Samsung, SK Hynix, Micron Face Memory Price War? Will Chinese DRAM and NAND Expansion Impact Global HBM Market?

TradingKey - An article from the financial blog ZeroHedge notes that Chinese semiconductor firms have begun flooding the market with domestic DRAM and NAND chips, which could drive down prices for memory and storage devices. Is the chip market facing a devastating moment? Will the blow from China's chip price war hit Samsung, SK Hynix, and Micron (MU) —the 'black swan' moment for these three chip giants?

Chinese Memory Manufacturers Expand Capacity as Domestic Products Enter Global Markets

According to a report by tech media outlet Tom's Hardware, consumers have discovered that the Vengeance DDR5 16GB memory modules from renowned memory brand Corsair utilize DRAM from Chinese firm ChangXin Memory Technologies (CXMT), rather than the "Big Three" memory manufacturers—Micron, Samsung, or SK Hynix. Chinese-produced DRAM has finally appeared in mainstream products.

This indicates a significant shift in the memory sector's supply dynamics. Previously, CXMT's products were primarily sold to domestic firms. However, Corsair, CXMT's partner in this instance, is a leader in the consumer memory space. Their collaboration suggests that Chinese-produced DRAM may begin flowing into international markets, potentially leading to a major transformation of the market landscape.

The analysis from Tom's Hardware points out that chip companies like CXMT, unlike the "Big Three" giants, are not constrained by data center contracts and have ample production capacity. Although they lack the most cutting-edge technology and tools, they can satisfy the demands of general consumers in the market.

Previously, Corsair typically sourced memory from Micron. However, with memory prices currently elevated and the production capacity of the "Big Three" already sold out and difficult to book, companies like Corsair may turn to lower-priced Chinese chip firms to ensure stable supply and reduce costs.

Sourcing memory chips from Chinese chipmakers is no longer an isolated case in the international market: HP (HPQ) placed a large order for LPDDR5 with CXMT in January; Qualcomm (QCOM) began collaborating with the company on custom DRAM in April; Dell (DELL) , ASUS, and Acer have also approached CXMT.

Since the start of this year, several Chinese memory manufacturers have ramped up production capacity, which now not only meets domestic demand but also provides overseas PC makers with more affordable alternatives with comparable specifications. For instance, Yangtze Memory Technologies (YMTC) is undergoing an epic expansion of memory production; the company's Q1 financial results show its NAND chip output has captured over 10% of the global market share.

Chinese Memory Chipmakers Launch Price War: Can They Capture Global Market Share?

As the traditional "big three" chipmakers fail to keep up with supply demands, Chinese chip manufacturers are gaining unprecedented market opportunities. However, will this truly impact the market shares of Samsung, SK Hynix, and Micron?

From a technical perspective, CXMT's prospectus reveals that its yield rates for DDR5 and LPDDR5X at the 1a (16nm-class) process node have reached over 80%. While the 1a process is relatively advanced, the cutting-edge technology of the memory "big three" has already advanced to the sixth-generation 10nm-class process, primarily known in the industry as 1c, or 1γ by Micron. The 1b node still sits between the 1a node and these advanced processes.

Currently, HBM (High Bandwidth Memory) required for AI data centers—specifically the third generation, HBM3—can utilize 1a process chips. For instance, SK Hynix only partially switched from 1a to the more advanced 1b process during the HBM3E era. The HBM3 and HBM3E chips that Samsung previously supplied in bulk to major clients like Nvidia and AMD were also produced using the 1a process.

Currently, HBM3E still accounts for the largest share of total HBM shipments, but capacity for the more advanced HBM4 is ramping up, which will serve as the standard memory chip for Nvidia's (NVDA) next-generation Vera Rubin platform and AMD MI450 platform, becoming the future mainstream. Currently, memory chips from China do not meet the standards for HBM4 production; regardless of how much Chinese chipmakers reduce costs, the technological barriers maintained by global memory giants remain difficult to breach.

However, in the consumer memory sector, as major memory manufacturers concentrate their production capacity on high-end HBM production lines, Chinese chipmakers are poised for rapid market share expansion. For example, due to its high yield rates on the 1a process, CXMT is well-positioned to capture this mainstream general-purpose consumer memory market.

However, some analyses suggest that a real market impact will only occur when the prices of DDR5 memory produced by these Chinese manufacturers drop significantly. When their memory products are used as white-label components by international consumer brands, the brands' procurement costs decrease substantially compared to previous purchases from giants like Samsung and SK Hynix; yet, retail prices at the point of sale are likely to remain flat. Consequently, the profits generated by these Chinese manufacturers' cost reductions are primarily captured by the brand owners. Only when prices drop so drastically that domestic white-label memory products remain profitable even when sold at half the price of international brands will Chinese manufacturers be able to influence memory market pricing by targeting price-sensitive consumers.

Yet, as long as Chinese manufacturers struggle to penetrate the most cutting-edge memory market, the technological moats of international memory giants will remain difficult to breach. This is further compounded by the fact that the lithography giant ASML is unable to export EUV (Extreme Ultraviolet) lithography machines to China due to policy restrictions, meaning Chinese manufacturers will be unable to shake the dominance of world-class memory giants for the foreseeable future.