China-Intel Alliance
China's Tsinghua Unigroup is cooperating with Intel Corp. to develop 3D NAND flash memory chips in earnest. Tsinghua Unigroup supported by the Chinese government’s huge amount of capital is joining forces with Intel which has technology in memory chips.
According to DRAMeXchange and industry sources on March 2, China’s Tsinghua Unigroup and Intel are discussing how to work together to develop and produce 3D NAND technologies in the long term.
DRAMeXchange released its report on the 1st, saying, “According to the contract, Intel has decided to deliver wafers for NAND flash chips first before supplying 64-layer 3D NAND flash chips. With Intel’s support, Tsinghua Unigroup’s products will be able to improve not only its competitiveness in sales but also its brand awareness in the market.”
Tsinghua Unigroup and Intel are leaders that can create a remarkable synergy of capital and technology. Tsinghua Unigroup is the biggest beneficiary of the Chinese government’s plan to invest 1 trillion yuan (US$157.53 billion or 170.61 trillion won) in order to raise its semiconductor self-sufficiency rate to 70 percent by 2025. Tsinghua Unigroup’s NAND plant, which has been constructed with the investment of 26 trillion won (US$24.01 billion), will start manufacturing 32-layer 3D NAND flash chips from the end of this year and expand the facilities to significantly increase the production next year.
Intel has the sixth largest share in the NAND chip market after SK Hynix. The company has belatedly entered the market last year by resuming the memory chip business for the first time in 20 years but it has high technical skills. It has cooperated with Micron Technology Inc., which ranks fourth in terms of NAND flash market share, for 12 years and started producing 64-layer 3D NAND flash memory chips from last year. Intel is currently developing 96-layer 3D NAND chips.
Some market watchers have said that the technology gap between South Korean memory chip producers and Chinese counterparts, which will begin production of 32-layer 3D NAND chips from the end of this year, is three years. This is because Samsung Electronics Co. has already mass produced 32-layer 3D NAND chips in August 2014 for the first time in the world, 48-layer ones in August 2015 and 64-layer ones in December 2016. The higher layers and cell accumulations of 3D NAND chips, the greater technical levels they need. Therefore, the technology gap cannot be narrowed with time and effort alone.
With its partnership with Intel, however, China is expected to rapidly narrow the technology gap and threaten South Korean memory chip producers, including Samsung Electronics. China will be able to release high-performance 3D NAND products early against expectations that it would launch low-end products for two to three years. Market research firm Market Realist said, “The partnership between China and Intel can bring about oversupply and harm the NAND flash industry ecosystem as a whole.” An official from the semiconductor industry said, “Samsung Electronics and SK Hynix are said to be paying attention to the possibility that the market conditions can be worse due to their competitor’s NAND expansion. This can add weight to the argument of the global investment banking industry that the price of NAND chips would plunge.”
In addition to Intel, China is also seeking to enter into a technical partnership with Japan’s Toshiba Corp. Toshiba needs to receive approval from Chinese antitrust regulators in order to sell its memory chip unit to a consortium led by Bain Capital LP that includes SK Hynix. So, China is taking advantage of this to make a kind of deal with Toshiba. The industry believes that China is requiring the prerequisites of technical partnership or product supply to Toshiba.
In addition, the Chinese government is plainly making intervention. For instance, China’s National Development and Reform Commission asked Samsung Electronics to refrain from semiconductor price hikes. Moreover, it asked to supply as many memory chips as its local firms want and end patent litigations with its local firms. China is dragging down South Korean memory chip manufacturers in a bid to grow its memory chip set producers and industry. An official from the industry said, “The Chinese government is making more attacks on the world’s No.1 South Korean semiconductor industry day by day.”