CXMT and YMTC Likely to Become Next Targets
The author is an analyst of NH Investment & Securities. He can be reached at hwdoh@nhqv.com. -- Ed.
There are rising chances that the US government will impose sanctions on additional Chinese memory makers, following SMIC. In our view, Chinese memory makers that recently started mass production will face difficult business conditions.
Additional Chinese memory makers to be subject to US government sanctions
According to media reports in Taiwan and China last week, there are rising chances that China’s CXMT and YMTC will become the next targets of US trade sanctions (following Chinese foundry maker SMIC). Under the sanctions, firms that supply products containing US technology to Chinese companies must obtain a license from the US government.
Chinese memory makers have started mass production in earnest in 2020. DRAM player CXMT currently manufactures products based on 19nm processes with a capacity of 40K wpm. The firm plans to start mass production of 17nm products by yearend. Meanwhile, in September, NAND player YMTC held a presentation to launch SSDs using its Xtacking technology. Xtacking makes peripheral circuits on a separate wafer and then attaches the wafers with memory array via hybrid bonding. YMTC’s capacity has risen from 15K at the beginning of 2020 to 40K wpm. The company also announced 128-layer QLC 3D NAND products in April.
If mass production and capacity expansions proceed at the current pace, Chinese memory makers could have a significant impact on global memory supply/ demand after 2022. However, if the US government’s sanctions become a reality, they will inevitably hurt the future moves of Chinese memory makers that started mass production this year.
Demand for IT products continues to improve
Memory supply/demand is improving on strong demand for game consoles and notebook PCs. An increase in memory orders from smartphone makers looking to fill the space left by Huawei, and data center makers' restarted memory purchase negotiations are also positive for supply/demand. We expect DRAM contract prices to decline q-q until 4Q20, remain flat q-q in 1Q21, and then rise again from 2Q21.
Led by strong demand for IT products, product lead times for foundry makers such as TSMC, UMC, and VIS have risen to more than six months. And, the lead time is expected to increase further due to sanctions against SMIC. Due to insufficient supply, most foundry makers have eliminated price discounts on long-term contracts. In fact, some customers are paying a premium to secure foundry capacity.