Latest US blacklist spells trouble for China’s biggest domestic 3D NAND supplier

One research firm thinks YMTC may have to exit 3D NAND altogether

Analysis The US has ramped up trade restrictions against YMTC, China's biggest domestic flash memory supplier, triggering concerns that the chipmaker will face significant production issues and potentially be forced to exit the 3D NAND market.

This is based on reactions from analysts and researchers to the news this week that the US Department of Commerce has placed YMTC, alongside 35 other Chinese companies, on its so-called Entity List, which requires firms on the list to receive a special license to important certain American technologies.

Short for Yangtze Memory Technologies Co., YMTC was placed on the Department's Unverified List back in October as part of the White House's big move to curb China's domestic semiconductor industry by restricting exports of US-made advanced chip-making equipment. By adding YMTC to the Entity List, the US is blocking it from procuring even more supplies it needs to produce flash memory chips, unless it obtains a special license.

Analysts told the South China Morning Post that being placed on the Entity List could hinder YMTC's production capabilities and its advanced memory chip capabilities.

"Adding YMTC to the Entity List will not bring down its current production completely. But it will hinder production and product development due to restricted access to US suppliers," Dan Hutcheson of TechInsights told the newspaper.

While YMTC was only founded in 2016, TechInsights recently discovered that the company had commercialized NAND flash with 232 layers, beating global rivals like Micron in the US as well, as Samsung and SK Hynix in South Korea, to the advanced memory chip technology.

The company's advanced memory chip capabilities had already been in question due to US sanctions blocking the export of state-of-the-art chip manufacturing equipment and tools, but the new Entity List action has created even more uncertainty.

Taiwanese research firm TrendForce said on Friday that the Entity List decision against YMTC will create a "huge technical obstacle in the development of its latest 3D NAND flash technology," particularly with increasing the manufacturing yield of its 128-layer and 232-layer processes.

The restrictions placed on YMTC this year by the US government has prompted TrendForce to radically adjust its projection for the company's supply bit growth rate. Originally, the firm said it expected YMTC's supply to grow 60 percent year-over-year for 2023. Now it expects a 7 percent decline over the same period.

What makes matters worse for YMTC, according to TrendForce, is that there is growing unease by NAND flash buyers outside of China to adopt its technology.

YMTC could also lose further access to advanced chip-making equipment since Japanese and Dutch providers may soon have to abide by US sanctions.

All these issues combined means YMTC faces a difficult path ahead as a company, which may force it to shake up its strategy. Its potential options could include abandoning the 3D NAND flash market or pivoting to manufacturing logic semiconductors using a mature process, according to TrendForce. ®