in 5-6 years.

HBM (High Bandwidth Memory) is currently experiencing the most severe bottleneck in the semiconductor supply chain. While more HBM, higher HBM, and faster HBM are always better, fulfilling all three conditions is not easy.

Professor Kwon Seok-joon explained, “In fact, HBM is naturally the bottleneck. For HBM, the more the better, the higher the better, the faster the better. But these three are not easy,” emphasizing that HBM demand follows the principle of 'the more, the better'.

Technical difficulties such as heat generation, thermal expansion issues with increased stacking layers, and yield reduction are intensifying. There is also a structural problem where the conversion of existing DRAM production lines to HBM exacerbates the shortage of general DRAM supply.

In the NAND flash sector, China's technology gap is assessed to be almost closed. While minor technical differences still exist, the overall level appears to be not significantly different from Korea's.

Professor Kwon Seok-joon stated, “It seems they've already caught up. There are slight technical differences, but from a company's perspective, for eSSDs in servers, while capacity and speed are important, controller technology is actually much more critical. In that regard, Hynix and Samsung are still at the highest level,” emphasizing that Samsung Electronics and SK Hynix maintain a top-tier advantage in controller technology.

Chinese NAND manufacturers are likely to flood the market with large volumes of increased production within 1.5 years through a selective and focused strategy, suggesting fiercer market competition ahead.