Chinese semiconductor companies are in the midst of building a globally competitive NAND Flash industry and have accelerated their investments and deal-making in the related component and product chains. XMC is expanding its fab capacity, while Unisplendour Guoxin (formerly known as Tongfang Guoxin) has also increased its investments in NAND Flash production. Along with activities from domestic semiconductor companies, major international manufacturers such as Samsung and Intel likewise are building up new NAND Flash capacity in China. Global market research firm TrendForce estimates that China’s domestic Flash memory capacity will reach 590,000 wafer pieces per month by 2020, a nearly sevenfold increase from 2015.
According to TrendForce’s analysis, the global NAND Flash bit supply is expected to grow by at least 47% annually on average from 2012 to 2016. During the same period, bit demand in the worldwide NAND Flash consumer market will also increase by an average rate of 46% every year. These projections indicate that the NAND Flash industry will continue to grow rapidly.
Jian-Hong Lin, TrendForce research manager, said that Chinese semiconductor companies are developing the manufacturing of Flash memory wafers under the country’s policy goal of becoming self-sufficient in the production of memory ICs. Lin also noted that there are four main approaches that the Chinese can take to break into the NAND Flash market. These are improving the manufacturing cost structure, exploiting the demand for 3D-NAND, expanding into emerging markets and attracting foreign investments in local memory production.
1. Improving the manufacturing cost structure: Price is still the main consideration in the consumer market, so managing the manufacturing structure will be crucial for the Chinese memory makers. They can offer lower-priced NAND Flash products by using various financial methods, such as adjusting annual depreciation rates, leasing land and equipment and obtaining government tax refunds.
2. Exploiting 3D-NAND demand: Major international suppliers of Flash memory have been slow to move forward with their technology migrations after the adoption of the 2x-nm node technology because shrinking the manufacturing process no longer brings significant cost advantages. Currently, 3D-NAND is seen by memory makers as another major innovation in cost-cutting. Lin said the transition from the planar (2D) to the 3D-NAND structure will require expertise from other technology fields. If the Chinese semiconductor companies managed to successfully bring together the talents and the necessary intellectual properties, they could catch up to the larger international memory suppliers in the 3D-NAND Flash market.
3. Finding opportunities in the emerging markets: China’s new economic initiative, known as “The Belt and Road” (B&R), benefits domestic industries that are tapping into the demand of the neighboring emerging markets. The Chinese NAND Flash industry therefore will have additional unique strengths under the B&R framework, such as being supported by the state’s resources as well as its influence abroad.
4. Getting investments from foreign semiconductor companies: International semiconductor manufacturers have been quick to build a presence in China, as they are attracted to the country’s huge market and abundant workforce. These foreign companies have trained lots of local industry talents that domestic manufacturers can also use to help run their fabs. Hence, the manufacturing capacity established by the international manufacturers would lower the development barriers for Chinese Flash memory makers.