Potential Apple-CXMT supply deal could threaten Korean chipmakers in long run

Apple, which currently sources dynamic random-access memory (DRAM) from Korean chipmakers Samsung Electronics and SK hynix, is turning to Chinese chips to ease the burden of “chipflation” — a portmanteau of “chips” and “inflation” — fueled by the AI investment boom.

Apple is testing memory chips from Chinese chipmaker CXMT for use across its product lineup, including iPhones and MacBooks, the Wall Street Journal (WSJ) reported on Sunday.

The U.S. company is also reportedly in preliminary supply talks with CXMT to use the former's products in some devices sold in China.

With an 8 percent market share, CXMT placed No. 4 in the global DRAM market in the first quarter of this year. Samsung Electronics ranked first, followed by SK hynix and Micron.

Experts, however, say that Apple and CXMT's partnership will have a limited effect on Korean companies.

“CXMT’s DRAM technology is still at the entry level, so its immediate impact on Korean chipmakers will be limited,” said Yoo Hoi-jun, an electrical engineering professor at KAIST. “However, Apple could provide an opportunity for CXMT to grow and potentially turn it into a long-term threat.”

Apple’s interest in CXMT reflects a shortage of memory chips. The surging demand for memory, driven by AI data centers, has squeezed chip supplies for smartphones and PCs, sending prices sharply higher.

Apple CEO Tim Cook likened the situation to a “100-year flood.”

“If there were more suppliers, that would be good,” he said during an earnings conference call on July 30, alluding to the DRAM memory chip market’s domination by three companies: Samsung, SK hynix and Micron.

“It would help us on the supply side and perhaps the pricing side.”

Before Apple, PC makers HP and Acer also began using CXMT chips in some products sold outside the United States to cope with the supply shortage.

U.S. politicians have taken a negative stance on Apple potentially adopting Chinese-made memory chips. They cited concerns that cooperation with Chinese companies could undermine the competitiveness of U.S.-based Micron.

Apple previously asked the Donald Trump administration to allow it to use memory chips from Chinese companies such as CXMT and YMTC in products sold outside the United States.

Under current export control rules, Apple would have difficulty providing product specifications to CXMT and obtaining customized chips but would still be able to purchase general-purpose chips that have already been developed, the WSJ reported.

As a result, Apple is reportedly seeking the White House's approval to first use CXMT chips in products sold in China.

Most of CXMT’s production capacity for this year has already been booked, meaning that it is unlikely to provide Apple with immediate relief from the global shortage, the report said. Once CXMT significantly expands production, however, Apple could gain greater leverage in price negotiations.

CXMT is moving to expand its existing production facilities and build new ones, including considering a second DRAM plant in Beijing, according to another report by Reuters. Once expansions at its existing facilities are completed, CXMT's monthly wafer production capacity is expected to more than double from the current 300,000 wafers to over 600,000.

Rising memory prices are pushing up smartphone and PC prices and weighing on demand.

Market research firm IDC forecast that global smartphone shipments will decline 13.9 percent this year. PC shipments are expected to fall 11.3 percent.

BY KIM IN-KYOUNG [kim.jiye@joongang.co.kr]