A power struggle on a Chinese factory floor last June offers a glimpse into just how dramatically the balance of power has shifted in the global semiconductor industry.
For months, Chinese chipmaker ChangXin Memory Technologies, known as CXMT, had been steadily raising prices on Huawei, one of China’s largest technology companies. When Huawei pushed back against the rising costs, CXMT didn’t budge, according to two people familiar with the situation.
The tension boiled over at CXMT’s manufacturing facility. A team of engineers from SiCarrier — a chipmaking equipment supplier with close ties to Huawei — had been working inside the cleanrooms at CXMT’s main research and development facility in Hefei, in China’s Anhui province, helping with equipment upkeep. Without any advance notice, CXMT told the engineers to gather their tools and exit the R&D area immediately, the two sources said.
Executives at SiCarrier interpreted the abrupt dismissal as a direct result of the ongoing power struggle between CXMT and Huawei, the sources told Reuters. While the companies continue to do business with one another, the engineers have not been permitted back into the R&D zone. CXMT, Huawei, and SiCarrier all declined to respond to questions about the incident.
The confrontation highlights a broader transformation underway in China’s chip industry. CXMT has climbed to become the world’s fourth-largest producer of memory chips, including DRAM — the type found in smartphones, laptops, and servers. The company now commands enough market influence to set prices that even a tech powerhouse like Huawei finds hard to accept.
Memory chips, which allow devices to run applications and save data, were once considered a low-profit business. CXMT and its flash-memory counterpart, Yangtze Memory Technologies Corp — or YMTC — spent years burning through losses while depending on government support to stay afloat.
The worldwide push to build out artificial intelligence data centers has completely changed the picture, turning these once-overlooked components into some of the most in-demand products on the planet. The Chinese memory companies are now in a position to choose their customers and name their prices, four people familiar with the matter told Reuters. In some instances, they are charging more than their larger South Korean competitors, Samsung and SK Hynix, as surging AI-related demand forces Chinese buyers to pay increasingly steep prices.
This month, CXMT signed a five-year supply agreement with ByteDance — the Chinese parent company of TikTok — valued at more than $7 billion, according to three people with knowledge of the deal. ByteDance did not respond to a request for comment on the arrangement, which had not previously been reported.
Reuters’ account of how CXMT and YMTC are exercising their new market power is drawn from interviews with more than a dozen people, including company executives, engineers, suppliers, and U.S. government officials, as well as a review of 50 Chinese government policy documents and corporate filings. The reporting reveals new details about their pricing strategies, business dealings, and expansion plans as both companies — referred to in China as the “twin stars” of memory — prepare for major initial public offerings. Neither company responded to requests for comment on their pricing, strategies, or the increasing attention they are drawing from Washington.
The Chinese firms’ growing control over chip supplies is putting them on a direct collision course with the United States government. The Pentagon has labeled both companies as Chinese military companies, citing what it describes as their involvement in China’s military-civil fusion strategy — an accusation both firms reject. YMTC is already listed on the U.S. Entity List, a designation that has cut off its access to American-origin equipment, software, and tools used in chip production.
Members of Congress are debating measures that would further limit both companies’ access to chipmaking equipment. However, the Trump administration is internally divided on whether to take stronger action against them, according to four people familiar with the internal discussions.
Apple has made the case that it depends on Chinese memory chips and has sought assurances that CXMT will not be added to the Entity List, two of those people said. A U.S. interagency committee approved CXMT for addition to the trade blacklist last year, which the Commerce Department oversees, but officials have held off on following through, Reuters reported last month.
Micron, the primary Western competitor to the Chinese firms, has been urging U.S. lawmakers to impose additional restrictions on CXMT and YMTC, including limiting their access to chipmaking equipment. Apple, Micron, the White House, and the departments of Commerce, Defense, and State all declined to respond to questions about the ongoing discussions.
HEADING TOWARD PUBLIC LISTINGS
The geopolitical pressure has done little to slow the Chinese chipmakers’ march toward stock market debuts.
CXMT, which is set to launch an $8.6 billion IPO in Shanghai on Monday, has wiped out a decade’s worth of losses in just six months, recording $7.5 billion in revenue for the first quarter alone — a 719% jump compared to the same period a year earlier.
As YMTC prepares for its own public listing, some executives within the company are pushing for a valuation target of 1 trillion yuan, equivalent to roughly $148 billion, according to two people familiar with the discussions.
Both companies receive backing from China’s Big Fund, a state-supported semiconductor investment vehicle, as well as from local and provincial governments — Anhui province in the case of CXMT and Hubei province for YMTC. The provincial authorities and the investment fund did not respond to requests for comment.
Chinese officials regard the two companies as strategic national assets central to Beijing’s goal of achieving technological independence, according to corporate filings and government policy documents.
The chipmakers are also taking the fight directly to their competitors’ home markets. YMTC entered South Korea in June, launching a consumer memory storage brand and stepping into a space vacated by Samsung, SK Hynix, and Micron, all of which have shifted focus toward more advanced chip segments. CXMT has longer-term ambitions to break into the U.S. market, according to three sources, though its current production capacity is being stretched by strong domestic demand.
Chinese authorities have instructed both CXMT and YMTC to give priority to supplying domestic companies, three additional sources told Reuters. Still, both chipmakers are planning to expand their manufacturing capacity, which could allow them to supply both Chinese and international customers as early as 2027, when new production facilities are expected to come online.
CXMT is currently building two new plants in Shanghai and Hefei and is in discussions with local governments about a potential third location, according to three sources. Those projects would more than double the company’s production capacity to over 600,000 wafers per month. If everything proceeds as planned, CXMT’s output could surpass that of Micron by 2030, one source said. Reuters reported in April that YMTC has plans for two additional factories beyond one already scheduled for completion this year.
Despite their rapid rise, the Chinese memory makers face real limitations. Both companies depend on deep ultraviolet lithography machines — equipment used to etch the microscopic circuits onto chips — supplied by Dutch manufacturer ASML. The Dutch government has been under U.S. pressure to restrict sales of advanced lithography equipment to Chinese companies, given the machines’ role in producing cutting-edge semiconductors with potential military uses and their incorporation of American technology.
South Korean and American competitors use ASML’s more advanced extreme ultraviolet lithography machines to produce DRAM chips. China has been barred from obtaining those machines since the Dutch government stopped issuing export licenses in 2019. While CXMT has produced its own version of high-bandwidth memory — a high-speed format critical for AI applications — five sources said it remains roughly two generations, or several years, behind its rivals.
“If more restrictions are imposed on lithography equipment, that would be the biggest challenge for Chinese memory makers,” said Ray Wang, an analyst specializing in memory and AI supply chains at research firm SemiAnalysis. “China remains quite behind in that part of the equipment supply chain compared to other tool segments.”
ASML declined to comment on the potential effects of any future export restrictions.
YMTC appears somewhat better positioned than CXMT to weather such a scenario. Since being placed on the U.S. Entity List in 2022, YMTC has swapped out roughly half of its equipment for domestically made machinery and developed new methods for stacking memory layers using less advanced tools, according to two people familiar with the matter.
PRICING POWER
Chinese memory chips were long viewed by foreign industry executives as budget alternatives to products from Western and South Korean manufacturers. That reputation no longer holds, six people told Reuters. In recent weeks, CXMT has been charging more than Samsung’s price of roughly $1,240 per unit for comparable 64-gigabyte DDR5 server memory modules, two of those people said. They declined to share the exact price CXMT is charging.
Samsung did not respond to questions on the matter. SK Hynix also declined to comment.
Several Chinese electronics and technology companies filed complaints with China’s Ministry of Industry and Information Technology this year over price increases by CXMT and YMTC, arguing the hikes were delaying their own product launches, according to two people. Those sources declined to identify which companies submitted the complaints.
The ministry, which did not respond to questions for this story, announced in April that it would take action against memory chip hoarding intended to push prices higher.
The Chinese government has also steered purchasing decisions toward domestic chip suppliers. Chinese state-owned companies are barred from buying memory chips from foreign manufacturers, according to two sources.
The supply agreement between CXMT and ByteDance came after the chipmaker struck a separate deal with Tencent in June, valued at more than $3 billion. Tencent did not respond to a request for comment.
At YMTC, Chairman Chen Nanxiang had seen this moment coming. In a 2024 interview with Chinese state media, he said that “while the industry had not yet reached explosive growth, that day would come within three to five years.”
By early this year, as the company began selecting its customers for the first time, Chen and his leadership team were in a celebratory mood, according to two sources. The boom he had anticipated had finally arrived.
