ChangXin Memory Technologies (CXMT) erased a decade of losses in just six months, reporting $7.5 billion in first-quarter revenue, a staggering 719% increase from the previous year. This rapid accumulation of capital positions CXMT for its Shanghai market debut on Monday, following an $8.6 billion initial public offering. Its flash-memory counterpart, Yangtze Memory Technologies Corp (YMTC), also prepares for its own IPO, with some executives targeting a 1 trillion yuan ($148 billion) valuation.
Who Profits from the AI Boom
The global buildout of AI data centers has transformed memory chips into one of the world's most sought-after products, sparking battles over pricing and a scramble for supply. Chinese memory makers now dictate prices, in some cases charging more than South Korean rivals Samsung and SK Hynix. This allows them to pick clients and extract higher prices from Chinese buyers. CXMT this month signed a five-year agreement with ByteDance, TikTok's Chinese owner, worth over $7 billion. This follows a June agreement with Tencent, valued at more than $3 billion. YMTC Chairman Chen Nanxiang had predicted this moment in 2024, forecasting explosive growth within three to five years. By early this year, his company began picking and choosing clients, celebrating the boom's arrival. Several Chinese electronics and tech firms, however, complained to China's Ministry of Industry and Information Technology this year about price increases by CXMT and YMTC, blaming the hikes for delaying product launches. The ministry responded in April, stating it would crack down on memory-chip hoarding aimed at driving up prices.
The State's Hand in Capital Accumulation
Both CXMT and YMTC receive substantial support from the Chinese state. The Big Fund, a state-backed semiconductor investment vehicle, backs both firms. Local and provincial governments, including Anhui province for CXMT and Hubei province for YMTC, also provide crucial aid. Chinese officials view these companies as strategic infrastructure, central to Beijing's drive for technological self-reliance. Authorities have asked CXMT and YMTC to prioritize supply to domestic firms. Chinese state-owned firms are restricted from buying from foreign memory makers, further solidifying the domestic market for these rising giants.
Across the globe, the U.S. state acts to protect its own accumulated wealth. The Pentagon has designated both CXMT and YMTC as Chinese military companies, citing their alleged role in aiding China's military-civil fusion strategy. YMTC was added to the U.S. Entity List four years ago, restricting its access to U.S.-origin suppliers, software, and tools. Congress debates further restrictions on both companies' access to chipmaking equipment. Micron, the main Western competitor to the Chinese firms, has lobbied U.S. lawmakers for these additional curbs. Apple, however, has argued it needs Chinese memory and sought assurances that CXMT won't be placed on the Entity List. CXMT was approved for addition to the trade blacklist last year by a U.S. interagency committee, but officials have held off. The Dutch government, under U.S. pressure, began withholding export licenses for advanced lithography equipment seven years ago, barring China from obtaining ASML's more-advanced extreme ultraviolet lithography machines.
Limits of Capitalist Production
Despite their growing dominance and state backing, the Chinese memory makers face constraints. Both companies rely on deep ultraviolet lithography machines from Dutch giant ASML. While CXMT has produced its own high-bandwidth memory, it remains two generations, or several years, behind its rivals. Ray Wang, an analyst at SemiAnalysis, noted that further restrictions on lithography equipment would pose the biggest challenge for Chinese memory makers, as China remains significantly behind in that part of the equipment supply chain. YMTC, added to the U.S. Entity List four years ago, has replaced around half of its equipment with domestic machinery and developed new techniques to stack memory layers using less-advanced tools. CXMT aims to break into the U.S. market long-term, but heavy domestic demand currently stretches its capacity. The company is building two new plants and is in talks for a third, projects that would more than double production capacity to over 600,000 wafers per month. If these plans materialize, CXMT's capacity could surpass Micron by 2030.