The memory boom comes at a cost for smartphone makers. Will Apple tap Chinese chip suppliers?

Apple is known for taking a hard-line stance in price negotiations with memory suppliers like Samsung, but even the tech giant — considered as one of the world’s biggest buyers — uncharacteristically accepted hefty price hikes without a fight.

“Apple is acting strangely. Usually, negotiations over memory prices are fierce. If we ask for, say, 150, Apple starts at 70, and after rounds of back-and-forth bargaining, we eventually settle somewhere around 100. But this time, we quoted 200 — and Apple signed immediately,” a Samsung Electronics representative from the memory division recalled.

Earlier this year, the industry was stunned to hear that Apple had agreed to purchase mobile dynamic random access memory (DRAM) chips for iPhones from Samsung Electronics and SK hynix at roughly double the previous price.

The anecdote reflects the supplier-dominated landscape of today’s memory market, but it has also fueled speculation that Apple may have an alternative in mind: Chinese vendors. 

Manufacturers squeezed by memory prices

Samsung Electronics posted an operating profit of 57 trillion won ($41 billion) in the first quarter alone. That translates into roughly 640 billion won in profit every day between Jan. 1 and March 31.

But every boom creates losers as well as winners.

While shares of memory makers — Samsung Electronics, SK hynix, Micron Technology, and NAND chip producers SanDisk and Kioxia — have surged this year, consumer electronics companies have seen their stock prices tumble.

Among them are Sony, Apple, Xiaomi, and HP as the consumer electronics makers that rely on DRAM and NAND are struggling.

The pain has been especially severe in China’s smartphone sector, as reflected in the latest earnings reports from Xiaomi and Transsion Holdings.

Xiaomi, the world’s third-largest smartphone maker, posted its first quarterly profit decline in three years in the fourth quarter of last year. The downturn was not simply due to weak economic conditions. Revenue and operating profit from its electric vehicle and AI businesses more than doubled from a year earlier. Only the smartphone division suffered, posting a 13.4 percent decline in revenue and a 40.6 percent plunge in operating profit.

Transsion, dubbed by Korean media as the "Samsung of Africa," saw its annual net profit cut in half. The company built its business on ultra-budget smartphones priced from as little as $15 and captured roughly 40 percent of the African smartphone market. But soaring memory prices undermined its low-cost strategy.

Memory chips, one of the key components in smartphones, had become simply too expensive. Raising prices risked destroying the appeal of budget phones, while freezing prices made it nearly impossible to absorb rising costs.

“If memory prices continue to rise, some smartphone companies could suffer massive losses or even go bankrupt,” said Lu Weibing, president of Xiaomi’s smartphone division.

Market research firm Counterpoint Research forecasts global smartphone shipments will fall 12 percent this year, marking the lowest level since 2013.

Hwang Min-sung, a semiconductor analyst at Counterpoint Research, said memory — which already accounts for roughly half of smartphone manufacturing costs — is expected to become even more expensive in the second quarter. “Smaller smartphone makers will face severe difficulties,” he said. “Meanwhile, large companies with stable access to memory supplies, such as Samsung, Huawei and Apple, may see this as an opportunity to consolidate a smartphone market that had become overcrowded with smaller players.”

Chinese memory makers as alternative

But while Chinese smartphone makers suffer, another group is quietly benefiting nearby: Chinese memory chipmakers.

Qualcomm CEO Cristiano Amon hinted at greater memory sourcing flexibility covering Chinese producers.

“Every single memory, you can imagine, CXMT and other smaller companies, we have been qualified,” he said during the latest earnings call in February, referring to Hefei, Anhui-based ChangXin Memory Technologies.

“And also, we have flexibility versus some of the other companies … you're going to see we have flexibility about working with new versions of memory as well as older versions of memory on our platform,” he said.

Analysts repeatedly questioned the company about surging memory prices and supply shortages. Amon’s response drew attention because he specifically mentioned CXMT, China’s leading DRAM producer.

Founded in 2016, CXMT launched DDR4 DRAM in 2019 and introduced DDR5 and LPDDR5X products last year. The company says its rapid progress stems from a “generation-skipping” research and development strategy.

Last year, 10 former Samsung employees were indicted for allegedly leaking advanced DRAM process and design technologies to CXMT, shocking Korea’s semiconductor industry. Prosecutors alleged that key technologies were manually copied and passed to the Chinese company.

One executive familiar with cooperation with Big Tech firms for memory supply said that Qualcomm and CXMT are jointly developing customized mobile memory products. Qualcomm declined to comment.

Meanwhile, speculation has resurfaced that Apple could once again source NAND memory from Yangtze Memory Technologies (YMTC), China’s leading NAND producer.

Apple reportedly came close to signing a supply agreement with YMTC in 2022 before U.S. sanctions derailed the deal. But as memory prices soar again, industry observers say Apple may be reconsidering YMTC as an option.

Korean electronics companies are reminded of the display industry’s earlier experience with BOE Technology. In 2020, BOE broke into Apple’s OLED supply chain by initially providing small volumes of replacement panels before gradually expanding shipments for lower-end iPhones.

Although BOE’s technology lagged that of Samsung Display and LG Display, its growing presence at Apple became a tangible threat to Korean suppliers. Last year, the U.S. International Trade Commission issued a preliminary ruling banning imports of BOE panels that infringed Samsung Display patents for 14 years, eventually forcing BOE into a settlement after three years of litigation.

That history explains why Korea’s memory industry is highly sensitive to reports of Apple potentially using YMTC chips. Industry insiders fear that if Apple begins working with YMTC, technical feedback and know-how from existing suppliers could gradually flow to the Chinese company during the certification process. Becoming an “Apple supplier” would also serve as a powerful endorsement of YMTC’s technology, potentially helping it secure more customers globally.

Washington turns ambiguous

The U.S. Federal Acquisition Regulatory Council announced on Feb. 17 restrictions on the use of semiconductors from CXMT and YMTC in products sold to U.S. government agencies.

At first glance, the move appeared to be positive news for Korean memory companies. But the details told a more complicated story. Products purchased before December 2027 were exempted, effectively giving companies years to continue buying Chinese memory during a period of tight supply. If no commercial alternatives are available, enforcement may even be delayed until the end of 2028.

The ambiguity of Washington’s position was also evident in what industry observers dubbed the “one-hour removal incident” involving CXMT and YMTC.

The U.S. Department of Defense released on Feb. 13 its annual list of Chinese military-linked companies under the National Defense Authorization Act. The list, which includes companies such as Huawei, Tencent and DJI, does not automatically impose sanctions but signals companies viewed as problematic by Washington.

This year’s initial list, however, omitted CXMT and YMTC. The omission immediately caused an uproar in Washington and the semiconductor industry, prompting speculation that the U.S. military might be preparing to use Chinese memory products. Roughly an hour later, the Pentagon withdrew the document. 

The Department of Defense officially republished the finalized version of the blacklist. The Pentagon buckled to the fierce backlash from Capitol Hill hawks and reinstated both CXMT and YMTC to the list of "Chinese military companies."  

Japanese media outlets including Nikkei have also reported that companies such as Dell and HP began testing CXMT DRAM for use in servers earlier this year.

Hwang of Counterpoint said that while Chinese semiconductors are now restricted from U.S. government procurement, U.S. electronics makers still need to sell products globally.

“When supply is tight, it becomes difficult to regulate a market if you cannot produce enough yourself,” he said.

How far has China come?

China still imports most of the memory chips it consumes. The country’s annual semiconductor imports totaled $385.8 billion in 2024 — larger than its crude oil imports — with memory accounting for roughly 24 percent.

“We still depended on imports for more than 90 percent of memory semiconductors in 2024,” noted Chen Nanxiang, chairman of YMTC, and 13 Chinese semiconductor industry leaders in a joint statement.

Ahead of China’s annual parliamentary meetings in March, executives and academics from China’s semiconductor sector released the joint report acknowledging that although CXMT and YMTC are rapidly improving technologically, China’s memory self-sufficiency remains low.

While some standard DRAM products from CXMT have gained market share domestically, yields for more advanced, high-end memory products remain unstable.

Korea remains one of China’s key suppliers of memory chips. In February, Korea’s exports of memory semiconductors to China surged 251 percent from a year earlier, outpacing the country’s overall semiconductor export growth rate of 158 percent, according to Korea Customs Service data.

China’s semiconductor self-sufficiency jumped from 25 percent to 35 percent between 2024 and 2025, according to a report by the Washington-based Center for Strategic and International Studies, surpassing the “Made in China 2025” target of 30 percent. Even so, memory remains one of the most difficult segments for China to localize.

Still, both CXMT and YMTC plan to expand production capacity this year. CXMT filed for an IPO on Shanghai’s STAR Market in December, while YMTC is also pursuing a listing. Both aim to raise large amounts of capital to finance further investments in production facilities.

At Semicon China in Shanghai last month, Hendel Jones, CEO of consulting firm IBS, said Chinese companies may trail Samsung Electronics and SK hynix by one to two years in 3D DRAM technology but are otherwise making meaningful progress. “The challenge for China remains processes below 5 nanometers,” he said.

BY SHIM SEO-HYUN, PARK HAE-LEE [[email protected]]