French economist: Chinese memory chip makers are becoming a disruptive force

Economists at the French bank for foreign trade (Natixis) said Wednesday that despite the global semiconductor shortage, China’s goal of self-sufficiency is increasingly difficult to achieve. But Chinese memory chip makers are entering the low-end market, and become the new disruptive force.

French economist: Chinese memory chip makers are becoming a disruptive force

Changjiang Storage (YTMC) and Changxin Storage (CXMT) represent a new disruptive force in the chip industry and are expected to help increase global chip capacity by 29 percent between 2020 and 2022, said Gary Ng, Asia-Pacific economist at France’s Banque du Commerce, in a virtual conference call.

Wu Zhuoyin said, “Despite the very low base, many mainland Chinese companies are likely to put pressure on the market leaders.” The expansion of Chinese memory chip makers at the lower end of the market could put pressure on suppliers to the memory chip industry, driving prices down, he added.

China has set an ambitious goal of achieving 70 percent self-sufficiency in semiconductor production by 2025. China’s self-sufficiency efforts in the technology sector have intensified as competition in the sector continues to grow, giving domestic suppliers with relatively weak technology a greater chance of being noticed in procurement.

Against the backdrop of a global semiconductor crisis that continues to have a major impact on the automotive industry and other sectors, major global economies, including China, the U.S. and the European Union, are planning major investments to boost the semiconductor industry.

However, Wu Zhuoyin said, because the current semiconductor industry depends on the global supply chain established over the years, it is almost impossible for any single country to achieve complete self-sufficiency. Global research and advisory firm Gartner predicted in a report last month that the global chip supply shortage could last until the second quarter of 2022 as foundry capacity continues to tighten.

Gartner principal research analyst Kaneshka Chahan (Kanishka Chauhan) said: “Semiconductor shortages will seriously disrupt the supply chain and will constrain the production of many electronic devices in 2021. Foundries are raising wafer prices, and in turn chip companies are raising device prices.”

However, although chip supply shortages have hit some industries hard, the crisis has also helped global foundries grow revenues significantly. Market research firm TrendForce said in a recent report that the total revenue of the top 10 foundries hit a record high in the first quarter of this year due to soaring demand for a variety of end devices.

Chip foundry giants like TSMC have begun to cope with the shortage by increasing capacity, but that could lead to overcapacity in the future, especially as domestic companies are making rapid progress in low-end memory chip production. Wu Zhuoyin said, “There may be a time when supply exceeds demand, which could then raise the question of whether there are too many chips in the world.”

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