PURPOSE  AND METHODOLOGY
PRC COMPANY WATCH LIST
CONSEQUENCES OF GROWTH
POLICY REMEDIES

CXMT Threat Overview

Changxin Memory Technologies Inc. scores as an ELEVATED RISK in the September 2023 Chip Risk Monitor.

CXMT has been placed on the Department of Defense Section 889 List but not the Department of Commerce’s Entity List.

Background

CXMT, also translated as Changxin Storage Technologies Inc., is a critical node within the People’s Republic of China’s (PRC’s) semiconductor sector. CXMT’s founding and flourishing has been hailed by Chinese press as a critical “bottleneck counterattack;” a means of leveraging advanced foreign technology in order to shore up Chinese technological weaknesses – and flip the playing field of international industrial capacity. CXMT was established by the Hefei government to develop China’s domestic DRAM manufacturing capabilities in accordance with the “Made in China 2025” national plan to build indigenous capability all along the semiconductor value chain.

The role that CXMT plays in China’s semiconductor strategy, and corresponding risk, are reflected in the company’s ties to the Chinese government, military, and surveillance systems – as well as to other non-government actors known to be affiliated with China’s military and surveillance apparatus.

Objective Risk

CXMT was founded as a part of the Chinese government scientific, technological, and industrial project. CXMT’s founders, shareholders, and co-investors are affiliated to the Chinese State, Party, and military bureaucracies. CXMT also partners with companies tied to the PRC military and surveillance system – and its products appear to support that system as well. 

Proximity to industrial policy risks

CXMT was originally launched under the guise of the “506 Project” – a cryptic effort backed by some 54 billion RMB in provincial government funding to fill in the DRAM layer of China’s semiconductor capability back. From the point of design, the company has existed squarely within the mandate of Beijing’s “Made in China 2025” national strategy. Funding for its research and development and commercial progress has been a part of the National Integrated Circuit Major Project, one of China’s Ministry of Science and Technology’s most high-profile and critical science and technology programs.

Ownership risks

CXMT was originally established as a State-owned enterprise backed by the National Integrated Circuit Industry Investment Fund Co., Ltd. and the Hefei Municipal Government. The former is a Chinese government-guided fund fueled by state-tied capital intended to provide capital for the domestic development of China’s semiconductor industry.

CXMT’s capital backers continue to be primarily State-owned and State-backed pools of funds. Government investors in CXMT include: China State-owned Enterprise Structural Adjustment Fund, China Ordnance Industry Group, China Communications Construction Company, China Mobile, National Integrated Circuit Industry Investment Fund, Hefei Municipal Government. Several of those, including China Ordnance Industry Group and China Mobile, have been identified by the US Department of Defense as PRC military companies.

CXMT also co-invests with Chinese government-linked investors, including the Big Fund and Shanghai National Defense Private Equity Fund Management Co., Ltd. In addition to its government equity investment, CXMT receives extensive central and local government subsidies.

Research and supply partnership risks

CXMT’s products appear to serve military and surveillance end-uses in China: Its chips are advertised in Chinese sources as military-grade; they appear in procurement documents for a government video surveillance system in Inner Mongolia and likely to be deployed increasingly in similar applications.

CXMT has formed a supply relationship with Huawei, was originally established under the leadership of the SMIC CEO, and partners with China Telecom on a high-performance computing project. All three of those partner companies have been identified by the US Department of Defense as Chinese Communist Military Companies and are on the Department of Commerce’s Entity List.

CXMT is closely integrated with Zhaoyi Innovation, also known as GigaDevice: Zhaoyi Innovation is government-backed, receives extensive government subsidies; appears to supply the Chinese Ministry of Public Security; cooperates on research and development projects with Chinese military entities; supplies Huawei, Hikvision, DJI, China Mobile, and iFLYTEK; and has a strategic cooperation agreement with SMIC.

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