The Chinese memory chip producer Yangtze Memory Technologies plans to bring online a second plant in its home city of Wuhan as early as the end of this year, sources familiar with the matter say, in a move that could further close the company's technology and output gap with global leaders like Samsung of South Korea and Micron Technology of the U.S.

The company, also known as YMTC, needs to expand production after a growth spurt that put it on the world's semiconductor map and delivered a notable success in Beijing's attempt to reduce China's reliance on imported chips.

Its original plant has been running near capacity and churned out 100,000 wafers a month at the end of 2021, two people told Nikkei Asia.

YMTC held a global market share of nearly 5% last year, according to analyst and industry estimates. It has become the world's sixth-largest NAND flash memory maker behind Samsung, SK Hynix, Kioxia, Western Digital and Micron, and the only one from China.

About 40% of its output at present is 128-layer 3D NAND flash memory, the most advanced produced so far by a Chinese chipmaker. But that is one or two generations behind global leaders Samsung, SK Hynix and Micron. The rest of YMTC's output is of older 64-layer 3D NAND flash memory.

The new plant would first build mainly 128-layer flash memory and could later shift to even more cutting-edge chips, such as 196-layer or 232-layer 3D NAND flash memory, assuming development goes smoothly in 2023 and 2024.

Apple has been testing YMTC's flash memory products since last year and could place its first order in "limited quantities" as soon as this year, two people familiar with the matter told Nikkei Asia. The U.S. tech giant has been talking with the Chinese chipmaker since 2018 in hopes of finding a cost-effective source of storage components.

Securing a deal with Apple would be a milestone, highlighting the quality of Yangtze Memory's chips, industry executives say. Apple's Chinese suppliers, including those from Hong Kong, already outnumber those from Taiwan, making China the largest source of suppliers to the U.S. company, according to a Nikkei Asia analysis. Apple also has close ties with several Chinese electronics manufacturers, including Luxshare, Goertek and BYD. Y

angtze Memory's success is also viewed as a victory for China, as the world's second-largest economy strives to localize semiconductor production and build industry champions. Yangtze Memory is backed by the China Integrated Circuit Industry Investment Fund, Beijing's most important chip investment funding vehicle. And YMTC is bullish on its growth prospects, increasing its investment budget from $24 billion in 2016 to the equivalent of $32.8 billion this year.

The Chinese chipmaker is currently installing equipment at the new chip plant, a key step before it goes into production. The factory will eventually have twice the capacity of the first, several people briefed on the matter said. The total capacity for the two factories will reach 300,000 wafers per month and could help YMTC expand its market share to more than 10% globally.

The company is split into two parallel teams composed of hundreds of top engineers tasked with developing 196-layer and 232-layer flash memory, one of the people said. Its aim is to catch up with foreign rivals. T

he most advanced products on the market, which Samsung, Micron, and SK Hynix have all succeeded in producing, are 176-layer 3D NAND flash memory chips. They are now racing to create chips composed of more than 200-layers. Kioxia and Western Digital said they will be making 162-layer 3D NAND flash memory by the end of the year.

The more layers a flash memory chip has, the more advanced the chips are -- and the harder they are to develop and produce commercially. NAND flash memory is a vital storage component used in all kinds of electronic devices, from smartphones and PCs, to data center servers and connected cars.

Most YMTC flash memory is currently used to make consumer-grade solid-state drives (SSDs), mainly for the Chinese market. It clients include leading storage makers Lenovo, Longsys, and Kimtigo of China, as well as Adata of Taiwan. YMTC has also introduced its own brand, ZhiTai, to sell SSDs directly to consumers.

Its share of the global flash memory market has risen quickly from 1.3% in 2019, when it first put 64-layer NAND flash memory into production, according to Counterpoint Research, which believes it could grab nearly 6% of the market by 2023, up from 4.8% in 2021.

Brady Wang, an analyst with Counterpoint, told Nikkei Asia that Yangtze Memory was working on its technology even before the company was formally launched in 2016. It has demonstrated its capabilities and gradually become a viable global player after years of effort, Wang said. It has also more than doubled its payroll in four years, to about 8,000 employees currently.

"It recruits many engineers and veterans who have Chinese backgrounds but used to work for multinational tech and chip companies," Wang said. "Managing a plant, however, is different from managing several plants at a massive scale. It remains to be seen if it [can] successfully ramp up production."

Political tension between U.S. and China also increases uncertainties for Chinese companies like YMTC, Wang said.

Washington has slowed the advance of China's semiconductor industry by adding the country's top chipmaker, Semiconductor Manufacturing International Co., and the telecom equipment group Huawei to a trade blacklist to restrict their use of American technology. Yangtze Memory has been among the most aggressive companies in pushing ahead with the development of domestic chipmaking equipment, but it continues to maintain good relationships with U.S. and other foreign vendors to ensure its expansion plans come to fruition.

YMTC declined to comment for this story.

By: DocMemory
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