China’s YMTC Blacklisted by US: Will It Exit the NAND Flash Market?

The Biden administrationas forecast in recent days, he added more than 20 Chinese companies on the Entity Listthe Department of Commerce list of companies, individuals or governments subject to specific licensing requirements for the export, re-export and/or transfer of specific items.

It is a list of companies unable to buy technological products from US companies without the green light from the US government. Updating the list adds Yangtze Memory Technologies (YMTC), a leading name in the production of 3D NAND flash memoryas well as its Japanese subsidiary.

According to the United States, the companies on the Entity List “have been involved in, are involved in, or are at significant risk of being involved in activities contrary to the national security or foreign policy interests of the United Statesand as a result must not have access to advanced technology. The Commerce Department will review and approve individual transactions relating to exports, re-exports, and the sale of machinery, technology, and other related goods from the United States to YMTC.

YMTC had already been included in the Unverified List (UVL) of the Department of Commerce and therefore was unable to obtain US manufacturing machinery to create semiconductor wafers or other related technologies always of US origin. Inclusion in the Entity List puts even greater boundaries and requires YMTC partners to obtain a license.

YMTC’s entry into this list, according to analysts Trend Forcecould represent the tombstone to the ambitions of Chinese society which until recently was “flirting” with Apple. TrendForce states that by 2024 YMTC could exit the 3D NAND flash sector.

“YMTC will be severely limited in increasing its bit production. Therefore, its market presence for 3D NAND Flash products is expected to weaken over time,” the analysts write. TrendForce points out that, without the support of Western machine makers, YMTC is now facing a huge technical hurdle in developing its latest 3D NAND flash technology known as Xtacking 3.0. In particular, increasing the production yield of 128- and 232-layer memories will be “extremely challenging” for the Chinese memory maker.

TrendForce notes that Western 3D NAND flash buyers will have reservations about doing business with YMTC. “A US-based smartphone brand has held back its purchase of mobile storage solutions from YMTC. At the same time, PC OEMs that previously would have qualified YMTC’s client SSDs have temporarily halted the sampling process and the adoption”.

TrendForce believes that YMTC will likely be forced to operate only in China in the future. Also, as the Chinese manufacturer will struggle to advance 3D NAND technology, it will miss out on opportunities to grow its market share. YMTC’s bit supply was originally expected to grow 60% year-over-year for 2023. However, earlier estimates were reduced to just 18% and YMTC is now expected to decline year-over-year by 7%.

Analysts also note that by 2024, YMTC’s competitors will have switched to advanced 3D NAND with 300 layers, which will prevent the Chinese company from competing again. To avoid going out of business, TrendForce isn’t ruling out “alternative paths” for YMTC: “For example, the company could go back to manufacturing 2D NAND flash, or it could transform itself into a supplier of logic ICs built with mature process technologies.”