[Edaily Reporter Bang Sung Hoon ] Chinese memory semiconductor company Changxin Memory Technology (CXMT) posted an operating profit margin of 82% in the second quarter of this year (April–June), ranking first among the six global memory companies, including Samsung Electronics, SK Hynix, and Micron. The structure of the memory market, which has long been dominated by companies from South Korea, the U.S., and Japan, is being shaken by the artificial intelligence (AI) boom.

According to the Nikkei newspaper on the 11th, CXMT’s operating profit margin for April–June was 82%, surpassing Micron (80% for March–May), SanDisk (78%), SK Hynix (76%), and Kioxia (74%). It also surpassed the profit margin of Samsung Electronics’ semiconductor business (70%). The performance figures for the six companies are based on earnings before interest and taxes (EBIT).

CXMT, which went public last July, specializes in DRAM—a type of temporary storage device—and counts Chinese Big Tech companies such as Alibaba Group, ByteDance, and Tencent among its clients. Its second-quarter operating profit was approximately 1.9 trillion yen (about 16.6197 trillion won), marking a turnaround from a 29 billion yen (about 253.7 billion won) loss a year earlier. Revenue increased tenfold to approximately 2.3 trillion yen (approximately 20.1186 trillion won), marking the highest growth rate among the six companies.

Although its profit level falls short of that of Korean companies or Micron, it outperformed Kioxia and SanDisk, which manufacture NAND flash—a type of long-term storage device.

CXMT’s strong performance is largely due to “spillover benefits.” Samsung Electronics, SK Hynix, and Micron are focusing their efforts on High Bandwidth Memory (HBM), which is built by stacking DRAM chips. As these companies prioritize supplies for AI servers, the supply of general-purpose DRAM used in PCs and game consoles has decreased, causing “DDR5” prices to skyrocket. CXMT, whose core business is general-purpose DRAM, has been the biggest beneficiary.

Differences in contracting methods also played a role. HBM is supplied under annual contracts with major cloud service providers, making it less sensitive to short-term market fluctuations, whereas DDR5 prices are directly linked to market conditions. Taiwanese research firm TrendForce noted, “Since the first quarter of this year, HBM’s profitability has fallen below that of DDR5.” Okamoto, a partner at KPMG FAS, also pointed out, “In the current environment, companies with a higher proportion of standard DRAM sales are more likely to benefit from market conditions.”

The money earned is being immediately channeled into investments. CXMT’s free cash flow (FCF) for the first half of this year showed a surplus of approximately 2.2 trillion yen (about 19.2438 trillion won), an improvement of about 2.8 trillion yen (about 24.4922 trillion won) compared to a year ago. Backed by funds from its initial public offering (IPO) and government support, the company plans to expand production capacity in Hefei, Anhui Province, while also building a new factory in Shanghai.

Excluding treasury stock, CXMT’s market capitalization stands at 87 trillion yen (approximately 761 trillion won), surpassing Tencent to become the top-ranked company on the Chinese stock market. This is nearly three times the size of Kioxia (31 trillion yen, approximately 271 trillion won). Unlike South Korean and Japanese companies, whose earnings are heavily influenced by market conditions and whose price-to-earnings (P/E) ratios remain in the single digits, CXMT’s P/E ratio is approaching 20. This indicates that investors have high expectations for the company’s growth.

However, as of the second quarter, the top three companies—Samsung Electronics (39%), SK Hynix (26%), and Micron (25%)—account for 90% of the global DRAM market share, while CXMT holds only 7%.

China’s manufacturing sector has grown by first expanding market share with low-cost, commodity products and then building competitiveness. In electric vehicle batteries—an area where South Korea and Japan once dominated—CATL has risen to become the world’s number one, and global manufacturers have also emerged in home appliances and smartphones.

The memory sector is following the same path. The parent company of Yangtze Memory Technology (YMTC), a NAND manufacturer, has also filed for an IPO, emerging as a competitor to Kioxia. CXMT and YMTC are following an identical strategy: leveraging the global memory supply shortage to strengthen their financial position and pursue aggressive investments.

The Nikkei assessed that if Chinese companies with expanded production capacity launch a low-price offensive, they could disrupt market conditions and pose a threat to the existing market landscape.