China’s YMTC targets up to 70% domestic equipment for fourth chip factory

China's largest flash memory chipmaker, Yangtze Memory Technologies Co (YMTC), plans to source as much as 70% of the equipment for its proposed fourth factory from domestic suppliers, marking a further step in Beijing's drive to reduce reliance on foreign semiconductor technology.

The company is targeting at least 60% local equipment content at the planned facility, with an ambition to raise the share to 70%, according to two people familiar with the matter cited by Reuters. That would exceed the proportion at YMTC's third factory, scheduled to begin operations later this year, where Chinese suppliers account for slightly more than half of equipment purchases.

The proposed factory will be built in Wuhan, where YMTC is headquartered, and is expected to produce its most advanced NAND flash memory chips, with more than 300 layers of memory cells stacked vertically. Construction is expected to begin next year, although the company has so far held only preliminary discussions with potential suppliers and has not placed formal orders.

The timing of the project and its domestic-equipment target are being reported for the first time.

The plant is expected to concentrate mainly on memory products for data centers and artificial intelligence applications, markets where demand for high-capacity storage is increasing as companies expand their computing infrastructure.

NAND flash memory retains information without a continuous power supply and is widely used in smartphones, computers, and data centers. Increasing the number of vertically stacked memory layers allows manufacturers to store more data on a chip without expanding its physical footprint.

YMTC's plan therefore combines two priorities: expanding production capacity in a growing market and developing a more domestic semiconductor supply chain as US export restrictions limit its access to advanced foreign equipment.

A higher local-content target could create additional business for Chinese semiconductor equipment manufacturers, including Naura Technology Group and Advanced Micro-Fabrication Equipment, the sources said.

Most of the expected increase in domestic purchases would involve equipment used in established production stages such as wafer cleaning, polishing and etching. Chinese suppliers have already demonstrated the ability to provide equipment for these processes on YMTC's existing production lines, according to the people.

Domestic companies also supply most of the cleaning and polishing equipment used by YMTC and have made progress in tools required to create the deep vertical structures found in advanced NAND chips.

However, the company's dependence on overseas suppliers has not been eliminated. YMTC still relies on foreign equipment for some sophisticated manufacturing processes, including lithography, inspection, and other advanced production technologies.

China increasing the domestic share of equipment purchases in processes where local manufacturers have established capabilities is more immediately achievable than replacing foreign suppliers across the entire production chain. The latter requires advances in highly specialized tools that are difficult to develop and qualify for commercial-scale manufacturing.

YMTC's proposed 70% target would represent progress in localization, but it does not mean the company has achieved technological independence from overseas equipment makers.

The expansion could also strengthen the position of domestic suppliers by giving them a larger production environment in which to test and improve their tools. Securing orders from a major memory manufacturer can provide equipment companies with commercial validation and opportunities to refine products for wider adoption.

US Restrictions Reshape China's Memory Industry

The planned factory comes against the background of tighter US controls on China's access to semiconductor technology. The US Commerce Department added YMTC to its Entity List in December 2022, requiring American suppliers to obtain licenses before exporting certain technologies to the company.

The restrictions have increased the pressure on YMTC to find domestic alternatives and build a supply chain that is less vulnerable to changes in US export policy.

Samsung Electronics and SK Hynix, two major South Korean memory manufacturers, face separate restrictions on equipment shipments to their Chinese facilities. Both companies require annual US authorizations to bring American-made chipmaking equipment into those plants. Washington indicated last year that it did not intend to approve equipment that would enable substantial capacity increases or major technology upgrades at their Chinese operations.

These constraints could give YMTC an advantage in upgrading its domestic manufacturing base, particularly as its South Korean rivals navigate restrictions on expanding their existing facilities in China.

YMTC's proposed fourth factory is expected to produce chips with more than 300 layers, above the production levels planned by Samsung and SK Hynix at their Chinese facilities. Samsung is converting its Xi'an factory to manufacture 286-layer chips, while SK Hynix is upgrading its Dalian facility to produce chips with 240 layers or more, compared with 192 layers previously, Reuters has reported.

The difference in planned layer counts points to an increasingly important competitive divide in China's memory market. YMTC is seeking to advance its manufacturing technology while its foreign rivals face limits on the equipment they can install and the upgrades they can undertake in the country.

Omdia data show that YMTC's share of China's NAND market rose to 38.5% in the second quarter from 28% in 2025, making it the country's largest NAND manufacturer ahead of Samsung. The increase suggests the company is gaining ground in its home market as it expands its manufacturing capabilities.

The fourth factory is part of a broader expansion plan. Reuters reported in April that YMTC was preparing to build two additional factories in Wuhan, which would bring its total number of plants to five.

When fully operational, the third, fourth and fifth factories are each expected to process about 100,000 silicon wafers a month, the sources said. Their combined capacity would more than double YMTC's manufacturing output.

The scale of the planned expansion would give the company a larger platform to challenge established memory producers, particularly in the market for data-center storage.