China Invests Billions In Memory Firms In Face Of US Sanctions

Chinese government-backed investors have invested a fresh 39 billion yuan (£4.3bn, $5.4bn) in domestic semiconductor start-up Changxin Xinqiao Memory Technologies (CXMT), in the country’s latest move to develop its chip industry while grappling with US sanctions.

The move comes after China’s biggest memory chip maker, US-sanctioned Yangtze Memory Technologies Corp (YMTC), was reportedly forced to raise billions in new capital after burning through $7bn in capital in less than a year as it spent heavily to find alternatives to US chipmaking technologies.

The US last month followed up export controls introduced in October 2022 with new sanctions that cut off more technologies from export to Chinese firms, including a broader range of AI GPU accelerator chips.

Funding moves

Hefei-based CXMT raised 14.6by yuan from the state-backed China Integrated Circuit Investment Fund Phase II in late October and funds from two other investors affiliated with local government, according to Chinese corporate data provider Tianyancha.

The semiconductor fund, known as the Big Fund, is one of China’s main tools in plotting its long-term chip strategy, but investments slowed a year ago amidst a corruption investigation into the fund’s leaders.

CXMT was founded only in 2021 and shares some shareholders and its general managerwith China’s biggest DRAM maker Changxin Memory Technologies (CMT), also headquartered in the eastern city of Hefei, according to Tianyancha.

CMT is aiming to compete with memory makers such as Micron Technology and Samsung Electronics and is reportedly planning an initial public offering in China that could raise more than $14.5bn.

Chip advances

Chinese chip firms have been taking their lead from telecommunications equipment maker Huawei, which released a 5G-capable smartphone this year in spite of being on the US ‘Entity List” blacklist since 2019.

Huawei has not commented on the source of its 5G chip, but it is believed to have been manufactured by domestic firm SMIC using equipment originally intended for less-advanced chips.

China’s YMTC, also under US sanctions, has similarly begun manufacturing what researchers called the  “world’s most advanced” 3D NAND memory chip, found in a solid-state drive launched quietly in July, analysts TechInsights said in a study published last week.

YMTC joined Huawei on the US Entity List in December 2022.

Alternate sources

The company recently raised billions of dollars in a new funding round, the Financial Times reported last week, after burning through 50bn yuan ($7bn) in capital from shareholders including the Big Fund in less than a year.

Unnamed people told the FT that YMTC has been spending heavily as it finds alternate sources for US manufacturing equipment or develops those technologies itself.

The sources said the funding round was oversubscribed and surpassed its target, in a sign of solidarity in the face of US opposition.