Does China’s rapid chipmaking expansion threaten the global AI memory chip boom?

The AI-driven “super cycle” in memory chips may lose momentum by 2028 as Chinese chipmakers aggressively expand production and global tech firms curb spending, a Samsung Electronics executive adviser said. “South Korea’s memory chip industry is performing very strongly this year and some forecasts suggest conditions could improve further next year,” adviser Kyung Kye-hyun said at a forum hosted by the National Academy of Engineering of Korea. “But caution is needed for 2027, particularly 2028.” Kyung, who led Samsung’s semiconductor business from December 2021 to May 2024, identified the rapid expansion of Chinese chipmakers’ manufacturing capacity as a major challenge for South Korean chipmakers. Chinese firms had already captured about 20 per cent of the NAND flash market, he noted, adding that their share of the DRAM market could exceed 10 per cent with support from ChangXin Memory Technologies (CXMT). “Chinese companies are planning to increase capacity by 300,000 wafers over the next three years, and I’m concerned this could allow them to capture around 12 to 13 per cent market share,” Kyung said on Monday. Korean chipmakers – including Samsung and SK Hynix – are enjoying strong earnings thanks to surging demand for memory chips, a crucial bottleneck for AI data centres. But analysts said Chinese firms, including Yangtze Memory Technologies and CXMT, are scaling up NAND and DRAM production by leveraging cost advantages and subsidies. On Monday, CXMT reported revenue of 50.8 billion yuan (US$7.4 billion) in the first quarter, up 719 per cent from a year earlier, and forecast revenue of 110 billion yuan to 120 billion yuan for the first half of 2026, driven by fast-rising DRAM prices. In addition to the capacity surge, Kyung noted memory demand could slow as big tech companies scaled back investment and the AI industry landscape shifted. “Big tech companies are investing aggressively right now, but capital expenditures are beginning to exceed cash flow,” Kyung said. “By around 2028, if returns on investment weaken, they may have no choice but to scale back spending.” He also highlighted the potential impact of a shift away from Nvidia-dominated graphics processing units towards artificial intelligence accelerators (XPUs) tailored to specific data centre and customer needs, a move that would require customised memory solutions. Samsung is also facing a potential labour strike over performance-based bonuses tied to earnings from its semiconductor business. The union said it planned to stage a general strike involving about 50,000 workers from May 21 to June 7. Analysts expect memory supply shortages to intensify and prices to come under further upwards pressure if the strike goes ahead. KB Securities estimated that global NAND and DRAM supply could be disrupted by 2 to 3 per cent and 3 to 4 per cent, respectively.