As Samsung Electronics's earnings shock shows that the memory semiconductor business has shifted into a downturn, semiconductor industry experts forecast that Chinese memory makers will slow down their aggressive investment drive. Some expect that China's memory mass-production will be postponed to next year or beyond even though China declared several times that the nation will begin to mass-produce memories this year.
"A company’s true competitiveness is exposed in times of recession," said Ahn Ki-hyun, managing director of the Korea Semiconductor Industry Association on Jan. 9. “Chinese chipmakers, who have difficulties due to explicit checks from the United States, will suffer a second shock from the downturn.” Even though the Chinese government was bent on promoting its semiconductor industry to the extent of ignoring the concept of cost, a drop in demand for memory chips would force Chinese chipmakers to slow down their investment, Ahn explained.
"Once a price war starts among chipmakers in the market, Chinese companies with weak technology and cost competitiveness will have no choice but to stomach huge losses," Ahn added. “One day, Chinese chipmakers will catch up with their Korean counterparts but the day will be further delayed."
In fact, foreign news media outlets have reported that the Chinese semiconductor industry has changed their tune. They reported that China's server DRAM maker Fujian Jinhua also suffered as Taiwan's foundry maker UMC, which had cooperated with it, dismantled its development team.
November last year, the U.S. government took steps to ban exports of U.S. semiconductor equipment to Fujian Jinhua out of military and security concerns. To make matters worse, the shadow of a slump lengthens, increasing Chinese chipmakers’ cost burden considerably, semiconductor industry watchers say.
Currently, Yangtze Memory Technologies (YMTC) is taking the lead in NAND flash memories, Fujian Jinhua in DRAMs for servers, and Innotron in mobile DRAMs in line with the Chinese government’s promotion of the Chinese semiconductor industry. In the case of NAND flashes, Chinese companies developed 32-layer products but have not yet started mass production due to a yield problem. Their Korean counterparts came up with 90-layer products. Chinese companies still have a long way to go, given that they are planning to mass-produce 64-layer products this year. As for DRAMs, they are still not ready to unveil the products, much less mass-produced them.