Key Takeaways:
Apple and Micron are locked in a lobbying war over Chinese memory chips that pits consumer pricing against domestic semiconductor sovereignty — with the Trump administration caught in the middle.
Apple Chief Executive Tim Cook has personally pitched President Donald Trump, Commerce Secretary Howard Lutnick and Treasury Secretary Scott Bessent on a plan to source memory chips from China's ChangXin Memory Technologies and Yangtze Memory Technologies for products sold outside the US, according to people familiar with the discussions. The request comes as memory chip prices have quadrupled over the past year, driven by AI data center demand that has consumed available supply and pushed Micron's gross profit margins above 80 percent.
"Allowing CXMT and other Chinese companies to sell to US tech companies, regardless of the region of sale, could destroy the domestic industry the same way China played a role in decimating US steel and manufacturing plants," Micron Chief Executive Sanjay Mehrotra warned Lutnick and other administration officials, the Wall Street Journal reported. Micron is the only sizable US maker of memory chips.
Memory costs have surged 4x in 12 months, according to TechInsights data, as AI infrastructure buildouts consume massive quantities of high-bandwidth memory at premium prices. The AI-driven consumption has reduced available inventory for smartphones, automotive systems and medical equipment, fundamentally altering Apple's traditional negotiating leverage with semiconductor suppliers. Apple has accused Micron of exploiting the shortage for excessive profits, while Micron counters that price increases reflect broader market dynamics and has committed $250 billion to expanding US manufacturing capacity.
The dispute forces the Trump administration to choose between two competing priorities: lowering prices for US consumers and increasing domestic semiconductor production to reduce dependence on other countries. Both CXMT and YMTC carry national security designations — YMTC is on the Commerce Department's Entity List, and the Pentagon has classified both firms as Chinese military companies. White House technology adviser Michael Kratsios told congressional members this week that American corporations should avoid commercial relationships with Entity List-designated firms.
CXMT and YMTC Gain Pricing Power
The Chinese memory makers at the center of the dispute have transformed from state-dependent loss-makers into formidable competitors. CXMT, now the world's fourth-largest DRAM producer, posted first-quarter revenue of $7.5 billion — a 719 percent increase from a year earlier that wiped out a decade of losses within six months. The company is set to debut on the Shanghai stock exchange Monday in an $8.6 billion initial public offering.
CXMT recently refused to lower chip prices for Huawei despite repeated requests from the Chinese technology giant, signaling a shift in leverage within China's semiconductor sector, according to Reuters. The company also signed a five-year supply agreement worth more than $7 billion with ByteDance, TikTok's Chinese parent company. In some cases, Chinese buyers are paying more for CXMT and YMTC chips than they would for comparable products from South Korean rivals Samsung and SK Hynix due to supply constraints.
YMTC, meanwhile, is preparing for its own IPO with some executives targeting a valuation of 1 trillion yuan ($148 billion). The company entered the South Korean consumer memory market in June, taking advantage of a segment that Samsung, SK Hynix and Micron have deemphasized in favor of more advanced AI chips.
Capacity Race and Technology Gap
Both companies are planning aggressive manufacturing expansion. CXMT is building two new fabrication plants in Shanghai and Hefei and discussing a third project elsewhere, aiming to more than double capacity to more than 600,000 wafers per month. One person familiar with the plans said CXMT's capacity would surpass Micron's by 2030 if the projects proceed as expected. YMTC is planning two additional factories on top of one due for completion this year.
Despite their momentum, both firms face significant constraints. They depend on ASML's deep ultraviolet lithography machines for production, while South Korean and American rivals use ASML's more advanced extreme ultraviolet systems — which China has been blocked from obtaining since the Dutch government stopped granting export licenses in 2019. CXMT has developed its own high-bandwidth memory but remains two generations behind competitors, according to five people familiar with the matter.
"If more restrictions are imposed on lithography equipment, that would be the biggest challenge for Chinese memory," one of the sources said.
Apple shares have gained 18 percent year-to-date, while Micron has surged 191 percent despite trading 23 percent below its late-June all-time high. The stock fell 6.99 percent on the day of the Journal's report. Apple's $600 billion American Manufacturing Program and a $30 billion agreement with Broadcom have been widely seen as efforts to build goodwill with the administration, giving the company political capital to offset controversial requests. A White House spokesperson said the administration would pursue "investments and economic relief for the American people while safeguarding our national security," offering little indication of how it plans to resolve the competing priorities.
This article is for informational purposes only and does not constitute investment advice.
