Super-cycle delivers $4.6 billion quarterly profit for the NAND chipmaker, but depreciation, cyclicality and supply-chain risks persist.
By Zhou Yuan
Yangtze Memory Technologies Corp (YMTC) is seeking to raise 33 billion yuan ($4.6 billion) through an IPO on Shanghai’s STAR Market after reporting a spectacular first quarter.
The company, whose wholly owned subsidiary, Yangtze Memory, is one of China’s leading 3D NAND flash manufacturers, submitted its listing application to the Shanghai Stock Exchange on Aug. 21. The offering will consist entirely of new shares, with proceeds earmarked for upgrades to existing production lines and research into next-generation memory technologies.
Markets often pair the company with Changxin Memory Technologies (CXMT) (688825.SH) as China’s storage “twin champions,” but their paths do not overlap. Yangtze Memory, makes 3D NAND flash for persistent storage in solid-state drives (SSDs) and smartphones; Changxin focuses on DRAM, the volatile memory that loses data when power is off. Both follow an integrated IDM model, yet their technology roadmaps and global competition are separate.
The prospectus shows YMTC’s most stunning figure: first-quarter 2026 revenue of 47 billion yuan and 33.4 billion yuan in net profit attributable to shareholders. The result reflects accumulated technology, production ramp-up and an AI-driven storage upcycle. But the industry’s inherent pressures — heavy depreciation, mean-reverting cyclicality and external supply-chain constraints — have not disappeared.
Third place, but not yet a global leader
Citing TrendForce data, the prospectus ranks YMTC’s NAND Flash business third globally and first in China by both shipment volume and sales value in the first quarter of 2026.
Yet context matters. Samsung and SK Hynix hold dominant top-two positions. The third tier, including YMTC, Micron, Kioxia and Western Digital, features narrow gaps, leaving rankings volatile.
Its biggest technological advantage is its proprietary Xtacking architecture. The company launched Xtacking 3.0 in 2022 and was among the first companies globally to introduce 3D NAND products with more than 200 layers. It followed with Xtacking 4.0 in 2024. As of March 31, YMTC had 5,611 granted invention patents and was one of relatively few mainland Chinese semiconductor companies to have cross-licensing agreements with leading international players.
However, the prospectus acknowledges a vulnerability: although no single customer exceeds 50% of revenue, the top five together account for 54-65% of sales across reporting periods covered by the prospectus. While YMTC has entered the supply chains of some top-tier global clients, its high-value enterprise products still lag overseas giants, and geopolitical constraints also make expanding its international customer base more difficult.
The AI-driven windfall
Unlike previous memory upcycles driven mainly by smartphones and PCs, the current surge is being powered by AI.
Global annual data creation is forecast to rise from 175 zettabytes in 2025 to 1,003 zettabytes in 2030, according to IDC data cited in the prospectus. Meanwhile, Goldman Sachs expects monthly global token consumption to reach 24 times current levels by 2030 as AI agents become commercialized.
Enterprise SSDs — the preferred storage for cloud AI — are a particularly strong beneficiary. TrendForce expects global enterprise NAND Flash demand to exceed 1.325 million petabytes by 2030, a compound annual growth rate of 36.1% from 2025 to 2030.
At the same time, supply has tightened. During the industry downturn in 2022 and 2023, Samsung, SK Hynix and Micron sharply reduced traditional NAND investment while directing resources toward higher-value high bandwidth memory and advanced DRAM. With new wafer-fab capacity taking two to three years to build, AI storage demand unleashed a multi-quarter capacity gap.
Yangtze Memory’s financial results show the impact. In 2023, at the bottom of the cycle, its gross margin was just 5.45% and it posted a loss of 19.2 billion yuan. By the first quarter of 2026, NAND production capacity utilization had reached 98%. Average NAND selling prices had risen 173% from the 2025 full-year level, while memory-chip prices jumped 218%, boosting its first-quarter net margin to about 71%.
That margin is clearly not sustainable. The prospectus warns that large-scale capacity expansion by overseas manufacturers could create oversupply and push the company back into substantial losses. TrendForce expects NAND supply to become more plentiful in the second half of 2027 as new capacity comes online, although a breakthrough in AI-agent adoption could provide another boost to high-speed SSD demand.
The three hurdles: capital, cycles, and supply chains
The prospectus puts the risks in revealing order. Continued heavy investment and falling prices and margins rank ahead of geopolitical tensions.
Memory manufacturing requires enormous and sustained spending on technology and capacity. YMTC spent 16 billion yuan on R&D during the reporting period and 96 billion yuan on acquiring and constructing long-term assets. Depreciation and amortization totaled 51 billion yuan.
Geopolitical supply-chain risks come third. Semiconductor manufacturing depends on specialised global collaboration. Trade policy volatility could disrupt procurement of critical equipment, spares and overseas market access. The company also faces supply-chain risks from its dependence on specialized equipment, materials and spare parts. Almost all of its core wafer manufacturing capacity is concentrated at its Wuhan’s East Lake Hi-Tech Zone, creating a geographic concentration risk in the event of power, water or other disruptions.
There are also unresolved patent disputes involving Yangtze Memory, its U.S. subsidiary, and Micron Technology and related companies, although the company’s legal adviser assessed the risk of an adverse judgment as low.
Finally, YMTC has no controlling shareholder or actual controller. Its two largest shareholders, Hubei Changhseng and Xinfei Technology, hold 26.54% and 25.35%, respectively, while several state-backed funds hold significant minority stakes. The structure provides checks and balances, but major disagreements among shareholders could make decision-making less efficient.
For now, the AI boom has given Yangtze Memory extraordinary financial firepower. Its IPO will provide another 33 billion yuan for technology and capacity.
The harder test will be whether it can keep investing through the next downturn, maintain its technological edge, and sell enough product at attractive prices when the industry’s inevitable cycle turns.
Source:
Caijing
