Three firms dominate the memory market. Is CXMT about to change that?

On July 27, Changxin Memory Technologies (CXMT) made its debut on the Shanghai Stock Exchange's Star Market, marking the largest listing in the tech-heavy segment. The company's share price soared by up to 476% during intraday trading, surpassing the initial public offering price. CXMT's market capitalization reached an impressive 3.14 trillion yuan, surpassing the Industrial and Commercial Bank of China for the top spot in China's market.

This significant achievement highlights the growing influence of China's semiconductor industry, particularly in the wake of Beijing's trade dispute with Washington.

China's semiconductor sector has experienced a major policy shift following its trade conflict with the United States. Initially seeking to produce world-class chipmakers through policy support for leading companies, Beijing now emphasizes reconnecting the semiconductor ecosystem and developing leading companies through a market-centric approach.

This shift was prompted by the breakdown of China's flagship support policy, the China Integrated Circuit Industry Investment Fund (Big Fund), which was established to bolster chip self-sufficiency.

The Big Fund, launched in 2014, was initially worth US$21 billion in its first phase and US$29 billion in its second phase in 2019. It provided substantial financial backing to Chinese semiconductor companies, including SMIC, Yangtze Memory Technologies Co. (YMTC), CXMT, and HiSilicon. However, the policy's failure became evident with the HSMC scandal, where a fraudulent company, Wuhan Hongxin Semiconductor Manufacturing Company, issued a US$18.5 billion investment plan to establish 14- and 7-nanometer manufacturing processes.

The fraud ultimately led to the exposure of corruption and structural fraud, resulting in a lawsuit and the loss of US$2.3 billion in public funds.

Despite the setback, CXMT has emerged as a prominent player in the DRAM market. Its founder, Zhu Yiming, a former Tsinghua University physics graduate, studied in the United States and gained valuable experience in Silicon Valley's semiconductor industry. After working at an American cybersecurity company, Zhu returned to China and established GigaDevice, which grew to become the world's third-largest manufacturer of NOR flash memory.

To bolster China's self-reliance in DRAM, Zhu partnered with the Hefei municipal government to launch "Project 506," a manufacturing project that heavily relies on Western technology and long-term government investment. CXMT's model demonstrates the blending of Western technology and local government support to propel China's semiconductor sector forward.