A leading Chinese chipmaker is listing in Shanghai after receiving confirmation from a U.S. chip toolmaker that they can supply its new production line, which will fund a massive expansion.
After months of uncertainty, Changxin Memory Technology was told the chipmaking equipment it needed would be exempt from U.S. export controls, according to three people with direct knowledge of the matter.
Founded seven years ago, Changxin Memory is one of the largest manufacturers of DRAM memory chips in China. It is also the only company capable of producing them at sub-billionth-of-a-meter miniaturization levels. CXMT plans to use U.S. equipment that can make less complex chips for cellphones, servers and electric vehicles, bypassing strict requirements for the export of advanced chip tools.
The company was one of several Chinese chipmakers forced to shelve fab expansion plans after the United States imposed sweeping export controls on Oct. 7 last year. Another larger Chinese memory chipmaker, Yangtze Memory Technology, has since found a workaround to resume capital spending. Now Changxin Memory, based in the eastern province of Anhui, is expanding its 2023 growth target.
“CX Memory has set a very ambitious expansion target this year despite the slump in memory chips,” said a person familiar with the matter, adding that its annual capital spending in 2023 will be 1.5% due to increased purchases of chip-making equipment. an increase of about $4 billion.
“CX Memory plans to switch to more Chinese equipment suppliers for expansion, so capital expenditures can increase by US$5 billion or more. Additional cash is needed to test relatively immature domestic equipment,” said another person familiar with the matter.
To raise funds for the effort, it plans an initial public offering on Shanghai’s tech-heavy STAR Market and is in discussions with at least two potential listing underwriters, including Bank of China, according to three people familiar with the matter. gold company. The listing plan is still in its early stages, so the size and timeline of the IPO have yet to be determined, a banker said.
Changxin Storage and CICC did not respond to requests for comment.
A banker close to the company said Changxin Memory is currently valued at well above 100 billion yuan ($14.5 billion) based on its technology assets and chip production capabilities. Another person close to Changxin Storage said this would far exceed the valuation of about 72 billion yuan after a round of financing in December last year. Current investors in its holding company parent, Innotron Memory, include Alibaba, a fund controlled by smartphone maker Xiaomi and a chip “big fund” — the National Integrated Circuit Industry Investment Fund.
The source of its new U.S. equipment has not been disclosed, but Lam Research and KLA, two of the largest U.S. chipmaker toolmakers, recently said the U.S. government had issued “clarifications” that would allow them to increase sales in China this year. The clarification means they can sell equipment they feared could be banned under the Oct. 7 export controls, they said.
Doug Bettinger, Lam’s chief financial officer, said on a recent earnings call that the increase would be in the “hundreds of millions of dollars.”
On KLA’s latest earnings call, CFO Bren Higgins said the clarification will create “some incremental opportunities to support some older generation storage devices in China.” Additional sales would exceed $200 million, he said.
Neither company detailed which Chinese company would be responsible for the additional sales. But the “clarification” would allow them to sell tools to Changxin Storage, said a person familiar with the matter.
Another person said the Commerce Department’s “clarification” didn’t change the parameters of the Oct. 7 controls, but instead outlined the correct method the company should use to count nanometers in customers’ chips.
China feels less vulnerable in obtaining memory chips, a commoditized product dominated by non-U.S. suppliers. In April, regulators launched a cybersecurity review of U.S. memory chipmaker Micron Technology, in a move widely seen as Beijing’s first retaliation for Washington’s efforts to prevent China from developing cutting-edge chips.
Industry experts say the investigation will prompt Micron’s Chinese customers to look for alternative suppliers, but Changxin’s products are not yet ready for replacements.
“CXMT is about eight years behind Micron,” said a Chinese semiconductor consultant who asked not to be named. “It’s four generations behind Micron, with no clear path to catch up.”