China’s YMTC is Poised to Lead in NAND Flash Technology

China’s fledgling Yangtze Memory Technologies Co. (YMTC) is poised to lead Samsung and Micron with NAND flash technology that it will very likely license to rivals during the next few years. So says YMTC’s former acting chairman, Charles Kau.

In 2018, YMTC announced its Xtacking technology under which periphery circuits that handle data I/O as well as memory cell operations are processed on one silicon wafer using a logic node that enables high speed I/O speed and functions. Once the processing of that array wafer is completed, it is connected with another wafer containing memory cells through billions of metal VIAs.

The company won an award for its innovative technology at the 2018 Flash Memory Summit in California.

“They are ahead of everybody,” Kau said in an interview with EE Times. “In the coming two to three years, YMTC, with their original patents and original know-how, will be dominating this sector.”

YMTC Xtacking architecture (Source: YMTC)

Kau had been president of Nanya Technology in Taiwan, and also chairman of Inotera Memories, a joint venture between Nanya Tech and Micron Technology. Five years ago, Tsinghua Unigroup (based in Beijing) hired him to help build China’s semiconductor industry. Kau accepted the 5-year contract and resigned as president of Nanya Tech, but remained on the company’s board. He also continued to act as Inotera’s chairman until Micron bought Inotera outright in 2016. That is the same year Tsinghua Unigroup established YMTC, which Kau was managing until recently, when his 5-year contract with Tsinghua Unigroup elapsed in October.

While recent measures taken by the US government to blunt the advancement of China’s semiconductor industry have taken a toll, Kau believes YMTC is likely to continue growing in the NAND flash business, potentially reaching the same scale as Samsung and SK Hynix in South Korea. By the end of 2022, YMTC will close the gap in technology as well as capacity, he predicted.

The company, which is currently using a 20nm process to make about 10,000 twelve-inch wafers per month with a 64-layer 3D NAND flash technology, expects to reach 200,000 wafers per month using either a 128-layer or 192-layer technology by 2022. Kau expects Samsung and SK Hynix will each probably have a monthly NAND flash capacity of about 300,000 twelve-inch wafers by 2022.

Doubts
Kau is confident of YMTC’s prospects, but others not associated with the company are more cautious. On the plus side, YMTC has very easy access to capital for expansion from China’s Big Fund (the National Semiconductor Industry Investment Fund), according to Jim Handy, an analyst with Objective Analysis. The fund last year raised the equivalent of $29 billion for investment in China’s chip industry. Handy had doubts about YMTC’s ability to match the production of the big NAND players anytime soon, however.

“I haven’t been carefully tracking capacity numbers recently, but some simple math implies that Samsung and Japan’s Kioxia are each at about 350K wafer starts per month, and Micron and SK Hynix are each at about 150K.”

YMTC’s Xtacking technology requires two wafers — one for the array and one for the logic — for every memory unit produced.  A 200K wafer count could mean 100K for array and 100K for logic, which would be the equivalent of 100K wafers from an individual competitor, Handy noted. If YMTC is targeting 200K pairs of wafers of Xtacking NAND, Handy questioned where the logic wafers would come from. “There’s no existing fab in China big enough to produce 200K logic wafers for YMTC,” he said.

Kau, who is quarantining in China after a visit to Taiwan, wasn’t immediately available to respond to Handy’s comments.

The NAND business will probably be worth $41 billion this year after peaking at $60 billion in 2018, according to Handy. The smartphones that are assembled in China are one of the key products that NAND flash goes into.

NAND chips are selling close to cost after overcapacity began in early 2018.

Late last month, Intel agreed to sell its NAND business to SK Hynix for about $9 billion. NAND flash was a very bad fit for Intel because it reduced Intel’s profit margins, according to Handy.

It may be a different story for the economic planners in China, who have been trying to ramp up chip production in part to offset import costs. The nation this year is expected to import about $300 billion worth of semiconductors, a dollar figure that’s even larger than China’s oil imports.

Despite developing its own technology, YMTC could face legal wrangles with competitors in the future, Handy said.

“China’s semiconductor makers are using a strategy of developing home-grown technology instead of licensing it from others. I understand that this is based on the idea that any internally-developed technology will not step on other companies’ patents since it was developed without their help. That is not the case. If one company develops and patents a technology, and then another company develops the same technology without even knowing that the first company already did that, the second company will still be using a technology that was patented by someone else, setting themselves up for IP infringement or royalty payments.”

US sanctions
While the US government’s sanctions against China’s Huawei and Semiconductor Manufacturing International Corp. (SMIC) will slow the development of China’s chip industry, work will continue with the aim of creating a complete infrastructure in production equipment, materials and EDA tools currently dominated by US companies, Kau said.

“They still can do middle- and low-end manufacturing. Some companies are doing equipment and materials. From a logic point of view, anything below 28nm they probably cannot do. But 28nm and above, 45nm, 40 and 60, they can do. That accounts for 80 percent of the volume they use in the consumer industry.”

Chinese chipmakers like SMIC will not be able to do high-end production for Huawei, which was buying 7nm wafers from Taiwan Semiconductor Manufacturing Co. (TSMC) until a ban by the US government took effect in September this year, according to Kau.

Still, China’s consumer electronics business accounts for a lot of volume and has nothing to do with 5G, AI or businesses where the US government has drawn a red line, Kau said.

In line with that outlook, Huawei plans to make 28nm chips for smart TVs and IoT devices by the end of 2021 at an existing chip plant in Shanghai, according to a Financial Times report last weekend. If true, the move would be a step down from the 5G phones that Huawei was making earlier this year with 7nm chips from TSMC.

China’s progress in building a domestic semiconductor industry will continue, albeit at a slower pace, Kau said.

“They will have some success, but there will be a delay. Maybe it will take about 10 to 15 years to catch up and be able to produce their own manufacturing equipment. If it is very high end like the EUV equipment that ASML is making, it’s going to take a much longer time.”

For 28nm and above, some Chinese materials and equipment companies are developing products already, he said.

Kau, who is 68, said he plans to spend more time with his family, invest in some Chinese companies in semiconductor materials and possibly serve as a board member of some European and American companies.

Investors in China’s semiconductor industry mention Advanced Micro-Fabrication Equipment Inc. (AMEC) as a company that shows potential. Shanghai-based AMEC makes equipment for etching and metal organic chemical vapor deposition processes.

“To catch up in 10 to 15 years is a bold statement, but coming from Charles, I would take it seriously,” says a fund manager with a large sovereign wealth fund that holds shares in Asian chip companies. The fund manager requested that his name and that of the fund be withheld. “I thought it would take 50 years to catch up. Many talented people around the world are helping China, as Taiwan benefited two to three decades ago, driven by both opportunity and ideology.”

China’s recruitment of Taiwanese chip engineers will probably slow in the coming years, partly as a result of the US-China technology war, according to Kau. China has built up its own pool of engineers who will carry on development in the future, he added.

“They are catching up. They really don’t need too many Taiwanese people.”

YMTC had about 60 employees from Taiwan at the peak out of a total headcount of 7,000, according to Kau.

Other Memory Makers
For China’s other memory companies that are making ordinary DRAMs, the future is even less sanguine, Kau said. Jim Handy has similar sentiments.

There are two home-grown DRAM efforts in China that Handy has tracked, ChangXin Memory Technologies (CXMC), and Jinhua Integrated Circuit Co. (JHICC). “CXMT in Hefei is an offspring of Qimonda’s China DRAM design center that later became a DRAM design consulting firm called Innotron before finally investing in production facilities as CXMT,” Handy said.

“It is not financed by the Big Fund, but does use regional government funding. JHICC in Fujian is financed by the Big Fund and has been on hold since its technology partner United Microelectronics Corp. (UMC) in Taiwan was found guilty of trade-secret theft, which motivated the US Department of Commerce to add JHICC to the Entity List, prohibiting the company from purchasing important tools.”

UMC last week pled guilty to one count of receiving and possessing a stolen trade secret and agreed to pay a fine of $60 million in connection with the JHICC case.

“UMC’s plea and plea agreement resolve a 2018 trade secrets case brought against UMC by the US Department of Justice,” UMC said in a press statement.

“As part of the plea agreement, DOJ agreed to dismiss the original indictment against UMC, including allegations of conspiracy to commit economic espionage and conspiracy to steal multiple trade secrets from Micron, patent-related allegations and alleged damages and penalties of $400 million to $8.75 billion,” UMC said.

Aside from the fine amount, UMC has no further financial obligations to DOJ, the company said.

“This is only one of a number of lawsuits, so I expect for UMC’s and JHICC’s legal issues to continue for some time,” according to Handy.

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