- YMTC has slashed up to 70 per cent of its orders from Naura Technology, a Chinese maker of production tools for wafer fabs, according to a source
- The cancelled orders come amid tighter US export restrictions on China’s chip industry, as well as a slowdown in the global memory market
China’s top memory chip maker Yangtze Memory Technologies Corp (YMTC) has significantly cut orders for production equipment in recent months, according to an industry source, a sign that its expansion plans have been dealt a major blow by Washington’s efforts to deny Chinese access to advanced chip-making technologies.
Based in Wuhan, capital of central Hubei province, YMTC has slashed up to 70 per cent of its orders from Naura Technology Group, a leading Chinese maker of etching, cleaning and chemical vapour deposition tools for wafer fabs, according to a source familiar with the matter, who declined to be named as he was not authorised to speak with media.
The orders were cancelled over the past four months, which aligns with the October 7 decision by the Biden administration to dramatically tighten export controls on advanced chip making equipment to China.
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“YMTC could be reducing procurement from its suppliers because it faces huge uncertainty in production and sales of its own products [due to US sanctions],” said Arisa Liu, a senior semiconductor research fellow at the Taiwan Institute of Economic Research.
YMTC did not immediately respond to a request for comment.
A Naura spokesman declined to comment.
The cancelled orders come amid tighter US export restrictions on China’s semiconductor industry, as well as a slowdown in the global memory chip market. South Korean memory chip giant Samsung Electronics reported a 69 per cent drop in operating profit in the fourth quarter of 2022.
State-backed YMTC, which is not listed publicly, is under no obligation to disclose its financial results or business performance, but analysts say the company is under growing pressure, especially after it was added to the Entity List by the US Department of Commerce in December 2022. Companies on the trade blacklist cannot purchase American-made products or services without Washington’s permission.
The South China Morning Post reported earlier that YMTC, which makes NAND flash chips, might postpone construction of its second wafer fab in Wuhan due to disruptions to its procurement supply chain. The company has also decided to lay off 10 per cent of its workforce.
According to the December initial public offering prospectus of Beijing Jingyi Automation Equipment Co, YMTC was its largest client in 2019 and 2021, accounting for about 50 per cent of total sales. But in the first half of 2022, orders started dropping off and YMTC’s contribution fell to 25 per cent. The prospectus did not give a reason for the drop in orders, but they happened before the US tightened export controls and blacklisted YMTC.
Most NAND flash suppliers have already started to scale back production after the market witnessed a price collapse in the second half of last year, according to a January note by research company TrendForce.
YMTC was seen as China’s best hope to break into the competitive global NAND chip market, an area monopolised by foreign players such as South Korea’s Samsung and SK Hynix, and Japanese company Kioxia.
The Chinese company holds a 5 per cent market share in NAND, according to a research note from asset management firm Bernstein.
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This article originally appeared on the South China Morning Post (www.scmp.com), the leading news media reporting on China and Asia.
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