Chinese memory chip manufacturer ChangXin Memory Technologies (CXMT) has seized newfound pricing power amid a global supply scramble, hiking costs for major tech firms like Huawei and securing a multi-billion dollar deal with TikTok owner ByteDance, according to sources familiar with the matter. The shift highlights a dramatic turnaround for domestic semiconductor firms once reliant on state funding and low-margin production, even as their market dominance places them on a collision course with Washington regulators.
CXMT-Huawei Standoff Over Pricing and R&D Access
For months, CXMT steadily increased prices on Huawei, one of China’s largest technology companies, while holding firm when Huawei demanded relief from the escalating costs, according to two people familiar with the situation. The pricing dispute boiled over in June on CXMT’s factory floor in Hefei, Anhui province. CXMT abruptly ordered a group of engineers from SiCarrier—a chipmaking-equipment vendor with deep strategic ties to Huawei—to pack their tools and leave the company’s core research and development cleanrooms, the sources said. Executives at SiCarrier concluded the confrontation stemmed from a broader power struggle between CXMT and Huawei. While the companies still conduct business, the engineers have not been allowed back into the R&D zone.
Surging Demand and Blockbuster Deals With ByteDance and Tencent
Global demand for artificial intelligence data centers has transformed memory chips from low-margin components into highly sought-after products, allowing Chinese manufacturers to dictate prices and select clients. According to four sources, CXMT and flash-memory counterpart Yangtze Memory Technologies Corp (YMTC) are in some cases charging more than larger South Korean rivals Samsung and SK Hynix. Capitalizing on this momentum, CXMT signed a five-year agreement with ByteDance worth more than $7 billion, three people familiar with the arrangement said. The deal follows a separate June agreement between CXMT and Tencent worth over $3 billion.
Did you know? CXMT’s revenue surged by 719% year-over-year in the first quarter, reaching $7.5 billion and erasing a decade of losses in just six months ahead of its planned $8.6 billion initial public offering in Shanghai.
U.S. Scrutiny and Trade Restrictions on Chinese Memory Makers
The growing grip on chip supply by CXMT and YMTC has drawn intense scrutiny from the United States. The Pentagon has designated both firms as Chinese military companies due to their alleged role in supporting Beijing’s military-civil fusion strategy, a charge both companies deny. YMTC already sits on the U.S. Entity List, restricting its access to American-origin tools and software. Meanwhile, Apple has argued that it needs Chinese memory supplies and sought assurances that CXMT will not be added to the trade blacklist, two sources reported. Conversely, Micron, the main Western competitor to the Chinese firms, has lobbied U.S. lawmakers to enact stricter equipment curbs on both companies.
Manufacturing Expansion and Technical Constraints
Despite geopolitical pressure, both Chinese chipmakers are pushing ahead with major production expansions. CXMT is building two new plants in Shanghai and Hefei and discussing a third with local authorities, aiming to more than double production capacity to over 600,000 wafers per month by 2030, which would surpass Micron’s output. However, significant technical hurdles remain. Both companies rely heavily on deep ultraviolet lithography machines from Dutch giant ASML. According to analyst Ray Wang at research firm SemiAnalysis, further restrictions on lithography equipment would present the biggest challenge for Chinese memory makers, as CXMT remains two generations behind its rivals in producing ultrafast high-bandwidth memory for AI.
Frequently Asked Questions
Why are Chinese memory chip makers raising prices?
Driven by skyrocketing global demand for AI data centers, companies like CXMT and YMTC have gained significant pricing power, allowing them to dictate terms and sometimes charge higher prices than established South Korean and American competitors.
What is the relationship between CXMT and Huawei?
CXMT and Huawei have experienced friction over rising component costs. The tension peaked in June when CXMT expelled Huawei-linked SiCarrier engineers from its R&D cleanrooms in Hefei following a price dispute.
Are CXMT and YMTC publicly traded?
CXMT is launching an $8.6 billion initial public offering in Shanghai, while YMTC is also preparing for a public listing with internal executives pushing for a 1 trillion yuan valuation target.
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