The Chinese semiconductor sector is expected to establish a significant presence in the global NAND flash market over the next two to three years, according to TrendForce. The charge is being led by the Tsinghua Unigroup, which has made significant investments in NAND flash manufacturers over the past year.
DRAMeXchange, a division of TrendForce, recently reported that China will gobble up about $12 billion of DRAM and $6.67 billion of NAND flash in 2015, accounting for 21.6 percent and 29.1 percent of the global DRAM and NAND flash industries’ total revenues, respectively.
“In the NAND Flash market, demand growth is strong in various related applications as the 15nm and 16nm processes have become the industry’s mainstream technologies and the development of 3D-NAND Flash is advancing rapidly,” said Avril Wu, assistant vice president at DRAMeXchange, in a press release. “The SSD application currently leads in NAND Flash demand, and the penetration of SSDs in notebooks is also climbing rapidly. Another demand driver comes from smartphone eMMCs, which have seen a sharp increase in their densities as well.”
Wu believes that obtaining cutting-edge technologies is not the top priority for Chinese memory makers, and said their first step is to “have the capabilities to design, produce and sell their own products,” which will help create a vertically integrated supply chain within China.
Despite the current oversupply situation in the NAND flash market, which is expected to continue into the first quarter of 2016, the Chinese government continues to expand its development of domestic supply chains for NAND flash and SSDs, according to Sean Yang, assistant vice president of DrameXchange, a division of TrendForce.
Some of the biggest advances cited by Yang include Chinese memory module maker Netcom’s collaboration with U.S.-based controller chip designer Marvell, and XMC’s recent efforts in developing its own 3D-NAND Flash technology. “The Chinese government is also eagerly courting major international memory suppliers such as Samsung, which plans to raise its Xian fab’s capacity to 100,000 wafer starts per month in 2016,” stated Yang in a release. In addition, Intel’s conversion of its Dalian fab in the first half of 2016 is expected to boost the Chinese NAND flash market.
“NAND Flash is certain to become the core technology in the development of the storage and memory industries in the near future as the number of consumer electronic products carry SSDs and eMMCs increases,” Yang added. “TrendForce expects that the Chinese semiconductor sector will latch on to this trend and gradually establish a substantial presence in the global NAND Flash production in the next two to three years.”
Here is Yang’s insight into China’s five approaches to its NAND flash strategy.
- Expansion of investments in China by major international NAND Flash manufacturers: Among international NAND Flash suppliers, Samsung has made the most progress developing the Chinese market. The company has rapidly gained share in the global SSD market with products carrying 3D-NAND Flash chips made in its Xian fab. With this success, Samsung plans to further raise the capacity of Xian fab and anticipates the production facility to be operating at its fullest capacity by the first phase of expansion next year. Intel too will begin producing 3D-NAND Flash chips in the second half of next year at its Dalian fab, which being converted from a processor fab to a memory fab.
- Filling of the capability gaps via acquisitions and investments: With the most aggressive record, Tsinghua Unigroup has become a prominent example of the surge in Chinese deal-making in the semiconductor sector. With a majority stake in Western Digital (WD), Tsinghua Unigroup will be able to indirectly take part in the NAND Flash industry from SanDisk’s merger with WD. The Chinese conglomerate also announced a deal to buy 25% of Powertech on October 30. By becoming Powertech’s largest shareholder, Tsinghua Unigroup will obtain crucial technologies and resources for the packaging and testing of memory products.
- Support for the development of domestic NAND Flash technologies: Major Chinese foundries, Semiconductor Manufacturing International Corporation (SMIC) and XMC, are currently the most proactive among their domestic peers; and their respective technologies, products and strategies are steadily maturing. XMC in particular is poised to create an impact in the NAND Flash industry in the next two to three years as it is working on the advanced 3D-NAND Flash.
- Integration of NAND Flash controller supply chain: Development of controller chips and firmware will be very important for the Chinese storage industry. These components have to meet the national standard on information security that was clearly established for the industry. The technical capabilities of Chinese controller chip manufacturers have advanced to a certain level with the takeoff of the domestic market and are rapidly gaining international visibility.
- Acceleration of vertical integration within the industry: A noteworthy example is the strategic partnership between Chinese memory module maker Netcom and Marvell, a major supplier of controller chips. As a fabless IC design house seeking to develop the Chinese SSD market, Marvell will take advantage of Netcom’s complete production chain in Suzhou. Such cross-industry alliances will strengthen the links among suppliers at different levels, allowing them to specialize and maximize their profits.