Although Unisplendour, the Hong Kong-based subsidiary of Chinese technology conglomerate Tsinghua Unigroup, terminated their investment plan in Western Digital last week.
The multiple bids Tsinghua made in the global memory market continues to make Tsinghua a star in the semiconductor industry. Given the fact that in 2015, China consumed $12 billion worth of DRAM and $6.67 billion worth of NANAD Flash, representing 21.6% and 29.1% of the global DRAM and NAND Flash industries’ total revenues, respectively, Tsinghua’s strategy in the memory market is not a surprise at all.
In Made in China 2025, a 10 year initiative to comprehensively upgrade the Chinese industry published in 2015, puts memory products, including DRAM, eDRAM, Flash, and V-NAND Flash as one of the strategic focuses of the semiconductor technologies. The initiative also outlined that China is aiming to self support 70% of its IC market by 2025. The key position of memory, especially the high capacity ones, in new technology such as big data within the Internet of Things (IoT) definitely attracts interests from the Chinese government. With no established domestic memory manufactures and almost 100% dependence on importing, memory chips are a critical commodity for Beijing’s plan to localize semiconductor production.
It is not easy to get into the memory market and build a infrastructure to support the supply chain. Over the years, China’s strategy in developing its memory industry has become more sophisticated and consists of the three main approaches:
1. International acquisitions and investments In addition to the Tsinghua group, a few other Chinese venture groups have been active buying stocks in the global semiconductor market. Some are state supported, such as Tsinghua Group, some are private capital. This “buying everything” approach is quick, easy, and effective. However, it also comes with resistance from foreign governments since some chip is used in sophisticated electronics. This includes military applications like missile systems that are related to national security directly. Based on these reasons, the United States government blocked a $2.9 billion deal from Chinese investors GO Scale Capital and GSR Ventures buying a unit of Philips.
2. Expansion of international memory manufacturers and extension of international corporations across verticals Taking advantage of China’s low labor cost, many international memory manufactures have set up factories in China. Among them, Samsung might be the one with the most progressive development plan. They are expanding their Xi’an fab by raising the capacity to full this year to capture more SSD market share. Intel will begin producing 3D-NAND Flash chips in their Dalian fab in 2017. Longsys, a Shenzhen-based company focused on NAND Flash recently joined a strategic relationship with Marvell, a major supplier of controller chips, to set up a production line for SSDs at its plant in Suzhou. Marvell will provide its controller chip to allow Longsys to develop and implement algorithms and protocols. These expansions in investment and international cooperation will definitely help China to put its name in memory supply chain and market and help Chinese companies develop memory chip technology.
3. Support domestic companies to develop technologies Another approach is to support domestic companies research and develop their own NAND Flash technology with funding and favorable policies. Semiconductor Manufacturing International Corporation (SMIC) and XMC are the two more famous companies with aggressive investment in R&D and maturing technology. In addition, there are a handful of smaller companies with their own NAND technologies:
Sage Microelectronics: Based in Hangzhou, Sage Microelectronics acquired the U.S. based bridging chip marker Initio for crucial interface technologies. Now they are one of the leading NAND companies in China, offering enterprise products with SATA2.0 interface and military-grade storage solutions.
Shandong Huaxin: SSD supplier that specializes in Storage solutions for data security. In 2015, their controller chips passed tests conducted by China’s State Commercial Cryptography Administration (OSCCA), setting them in a leading position in this market. They offer complete SSD solutions using SATA 3.0 interface and are compliant with the national encryption standard for businesses, government agencies, energy industry, and defense industry.
Memblaze: Headquartered in Beijing, Memblaze is one of the hottest investments targeting the NAND Flash industry. Their PBlaze 3 series has exceptional IOPS performance and their PBlaze 4 series has also helped Memblaze establish their position in the large-scale data center market. They are also one of few domestic manufactures that can use NVMe controller to develop data protection and encryption software for products.
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