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China tech

Chinese chip leader says production on track despite trade war

Yangtze Memory's huge new factory set to begin output this year

A researcher works at China's Tsinghua Unigroup. Beijing aims to boost the country's self-sufficiency in semiconductor technology.   © Reuters

SHANGHAI -- China's hope for competing with such leading global chipmakers as Samsung Electronics and Micron Technology said production of advanced memory chips remains on track despite a trade war with the U.S. that has hurt its peers.

"The company's production is on schedule," Chen Wei-Hua, co-chief technology officer of state-backed Yangtze Memory Technologies, told the Nikkei Asian Review on Wednesday on the sidelines of Semicon China trade show.

"Our partnership with suppliers globally is business as usual," Chen add.

Yangtze Memory, envisioned as a national champion in memory chips, is backed by the country's flagship chip industry investment fund. The company is building a $24 billion production complex in the central Chinese city of Wuhan that will mass produce China's first homegrown 64-layer 3D NAND flash chips, the current global industry standard, by the end of 2019.

Chen's remarks came as U.S. and China are negotiating to settle a yearlong trade dispute, during which some of Yangtze Memory's peers have face a crackdown from Washington. Chipmakers are vulnerable in the trade war as their products are tied to national security and require input from U.S. suppliers. 

Yangtze Memory's $24 billion memory chip project in Wuhan.

Fujian Jinhua Integrated Circuit, a Chinese government-backed DRAM program, was suspended after being cut off from the use of American technology. The company was charged by the U.S. Justice Department with industrial espionage along with its Taiwanese technology partner United Microelectronics Corp.

Chen said Yangtze Memory would never allow employees to steal intellectual property theft or trade secrets from other companies.

"We asked all of our employees to sign an agreement that they won't bring any illegal sources into our company. ... Intellectual property theft is strongly prohibited," Chen told the Nikkei Asian Review. "We do research and development all based on our own intellectual property."

Increasing self-sufficiency in semiconductors is a key technology goal for China, but Beijing has toned down references to its Made in China 2025 plan for industrial modernization amid the trade war.

Both NAND flash and DRAM are crucial memory chips that go into almost every electronic devices from personal computers, smartphones, servers to connected cars. All of the world's chip manufacturers heavily rely on U.S. semiconductor tool suppliers, such as Applied Materials, Lam Research and KLA-Tencor.

Chen also played down concerns that the Chinese company will cause a memory supply glut by relentlessly boosting production capacity, holding that his company is profit-driven and will plan its output based on market demand. Yangtze Memory CEO Simon Yang said in a speech at an industry summit last September that his company would never aim to crash the market, the Nikkei Asian Review reported.

The company's advance has sparked concern among leading memory chip suppliers, including South Korea's Samsung and SK Hynix, Japan's Toshiba and U.S.-based Micron Technology, that the new player would disrupt the market with output from its massive plant. The industry is already suffering a price slump because of a slowdown in the smartphone market and economic uncertainty.

Market watchers view Yangtze Memory as China's most promising newcomer to the memory chipm segment even though it will not make a significant impact on the market in 2019 and 2020.

"Among multiple memory projects ongoing in China, YMTC probably has the most solid manufacturing and technology foundation," said Mark Li, a veteran semiconductor analyst at Bernstein Research.

"Should 64-layer 3D NAND flash enter production as planned in the second half of 2019, Yangtze Memory would potentially narrow the gap versus foreign leaders from three to four years to around two years," Li said.

Besides support from the China National Integrated Circuit Industry Investment Fund. -- nicknamed the "Big Fund" -- Yangtze Memory is a subsidiary of Beijing-backed Tsinghua Unigroup. Other notable investors included Hubei Guoxin Investment and Hubei Technology Investment Group, two local government funding vehicles in Hubei Province, where the new plant is located.

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