Apple reportedly is seeking out a cheaper China alternative in face of memory-cost pressures that caused it to raise the prices of iPads and MacBooks last week.
The memory crunch that forced Apple to hike prices of its MacBooks and iPads has reportedly driven the company to look at a cheaper China alternative that some say could turn into a major competitor in memory.
Apple (AAPL) has approached the U.S. administration for clearance to use ChangXin Memory Technologies' memory chips, the Financial Times reported on Saturday. Both companies were contacted by MarketWatch for comment.
CXMT is on the Pentagon's so-called 1260H list of Chinese companies alleged to be aiding its military. While not banned from using, Apple would be subject to political backlash if it went ahead without the blessing of the U.S. government.
Investors and analysts in the tech space offered mixed views on just what CXMT means to the memory market.
"CXMT is going public in China, they may be the cure for Apple's ills," said Atreides Management's managing partner Gavin Baker, in the All-In Podcast that aired Saturday. "They will flood the market to some degree with cheap, consumer-grade DRAM, but for the DRAM you need in these AI servers, there are three companies that make it. It's really hard to do. This is as close to magic as science can get."
DRAM stands for dynamic random-access memory and temporarily stores data that computer systems need to quickly access.
The companies that make this technology, Micron (MU), SK Hynix (KR:000660) and Samsung (KR:005930) still trade "cross-sectionally cheap relative to the rest of AI," Baker argued. He estimates that DRAM will be 30% to 40% of all hyperscaler capital expenditure in 2027.
"Hundreds of billions of dollars that are spent are going straight to DRAM," he said. That could be beneficial for society, because those rising memory costs will "inflate the costs of building a gigawatt data center to where, even for the hyperscalers, economics matter."
The types of DRAM made by Micron and its rivals are extremely hard to make, not the consumer-grade DRAM, Baker pointed out.
However, others say CXMT could become a much bigger player in that space. While Apple's efforts to get approval to buy CXMT memory could be a tough due to the current political climate, even considerng that company is "a strong validation of CXMT's product reliability and the severity of the memory shortage," a team of Citi analysts led by Kevin Chen told clients in a note on Sunday.
The company's LPDDR5X advanced DRAM that it rolled out last year has reached speeds that make it potentially "addressable to high-end mobile, tablet, and notebook applications," they said. The idea that Apple is thinking about CXMT will help shift "market perception of CXMT from a domestic substitution play to a credible global No.4 DRAM maker."
A Substack co-written by Dylan Patel who is the founder, CEO, and chief analyst of the SemiAnalysis research and consulting firm, that published last week got attention for declaring that CXMT could "challenge DRAM incumbents."
"The company is likely to become the largest semiconductor IPO in China and mark a major milestone for the country's leading memory manufacturer, which is also destined to compete only more fiercely with the leading memory suppliers of Samsung, SK Hynix, and Micron from here," said the post.
Shares of SK Hynix finished 1.6% lower in Korea, while Samsung lost over 4%. On Monday came news the two companies plan to invest more than $500 billion in a new chip fabrication hub in southwestern South Korea in an initiative announced by President Lee Jae Myung.
""We must secure absolute competitiveness in advanced technologies including semiconductors and AI, and make sure the fruits of this growth are distributed evenly nationwide and felt by all citizens," he said in a televised address, according to Reuters.
Samsung shares and SK Hynix shares have seen losses over the past week in a market where retail investors who have been pouring into AI plays, have recently pulled back on concerns about valuations and spending. The Kospi KR:180721 finished down 0.2% after tumbling nearly 6% on Friday. The index, up 99% this year, is down 4.4% as June draws to a close.
U.S. stock futures (ES00) (NQ00) pointed a higher open for Monday, with the Nasdaq Composite COMP and S&P 500 SPX poised for their first positive sessions in six.