August 29, 2019

China Supply Chain - NAND Memory

000660 KS, 005930 KS
By Van Tran
Production of Yangtze’s 64-layer TLC process could be delayed further into 2020 because of technical problems.

Background: The Chinese government announced the “Made in China 2025” blueprint in 2015 to transition China to self-sufficiency in high-tech industries. One of the sectors targeted was semiconductors and NAND memory.

Yangtze Delaying 64-layer TLC Production
As discussed in OTR Global’s Feb. 11 note, Yangtze Memory Technologies Co. Ltd. (YMT) had originally planned to ramp production of 64-layer tri-level cell (TLC) by the end of 2019, with delivery to customers by early 2020. However, two sources have said that because of technical bottlenecks and low yields, mass production will not begin until early 2020, with customer delivery by mid-2020. The delay puts Yangtze even further behind Samsung Electronics Co. Ltd. (005930 KS), LG Display Co. Ltd. (034220 KS) and SK Hynix Inc.’s (000660 KS) and Toshiba Corp.’s (6502 JP) Toshiba Memory.

Supply chain sources also said YMT will begin supplying first-time customers HP Inc. and Lenovo Group Ltd. (992 HK) with low-density 32 GB and 128 GB SSD, with shipments expected to begin by 1Q20. Yangtze’s low-density 64 GB and 128 GB SSD’s are mainly used for Microsoft Corp.’s low-cost OPP (Open Price Program) for student users, installed with very low-cost desktops or notebooks that require minimal hardware specifications. Yangtze’s 32 GB SSD’s are used for basic boot drive function for lower-cost OPP machines.

The initial orders for the two PC vendors are expected to be fabricated on Yangtze’s 32-layer multi-level cell (MLC), which is an older and more expensive manufacturing process for NAND flash memory.

As addressed in the Feb. 11 note, Yangtze continues to lag competitors at the 96- and 128-layer process level. One source speculated that HP and Lenovo are buying from Yangtze at a substantial discount, since it is difficult to source from leading vendors such as Samsung, Toshiba Memory and others, who have cut back production of lower-than-128 GB NAND densities to focus on 256 GB or higher densities on the 96-layer TLC process.

Sources expect Yangtze’s NAND to begin mass shipments to local server OEMs such as Inspur Software Co. Ltd. (600756 CH) and hyperscale data customers such as Baidu Inc. in mid-2020, when Yangtze’s 64-layer TLC NAND are expected ready for shipment.

OTR Global’s 3D NAND Manufacturing Process by Vendor (Feb. 11 note)
Samsung Electronics Co. Ltd.92-layer TLC 128-layer TLC
Toshiba Memory96-layer TLC 128-layer TLC
Western Digital Corp.96-layer TLC 128-layer TLC
Micron Technology Inc.64-layer TLC96-layer TLC128-layer TLC
SK Hynix Inc.72-layer TLC96-layer TLC128-layer TLC
Intel Corp.64-layer TLC96-layer TLC128-layer TLC
Yangtze32-layer MLC 64-layer TLC*
Data compiled from aggregated interviews with supply chain sources. Yangtze’s64-layer TLC shipment to customers delayed to mid-2020 from previous expectation of early 2020 (Feb. 11 note).