The Most Dangerous Chinese Company You Haven’t Heard Of

While Chinese companies like Huawei and TikTok have grabbed headlines for threatening American national security and data privacy, the Chinese chipmaker CXMT is less well-known. That doesn’t make it any less dangerous.

Founded in 2016, Changxin Memory Technologies (CXMT) was created as a “pilot demonstration” of the Made in China 2025 initiative – the Chinese government’s effort to make China the world leader in high-tech manufacturing. Like fellow would-be state champion chipmakers SMIC and YMTC, CXMT is awash in Chinese subsidies. The company’s strategy relies on IP theft to close ground against competitors.  It also has multiple business leaders also serving in important Communist Party roles and connections to the PLA.

As China’s largest maker of DRAM (dynamic random-access memory) chips, CXMT’s great ambition is to meet half of the world’s global DRAM demand – the memory used in almost all electronic devices. The company is preparing to ramp up output to approximately 120,000 wafers per month, on its way to 300,000 in the medium to long term. Those levels are still far behind the combined output of industry competitors like Samsung, SK Hynix, and Micron totaling millions of chips per month. But CXMT has made great strides in demonstrating the ability to scale wafer production, and it may have already produced advanced 17nm chips which it has developed in house. Turning CXMT into a national champion is a five- or ten-year project.

The danger from CXMT is the same as it is from other Chinese chipmakers – the Chinese government aims to dominate various segments of the global chip market. By pumping subsidies into various Chinese companies, it hopes to undercut prices and seize market share. Letting CXMT dominate the production of the basic memory chips found in billions of devices would create supply chain vulnerabilities, threaten the health of Micron (probably the sole American DRAM chipmaker), and give the Chinese government another avenue by which it can infiltrate Americans’ networks and devices. At that point the Chinese government can accomplish theft, sabotage, and surveillance. No American should feel comfortable at the idea of a home full of internet-connected products using CXMT chips.

The federal government has the power to stop CXMT. Right now CXMT still relies on equipment from American semiconductor equipment manufacturers like Applied Materials, Lam Research, and KLA Corporation. In May, The Information reported that the Commerce Department’s Bureau of Industry and Security (BIS) is planning to ban exports of chipmaking tools to YMTC and CXMT. The federal government’s delay in implementing those restrictions has already harmed America. Earlier this month, YMTC debuted a 232-layer memory chip, showcasing cutting-edge technology that was made with American know-how. Any export controls targeting YTMC are now too little, too late.

With CXMT still in its infancy, the Commerce Department shouldn’t make the same mistake it did with YMTC and dither on restrictions while the company achieves technological breakthroughs. CXMT – and YMTC – need to join SMIC on the Entity List.