U.S. considers crackdown on memory chip makers in China

WASHINGTON, Aug 1 (Reuters) – The United States is considering limiting shipments of American chipmaking equipment to memory chip makers in China including Yangtze Memory Technologies Co Ltd (YMTC), according to four people familiar with the matter, part of a bid to halt China’s semiconductor sector advances and protect U.S. companies.

If President Joe Biden’s administration proceeds with the move, it could also hurt South Korean memory chip juggernauts Samsung Electronics Co Ltd (005930.KS) and SK Hynix Inc (000660.KS), the sources said, speaking on condition of anonymity. Samsung has two big factories in China while SK Hynix Inc is buying Intel Corp’s (INTC.O) NAND flash memory chips manufacturing business in China.

The crackdown, if approved, would involve barring the shipment of U.S. chipmaking equipment to factories in China that manufacture advanced NAND chips.

It would mark the first U.S. bid through export controls to target Chinese production of memory chips without specialized military applications, representing a more expansive view of American national security, according to export control experts.

The move also would seek to protect the only U.S. memory chip producers, Western Digital Corp (WDC.O) and Micron Technology Inc (MU.O), which together represent about a quarter of the NAND chips market.

NAND chips store data in devices such as smartphones and personal computers and at data centers for the likes of Amazon (AMZN.O), Facebook and Google (GOOGL.O). How many gigabytes of data a phone or laptop can hold is determined by how many NAND chips it includes and how advanced they are.

    Under the action being considered, U.S. officials would ban the export of tools to China used to make NAND chips with more than 128 layers, according to two of the sources. LAM Research Corp (LRCX.O) and Applied Materials (AMAT.O), both based in Silicon Valley, are the primary suppliers of such tools.

All the sources described the administration’s consideration of the matter as in the early stages, with no proposed regulations yet drafted.

Asked to comment on the possible move, a spokesperson for the Commerce Department, which oversees export controls, did not discuss potential restrictions but noted that “the Biden administration is focused on impairing (China’s) efforts to manufacture advanced semiconductors to address significant national security risks to the United States.”

FAST-GROWING COMPANY

YMTC, founded in 2016, is a rising power in manufacturing NAND chips. Micron and Western Digital are under pressure from YMTC’s low prices, as the White House wrote in a June 2021 report. YMTC’s expansion and low-price offerings present “a direct threat” to Micron and Western Digital, that report said. The report described YMTC as China’s “national champion” and the recipient of some $24 billion in Chinese subsidies.

YMTC, already under investigation by the Commerce Department over whether it…