China is flooding the market with extremely cheap DDR4 modules. This is a threat to South Korea

Memory chips are the engine of South Korea’s trade-dependent economy. In fact, for the South Korean government, the semiconductor industry has a strategic role. And Samsung and SK Hynix companies that support it. The former has an approximate market share of 40%, while SK Hynix maintains a very respectable 29%. Behind both positions is the American Micron Technology with a share of approximately 26%.

The memory integrated circuits market has huge growth potential due to the high demand for these chips, which has led to an increase in the number of data centers for artificial intelligence (AI) applications. And, as expected, Chinese semiconductor manufacturers don’t want to be left behind. Changxin Memory Technologies (CXMT) is one of the Chinese companies specializing in the production of memory chips, and like other companies in the country led by Xi Jinping, it has decided to compete in this very attractive market by deploying a very aggressive policy.

Chinese manufacturers compete with prices 50% lower

In particular, CXMT has increased its DRAM chip production capacity almost fivefold over the past four years, allowing it to increase its global market share to a very respectable 9%. This growth puts the company just behind Micron if we maintain its market share, making it already the fourth largest memory chip maker on the planet. To further complicate the situation, the Chinese government is providing financial support to its manufacturers of this type of semiconductor in response to sanctions imposed by the United States and its allies, which is causing Chinese companies to become more competitive.

Be that as it may, the pricing strategy of not only CXMT, but also other Chinese memory chip manufacturers such as Fujian Jinhua, is extremely aggressive. In fact, these two companies are expanding their production capacity and reducing prices. Both are currently selling their DDR4 chips. with 50% discount compared to similar integrated circuits produced by South Korean companies. As we can guess, for Samsung and SK Hynix, this strategy represents an all-out aggression that leaves them no choice but to cut prices, and therefore profit margins. Of course, we, the users, benefit.

CXMT’s production capacity has increased from 70,000 wafers per month in 2022 to as much as 200,000 wafers in 2024. But that’s not all. Its goal is to reach 300,000 wafers per month and capture 11% of the global DRAM memory chip market over the next few years. Fujian Jinhua is under US government sanctions but has still managed to significantly increase production. At this stage, South Korean manufacturers have decided to reduce production of DDR4 chips and increase production of DDR5 and HBM3 memory for a very good reason: their Chinese competitors still do not have the necessary technology to produce these last two types of memory chips on a large scale.

Image | Mo Bodden

Additional information | DigiTimes

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