A major Chinese chipmaker is moving forward with a Shanghai listing that will fund a major expansion, after receiving confirmation from US chip toolmakers that they can supply its new production lines.
After months of uncertainty, ChangXin Memory Technologies has been told the chip-making equipment it needs will not be subject to US export controls, according to three people with direct knowledge of the matter.
CXMT was founded seven years ago and is one of Chinathe largest manufacturers of DRam memory chips. It is also the only one capable of producing them at a miniaturization level of less than 20 billionths of a metre. CXMT plans to use American equipment capable of producing less sophisticated chips for phones, servers and electric vehicles, bypassing stringent export requirements for advanced chip tools.
The company was one of several Chinese chipmakers forced to put expansion plans for manufacturing facilities on hold after the United States introduced its own extensive export controls on October 7 last year. Another major Chinese memory chip maker, Yangtze Memory Technologies, has since found workarounds to resume capital spending. Now CXMT, headquartered in the eastern province of Anhui, is extending its growth targets into 2023.
“CXMT has set a very ambitious expansion goal this year despite the downturn in memory chips,” said a person familiar with the situation, adding that its annual capital expenditure would increase by approximately $4 billion in 2023 as increased purchases of chip manufacturing equipment.
“CXMT plans to target more Chinese equipment suppliers for expansion, so capital expenditure can be increased by $5 billion or even more. Testing relatively immature home equipment requires additional money,” said another person familiar with the situation.
To finance this, it is planning an initial public offering on the Shanghai Star board and is in discussions with at least two possible underwriters for the listing, including China’s bank CICC, according to three people familiar with the matter. Listing plans are still in the early stages, so the size and timing of the IPO have not been determined, a banker said.
CXMT and CICC did not respond to requests for comment.
CXMT’s current valuation is well above Rmb100bn ($14.5 billion), based on its technology assets and chip-making capacity, said a banker close to the company. It would be well above a valuation of around RMB72 billion after a round of fundraising in December, according to another person close to CXMT. Current investors in parent company Innotron Memory include Alibaba, a fund controlled by smartphone maker Xiaomi, and the “big fund” for chips — the National Investment Fund for the integrated circuit industry.
The sources of its new US equipment were not disclosed, but Lam Research and KLA, two of the largest US makers of chipmaker tools, recently said the US government had issued a “clarification” that allowed them to increase their sales in China this year. They said the clarification meant they could sell equipment they previously feared could be banned under Oct. 7 export controls.
Doug Bettinger, LAM’s chief financial officer, said in a recent earnings release that the hike would be worth “a few hundred million dollars.”
On KLA’s latest earnings call, Bren Higgins, chief financial officer, said the clarification would create “some incremental opportunities to support some of the older generation memory devices in China.” He said the additional sales would exceed $200 million.
Neither company provided details on which Chinese company would account for the additional sales. But one person familiar with the situation said the “clarification” would allow them to sell instruments to CXMT.
Another person said the Commerce Department’s “clarification” didn’t change the parameters of the Oct. 7 checks, but it did outline the correct method companies should use to calculate the nanometer level of their customers’ chips.
China feels less vulnerable about its access to memory chips, which are commoditized products dominated by non-US suppliers. In April, regulators initiated a cyber security review of technology from US memory chip maker Micron, a move widely seen as Beijing’s first retaliatory action against Washington’s measures to prevent China from developing cutting-edge chips.
Industry experts said the investigation would prompt Micron’s Chinese customers to find alternative suppliers, but CXMT’s products were not ready substitutes.
“CXMT is about eight years behind Micron,” said a semiconductor consultant in China who declined to be named. “It’s four generations behind Micron and doesn’t have a clear path to catch up.”
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