China's largest DRAM manufacturer, Changxin Memory Technologies (CXMT), reported nearly a tenfold increase in revenue for the first half of the year, returning to a profit of 16 trillion won. This surge is attributed to a spike in memory demand driven by the artificial intelligence (AI) industry, coupled with a global shortage of DRAM and soaring prices.
Since its listing on the Shanghai Stock Exchange last month, CXMT's market capitalization has soared to 815 trillion won, making it the top AI stock in China. Morgan Stanley predicts that the company's annual revenue could approach 80 trillion won this year. In response to the U.S. Department of Defense's designation of it as a 'Chinese military enterprise,' CXMT has launched a legal challenge. Just a few years ago, the Chinese memory firm was a latecomer in the industry, but it is now making its presence felt in both the capital markets and international politics.
However, the technology gap remains pronounced. Goldman Sachs and UBS estimate that CXMT lags 2 to 3 generations behind Samsung Electronics and SK Hynix, with production efficiency per wafer reportedly at only a quarter of Micron's level.
While Samsung and SK Hynix focus on 1b (12-13 nanometer) processes and prepare to transition to 1c processes by the end of 2027, CXMT is expected to remain at the 1x process level during that time, indicating a potential lag of nearly five generations. Omdia forecasts that CXMT's market share based on shipments will struggle to exceed 7% by 2027. Such figures might suggest a sense of relief, indicating that 'things are still manageable.'
However, the real threat posed by CXMT's recent performance lies not in cutting-edge technology but in volume. As demand for memory driven by AI surges and supply remains constrained, China is aggressively increasing its market share in the general DRAM sector. The fact that CXMT is several generations behind in advanced processes does not shield it from the low-cost, high-volume onslaught occurring in the legacy semiconductor market.
Moreover, considering the explosive popularity of AI developed in China within cost-sensitive corporate markets, this threat feels even more pronounced.
History tends to repeat itself. The paradox of a significant gap may delay the recognition of impending crises. South Korea, too, built its capabilities when the U.S. and Japan dominated the semiconductor market. Currently, there is no competitor that surpasses our companies in memory semiconductors.
However, there is no such thing as an eternal technological gap. Pursuers have always gained strength by encroaching on lagging areas of the market, a long-standing trend in the semiconductor industry.
In this context, the recent controversy over performance bonuses and demands for profit-sharing within the domestic semiconductor industry feels particularly bitter. As the semiconductor boom continues, negotiations between labor and management over the size of bonuses and the introduction of profit-sharing systems are recurring annually. While it is natural to reward efforts during prosperous times, now is not the time to focus solely on sharing the fruits of labor.
With a powerful pursuer like China, backed by the strength of capital markets, closing in, the gap can narrow rapidly if our companies become complacent and open their coffers.
Ultimately, there is only one answer. The only survival strategy is to maintain a technological edge. We must advance beyond 1b to 1c processes and continue to expand our technological superiority in high-value areas such as advanced fine processes and high-bandwidth memory (HBM). It is inevitable to choose and concentrate on widening the gap in advanced areas, even if it means conceding some ground in legacy sectors.
The profits earned now should not be used for distribution but should serve as reinvestment capital for next-generation processes and research and development. Before engaging in debates over profit distribution, all stakeholders—businesses, government, and labor unions—must reflect on how critical the current period is.
* This article has been translated by AI.
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