The U.S. is going to come down hard on China again: blocking flash memory manufacturing equipment above 128 layers

According to a Reuters report on August 1 local time, four people familiar with the matter revealed that the United States is considering restricting the export of U.S. chip manufacturing equipment to Chinese storage chip makers.

As for the object of the restrictions, which includes Changjiang Storage (YMTC), the United States hopes to use this to limit the development of China's semiconductor industry, and to protect related U.S. companies.

The newspaper quoted sources who asked not to be named as saying that if the U.S. government determines to take the plan, it may also harm the interests of two major South Korean storage manufacturers, Samsung Electronics and SK Hynix.

Because Samsung has two large NAND Flash factories in China, while SK Hynix also previously completed the acquisition of Intel's NAND Flash manufacturing business in China.

Therefore, once the U.S. restriction plan is approved, the scope of restrictions will be expanded to include a ban on the shipment of U.S. chip manufacturing equipment to NAND Flash factories in mainland China.

According to the report, export control experts said that the plan will be the first time the United States through export controls to target China's production of memory chips without specialized military use.

In addition, because the current U.S. storage core of the company is left only Western Digital and Micron Technology (Micron) two companies, although the two storage chip manufacturers together account for about the global NAND Flash market share of more than 25%, but Western Digital in the United States does not have NAND Flash production capacity, Micron in the U.S. mainland only part of the capacity, so the restriction plan also represents a broader U.S. national security significance. broader U.S. national security implications.

The other two sources said that, according to the plan being developed, the United States will prohibit exports to China for the manufacture of NAND Flash memory chip equipment above the 128-layer stack, and the current production of such chip equipment, the United States, including Applied Materials (Applied Materials) and Panlin Group (LAM Research) and other manufacturers.

In this regard, the source pointed out that the relevant plans are currently under discussion, there is no bill drafting procedures.

The U.S. Department of Commerce would not comment on the news, noting only that the U.S. government's focus is on undermining China's ability to manufacture advanced semiconductors to address significant national security risks to the United States.

As for, Panlin Group, SK Hynix and Micron also declined to comment on the U.S. policy. Samsung, Applied Materials, Long Cun, and Western Digital have yet to respond to the news.

The report highlights that Long Cun, founded in 2016, is a rising star in NAND Flash manufacturing. Data also shows that Long Cun has long been successful in mass production of 128-layer NAND Flash, and is actively developing 232-layer NAND Flash, with rumors that mass production could occur as soon as the end of this year.

The U.S. government noted in a report in June 2021, including Micron and Western Digital are facing competitive pressure from the low prices of Long Storage products, representing a direct threat to Micron and Western Digital from Long Storage's expansion and low-cost products. The report highlights ChangCun's description as the leading NAND Flash chip manufacturer in China and that it has received approximately $24 billion in government subsidies.

In addition, the U.S. Department of Commerce also noted that Long Cun is currently under investigation by the U.S. Department of Commerce for questioning whether the company violated U.S. export control regulations by selling memory products to China.

According to market consulting and research firm Yole Intelligence, Long Cun accounts for about 5% of global NAND Flash production, almost double the growth of a year ago.

In addition, Western Digital accounts for about 13% and Micron Technology accounts for about 11%. Therefore, in the future, if the U.S. bans the export of production equipment for NAND Flash chips above the 128-layer stack to Long Cun, Long Cun may be trapped and have a difficult path to move forward in the future.

Yole data further shows that in 2022, China's NAND Flash memory chip production (including Samsung, SK Hynix and other mainland production), will account for less than 14% of global production capacity in 2019, growing to more than 23% in 2022, while the U.S. production in the same period from 2.3%, down to 1.6%.

Moreover, the vast majority of production of NAND Flash memory chips by U.S. companies is done overseas.