China’s Making Memory with its New Biggest Company

China’s most valuable publicly listed company isn’t Alibaba or Foxconn or, as of yesterday, not even Tencent. Instead, it’s a stock market newcomer everyone is furiously Googling to find out more about. 

Changxin Technology Group, or CXMT for short, soared 466% in its debut yesterday on Shanghai’s STAR Market. The company raised $8.6 billion in its IPO and its market cap surged above Tencent, an internet company known for mobile games including “Honor of Kings.” 

CXMT plans to put the fresh capital to work ramping up production of its specialty: DRAM chips. 

Not So Random

Dynamic Random Access Memory (DRAM) is in high demand. AI taps loads of DRAM, and the AI boom has created a supply crunch for the DRAM chips that data centers (and phones and computers) rely on. Tech makers including Apple, Google and Nintendo have raised prices on their devices to account for the memory crunch. Gartner expects the combined price of DRAM and SSD (solid-state drive) to jump 130% by the end of this year, lifting PC prices 17% and smartphone prices 13%. 

DRAM is dominated by three players, which together control about 90% of the global market: Samsung and SK Hynix, both hailing from South Korea, and the US’s own Micron. SK Hynix less than three weeks ago demonstrated investors’ demand for memory-chip stocks, when its blockbuster US IPO became the largest-ever by a non-US company. But there could be room for a new player:

• CXMT’s revenue jumped from less than $1 billion in the first quarter of last year to more than $7 billion the same time a year later. The company’s market share is on a path to grow from 9% this year to 12% next year, SemiAnalysis predicted. Also, Apple is said to have asked the White House for permission to use CXMT’s chips, an exception that could speed up its market takeover. 
• A barrier for CXMT is that it’s on the Pentagon’s blacklist as a national security threat. Micron, which has a clear stake in the game, has contended that letting in Chinese DRAM would hurt the domestic market. But tech companies are seeking out cheaper sources of the highly-constricted memory because until they find some, prices will be passed down to US consumers. 

Home and Away Game: CXMT has struggled to overcome US export controls when it comes to competing in the global market. Back home in China meanwhile, another chipmaker is hot on CXMT’s tail: Yangtze Memory Technologies, or YMTC. The company is hatching its own plan to go public and is reportedly targeting a 1 trillion yuan (about $148 billion) valuation. Both of the Chinese memory-makers, dubbed the “twin stars” of memory in their home country, are rapidly expanding capacity.