China's CXMT to Start HBM3E Production Despite Low Yields

China's ChangXin Memory Technologies (CXMT) plans to start production of HBM3E, an advanced high-bandwidth memory chip used with AI processors, despite yields of only 20% to 30%. The decision highlights China's shortage of AI memory chips, which are essential to a government-backed push to build domestic alternatives to Nvidia's AI processors amid US curbs on foreign-made technology. CXMT has sent HBM3E samples to several domestic AI chip designers and expects limited production within the next two months.

Low yields and costs

Yields are about 20% to 30%, compared with around 70% at SK Hynix, the market leader, according to two people familiar with the matter. Low yields make production expensive because a large share of chips must be discarded or reworked. CXMT's HBM3E is expected to cost more than comparable products from overseas rivals, one of the people said.

Why CXMT is pressing ahead

Chinese AI chipmakers have struggled to obtain enough advanced memory to increase output. Reuters reported last month that Huawei, Cambricon, MetaX and Iluvatar CoreX had raised prices for current and next-generation AI chips by 20% to 50% as memory costs complicated efforts to ramp up production. Chinese chipmakers have increasingly sought advanced HBM through unofficial channels, where it can cost several times more, the people said.

Performance and generation gap

In testing, CXMT's HBM3E performance was closer to SK Hynix's previous-generation HBM3 than to the South Korean company's HBM3E, one person said. CXMT has sent customers two HBM3E versions: a standard design and an updated version that includes changes intended to improve yields. Samsung said in July that it had expanded HBM4 sales and shipped HBM4E samples to major customers, putting CXMT at least one generation behind in commercial HBM production.

Market context

SK Hynix held 50% of global HBM revenue in the second quarter, according to Counterpoint Research, followed by Samsung with 33% and Micron with 18%. Most revenue came from HBM3E. CXMT held a 10% share of global DRAM revenue in the quarter, making it the world's fourth-largest supplier of conventional memory chips. US export controls limit its access to some of the most advanced chipmaking equipment, making it harder to close the gap with global rivals. Washington tightened export controls on certain advanced HBM products bound for China in December 2024.

Sources: Reuters