China’s memory makers push into low-end chips with semiconductor shortage expected to run into next year

China’s memory chip makers are pushing into the lower-end of the market even as the country faces an increasingly steep uphill battle to achieve its self-sufficiency goals amid ongoing geopolitical tensions and a global semiconductor shortage.

Yangtze YTMC and Changxin Memory Technologies represent a new disruptive force in the sector and are expected to increase global capacity by 29 per cent between 2020 and 2022, economists from investment bank Natixis said on Wednesday.

“Even though it is coming from a very low base, it is probable that some mainland China firms will put pressure on market leaders,” Gary Ng, Asia Pacific economist at Natixis, said in a virtual conference call, adding that an expansion of low-end products from Chinese memory chip makers could add downwards price pressure on suppliers in the memory chip sector.

China has flagged an ambitious yet loosely-defined goal - as part of its industrial upgrade blueprint known as Made in China 2025 - to achieve 70 per cent self-sufficiency in semiconductor production by 2025.

The self-sufficiency drive has been ramped up amid rising tensions between the US and China in the technology sector, giving domestic suppliers with inferior technologies a better chance to be considered in procurement, according to several industry experts the South China Morning Post has interviewed recently.

Amid a global semiconductor crunch, which continues to cause disruption in the auto industry and beyond, China is among major global economic powers, including the US and EU, planning heavy investment to boost the semiconductor industry.