China's largest foundry operator, SMIC, surpassed the US$2 billion revenue mark for the first time in the third quarter of 2024. Meanwhile, companies like CXMT and JHICC are aggressively lowering DDR4 prices, making their products up to 50% cheaper than those from Samsung Electronics and SK Hynix.
According to reports from South Korean media including Maeil Business Newspaper, a decade ago, China had almost no noteworthy semiconductor companies. However, the likes of SMIC, YMTC, CXMT, HiSilicon, and Unisoc have quickly emerged, leveraging a vast domestic market and government support to challenge the semiconductor markets dominated by the US, Taiwan, and South Korea. Whether they can replicate the success formula seen with LCD panels remains to be seen.
Recently, the South Korean industry has been concerned about talent poaching, as SMIC recruits semiconductor professionals from Taiwan and South Korea. Consequently, there is a belief that TSMC should now be more worried about SMIC rather than Samsung. In 2023, SMIC successfully developed a 7nm process technology, which South Korean scholars believe resembles TSMC's first-generation 7nm technology from 2018-2019.
Despite being affected by US export controls, SMIC has made significant progress in process development through talent acquisition. Although still lagging behind Taiwan and South Korea in advanced processes, its advancements are quite remarkable for a company that was established only some 20 years ago.
Experts in South Korea predict that within the next ten years, China's foundry operations will at least double or triple their current market share in technologies above 10nm and mid-range processes. If SMIC continues to profit and secures substantial government investment, it could catch up to TSMC within a decade.
Chinese companies rapidly capturing DDR4 market share
Industry observers in South Korea note that SMIC's development model is increasingly mirroring that of Samsung, expanding from foundry services into memory production, effectively becoming an integrated device manufacturer (IDM). In 2018, SMIC established its memory subsidiary, Semiconductor Global Solutions (SGS), recruiting a significant number of engineers from Samsung and SK Hynix to develop DRAM in Pudong and Ningbo.
In the memory sector, Chinese companies are rapidly capturing market share in DDR4 by increasing production while also pushing forward with DDR5 mass production. CXMT is currently focused on producing 17-18nm DDR and LPDDR4X, aiming to expand its output of lower-priced memory products.
Morgan Stanley forecasts that CXMT's DRAM market share will exceed 10% for the first time in 2024. The South Korean industry generally believes that the technological gap between CXMT and Samsung may have narrowed to less than 1.5 years. Meanwhile, YMTC may close the technology gap with Samsung and SK Hynix to under one year in the NAND flash domain.
In 2023, SK Hynix produced stacked 238-layer 3D NAND, while Samsung is expected to begin mass production of its ninth generation 3D NAND in 2024, speculated to stack 280-290 layers. YMTC developed a 232-layer 3D NAND in 2022 and is currently in the early stages of mass production, indicating that the technology gap with South Korean manufacturers is only 1-2 years.
Additionally, Chinese semiconductor companies are actively entering the artificial intelligence (AI) field, particularly focusing on high-bandwidth memory (HBM). Industry rumors suggest that CXMT is collaborating with packaging and testing firm TF to develop HBM samples, while XMC plans to establish a factory for HBM production. Huawei is leading several companies, reportedly including JHICC, in planning HBM production.
