Devices are growing more expensive. Will China's memory chips help?

A company carrying China's hopes of securing its own artificial intelligence memory chip supply could help ease overseas data centre-driven shortages that are pushing up the cost of everyday devices.CXMT has become mainland China's most valuable company at more than $US500 billion ($717 billion) in a stock market debut on Monday that the manufacturer hopes will let it ramp up production.Memory prices for consumer devices have soared as manufacturers focus on supplying more advanced chips for the AI industry's data centre boom.The shortage of chips for everyday devices has been nicknamed "RAMageddon".CXMT is China's leading manufacturer of memory chips. (AFP: Pedro Pardo)"Shortages in … memory have become more difficult to resolve quickly," said Ellie Wang, an analyst at tech industry intelligence firm TrendForce."This is also why more consumer electronics companies are considering CXMT as an additional supplier."Tech companies including Dell, HP and Apple have reportedly been testing CXMT memory chips as they look for other sources of supply."The appeal for CXMT chips is price," said Sue Keay, director of the University of New South Wales's AI Institute.It could give Apple leverage over the dominant suppliers Samsung, SK Hynix and Micron, and help it hedge against further shortage-driven price rises, experts say.However, they warn that if CXMT eases the strain in supply it would not necessarily make consumer devices nor memory chips cheaper.Why is CXMT so important to China?The AI boom needs memory chips, called Dynamic Random Access Memory (DRAM), for models such as ChatGPT and Claude to store information and perform their calculations.But the race to build data centres is straining supply of memory, and the United States has imposed export controls against China buying advanced chips as the countries compete in developing the technology.CXMT, or ChangXin Memory Technologies, was a "key pillar" of China's ambition to build a self-sufficient chip industry, Dr Keay said."CXMT will allow China to reduce dependency on Korea and the US," she said.Since starting 10 years ago, and with backing from state-owned shareholders, it has emerged as the world's fourth-largest producer of DRAM chips with about 8 per cent market share.That is behind South Korean companies Samsung Electronics and SK Hynix, which account for 36 per cent and 29 per cent, and US firm Micron (24 per cent), according to Counterpoint Research.CXMT's customers include Chinese smartphone, PC and server manufacturers.In 2024 it met only 20 per cent of domestic chip demand but aimed to supply more than two-thirds of the local market in the future, said MS Hwang, research director at Counterpoint Research.The company's stock market debut has been described as a test of whether China can build a competitive domestic chip producer in a sector largely dominated by foreign firms.Its shares boomed more than 500 per cent on Monday as it surpassed the Industrial and Commercial Bank of China (ICBC) as mainland China's most valuable listed company.What does it mean for China's AI race?CXMT made its stock market debut as it was transitioning away from being a purely domestic player, according to Mr Hwang.While CXMT is competitive in making mainstream memory chips used in consumer devices, it lags in the advanced High Bandwidth Memory (HBM) chips that are another important component in AI data centres.CXMT hopes to catch up in the production of HBM chips. (Reuters: Carlos Barria)The company is seen as China's best shot at developing its own cutting-edge HBM chips to power Chinese AI models, Brookings Institution expert Kyle Chan told the Associated Press news agency.Mr Hwang said the company aimed to leapfrog competitors by adopting next-generation technologies that would create more powerful advanced memory chips."Although CXMT currently lags in HBM, it is positioned to start catching up by late 2026," he told the ABC."CXMT's next strategic road map includes supplying HBM within China starting in 2027."Will it end shortages and high prices?Dr Keay said as Samsung, SK Hynix and Micron focused on producing HBM to feed the AI data centre boom, CXMT would help meet the supply gap in chips for consumer devices — if it continued to focus on conventional memory.American tech firms HP and Dell have shown interest in CXMT's DRAM chips, while the Financial Times has reported Apple has begun testing them for devices sold in China and is lobbying the US government for clearance to buy them.Western tech companies have been testing CXMT's chips. (AFP: Pedro Pardo)However, there was a political complication as the Pentagon had added CXMT to a list of companies with alleged links to the Chinese military, said Dr Keay."So any deal carries real geopolitical risk for Apple," she said.The ABC approached CXMT and Apple for comment.Mr Hwang said it was a "highly plausible scenario" that CXMT's market debut and plans would lead to cheaper technology in Australia and other Western countries."This new fourth major player has made a powerful [stock market] debut," he said."As competition intensifies around capacity expansion, CXMT's market presence will serve as a critical driver for lowering global memory prices in the future."However, other experts said that even if CXMT ramped up production, and Apple and other international brands adopted its chips, it would not mean cheaper consumer electronics in Australia any time soon."CXMT is unlikely to flood the market with cheap chips because its output is largely pre-committed, mostly to Chinese customers," Dr Keay said."It looks like Apple's first potential use of CXMT chips would be focused on devices for the Chinese market."Apple is reportedly testing CXMT's memory chips as it looks for other sources of supply. (Reuters: Mike Segar)Ms Wang, from TrendForce, said CXMT's initial public offering would help it expand production capacity and invest in technology."However, new memory capacity typically takes at least a year to translate into meaningful supply, so it is unlikely to provide immediate relief from the current shortage," she said."Over the medium to long term, CXMT's capacity expansion could increase the supply of mainstream and consumer DRAM while making the global memory supply base more diversified."This should help improve the supply-demand balance and limit excessive price increases, although it may not necessarily lead to an outright decline in memory prices."ABC with wires