A new report from Dylan Patel of SemiAnalysis paints a picture of a NAND chip market over which Chinese chipmakers like YMTC are poised to grab massive market share. Over the past few years, the NAND chip market has enjoyed explosive growth, with Patel writing that “the number of bits of NAND manufactured and shipped has grown at a pace of 30% to 35% every year.”
Earlier this month, YMTC announced the ability to develop 232-layer chips, a major technological breakthrough that puts it on par with rival global leaders. Writes Patel,
“YMTC is not just a copycat with trailing edge technology like many erroneously perceive Chinese semiconductor companies on the leading edge. They are building their own innovative and unique product. While they rely heavily on the over 24 billion dollars of government subsidies, process tools from Lam Research, and licenses of critical technology from Adeia (Xperi), they are running ahead of other players in NAND with homegrown innovation…They will structurally change the NAND industry.”
YMTC’s potential dominance of the chip market portends a host of adverse security and economic consequences for the American people. An increasing number of national security leaders are publicly pressing the Commerce Department to put Chinese military-linked chipmaker YMTC on the Entity list. That move would prohibit U.S. firms from selling high-tech tools to YMTC – a much-needed step to protect Americans’ privacy and national security. Instead, the Commerce Department has done nothing, allowing YMTC to achieve a serious technological breakthrough in the meantime.
Commerce’s refusal to institute export controls targeting Chinese military linked chipmakers reflects its broad lackadaisical attitude toward safeguarding American technology from Chinese misuse. That’s the takeaway from a Wall Street Journal story this week. In 2021, the Department approved 88% of applications for technology exports to China. Nor does that extremely high figure take into account the number of applications “returned without action,” meaning an uncertain outcome.
Former Deputy National Security Advisor Matt Pottinger has noted the problem of competing interests within the federal government. He told the Journal that the Bureau of Industry and Security (BIS), “has struggled to reconcile its mission to protect U.S. national security with the Commerce Department’s objective of promoting U.S. exports. The dilemma is most acute when it comes to China.”
An especially chilling piece of data from the Journal story also exposes how little the Commerce Department has spent tackling the China problem: “Kharon, a Washington, D.C.-based research and data-analytics firm, said it has identified tens of thousands of Chinese entities that may meet the U.S. criteria for military end-user export restrictions, even though there are only roughly 70 on the Commerce Department’s current list.”
BIS must lead within the federal government on being a force to ensure America’s national security. It must stop caving to industry pressure. And it must institute meaningful export controls targeting YMTC and another rising Chinese chipmaker, CXMT, which also maintains known ties to the Chinese military. Any future inaction will extend the Department’s track record of putting profits over national security.