Why YMTC is building now
Yangtze Memory Technologies Corp, China’s leading maker of NAND flash, has started construction of a third factory in Wuhan with mass production aimed for 2027. The project marks a new phase for a company that remains on the United States Entity List, which limits access to many advanced manufacturing tools. Demand at home is rising quickly. Training and serving large artificial intelligence models, running cloud services, and building consumer devices all require vast amounts of fast persistent storage. NAND flash provides that storage in servers and smartphones. Chinese buyers are shifting toward local suppliers as supply chains are redesigned. For policymakers, more local memory capacity reduces reliance on imports and supports data infrastructure that is seen as strategically sensitive. YMTC’s move gives China a bigger local source of modern flash at a time when access to certain foreign technology is restricted.
The timing aligns with a rebound in memory prices after a deep down cycle in 2023. Expansions by the largest producers outside China have been cautious to avoid another glut. By pushing ahead, YMTC can serve domestic customers even if it does not match the newest process technology used by Korean and United States rivals. Industry records show the company continues to ship 3D NAND built on its Xtacking architecture while also qualifying more Chinese made equipment. A third factory also gives YMTC more room to iterate, improve yields, and adapt its product mix for servers, personal computers, automotive systems, and industrial devices. The company is owned by a state backed holding entity, and the expansion aligns with national investment programs for strategic industries.
Inside the new Wuhan fab
The new facility is the third major complex on YMTC’s Wuhan campus. Two existing plants focus on 3D NAND, and the company has been expanding the second site to lift output. Reports from the Chinese supply chain indicate the third site will rely more heavily on domestic tools than the first two, a shift in line with national policy. The company intends to produce first wafers in 2027, then ramp volume as yields and equipment readiness improve. While specific node details are not public, the goal is to add meaningful capacity for mainstream data center and consumer storage products.
Layer counts and Xtacking explained
Modern NAND is built in three dimensions with layers of memory cells stacked vertically. More layers improve density and reduce cost per bit. YMTC’s approach, called Xtacking, bonds a logic wafer to a memory wafer. This separates the circuits that control the memory from the array of cells, and it can improve performance and shorten development cycles. In 2023, YMTC introduced a 232 layer chip under the X3 9070 name, a device that stores four bits per cell, known as QLC. The chip reached a density of about 19.8 gigabits per square millimeter. The third factory is expected to carry forward this class of technology, even if the very highest layer counts adopted by global leaders remain out of reach in the near term.
Relying on more Chinese equipment is a central part of the plan. Local suppliers are moving to fill gaps in lithography, etch, deposition, and inspection. Progress is steady, but matching the speed and precision of the most advanced imported tools will take time. The company appears confident that, by the time the new lines come online, domestic tool sets will support high volume manufacturing for mainstream products, even if cutting edge features are not present at the start.
Sanctions, tools, and workarounds
In December 2022 the United States placed YMTC on the Entity List. That action, along with earlier and later export rules, restricts access to a set of lithography, deposition, etch, metrology, design software, and other items that contain United States technology. In 2024 the Bureau of Industry and Security (BIS) also added explicit controls on high bandwidth memory used for artificial intelligence accelerators. Licensing has become more granular for facilities in China, and the compliance burden on international suppliers has increased.
Companies in China have tried to keep production going with legacy tools, modified processes, and purchases that avoid restricted items. Some have also investigated third party channels for non restricted spares and materials. None of those paths completely replace the most advanced equipment. The strategy behind YMTC’s third plant points to a different path, building a native supply chain that can run at scale without reliance on restricted imports. If that approach succeeds, the result would be a stable domestic source of flash memory for servers and devices made in China.
A step toward DRAM and high bandwidth memory
There are signs that YMTC aims to expand beyond NAND. Corporate registry filings in China show a new entity was created to build the third factory in Wuhan with registered capital of about 20.7 billion yuan. Industry reports indicate the company is evaluating whether to allocate part of the new site to develop dynamic random access memory (DRAM). The idea links directly to high bandwidth memory, a stacked form of DRAM used alongside graphics processors and other accelerators to train and run large AI models. Access to high bandwidth memory has become a bottleneck in China after new controls, and domestic chip designers, including well known cloud players, want local supply options.
YMTC has been developing through silicon via (TSV) packaging skills that are needed to stack DRAM dies into high bandwidth memory. A potential collaboration with ChangXin Memory Technologies, a leading Chinese DRAM maker, has also been discussed in industry media. CXMT has explored HBM2 and is moving toward HBM3 on domestic lines, with Chinese sources pointing to a 2026 to 2027 window for meaningful output. YMTC brings expertise in hybrid bonding from its Xtacking work, which could help with stack alignment, interconnect density, and thermal management in HBM modules. Multiple Chinese firms, such as Tongfu Microelectronics and Wuhan Xinxin, are building out advanced packaging capacity to connect memory to processors.
At present, high bandwidth memory supply is dominated by three companies in South Korea and the United States. Their production is booked well in advance by buyers of AI accelerators. Chinese importers face licensing barriers and lengthening delivery times. Even a modest domestic effort would give China a local option for AI servers, edge accelerators, and research clusters. The near term market would likely be limited to Chinese customers who can qualify early versions while the technology matures.
Capacity, customers, and market impact
YMTC’s two existing Wuhan fabs were capable of producing about 160,000 12 inch wafers per month at the end of 2024. Plans called for a further increase of roughly 65,000 wafers during 2025 as tool installations continued. The third plant would add a separate stream of supply starting in 2027. Industry analysts estimate YMTC accounts for roughly 7 to 8 percent of global NAND capacity but less than 5 percent of revenue today, a gap that reflects product mix and pricing. Investment trackers have also projected that spending by YMTC could account for a sizable share of global NAND capital outlays in 2025. The company has set an ambition to climb into the top tier by capacity as the new lines ramp.
Most output is likely to stay inside China. Hyperscale data center operators, domestic server and storage vendors, smartphone and PC makers, surveillance system providers, and smart car platforms are all large consumers of flash memory. They are also under pressure to cut exposure to imported parts. If YMTC increases shipments through 2027, local buyers could replace more imported NAND in solid state drives and embedded storage. That shift could soften demand for foreign chips in China and influence global pricing, even if YMTC sells little outside its home market.
Risks and constraints
Ramping memory at competitive cost is difficult in any market. The most advanced NAND uses hundreds of layers and tight tolerances, and every lost percentage point of yield reduces margin in a commodity business. QLC devices push density but carry endurance and performance trade offs that matter in enterprise drives. YMTC also needs a supply of controllers, firmware, and qualified module assembly to deliver products for data centers, not just bare chips.
Policy risk remains high. Export rules can change, licenses can be revoked, and new categories of tools can be added to control lists. Financial risk is also present, since memory pricing is cyclical and capacity decisions made today will meet the market two years from now. YMTC’s focus on domestic customers reduces some exposure to foreign trade barriers, but it does not remove the pressure to match quality and reliability standards set by incumbent suppliers.
Milestones to watch through 2027
Investors and customers will be looking for proof points that the third factory can scale, that tool chains are ready, and that the product plan covers both consumer and enterprise needs. Several signposts will show if the schedule holds and whether a DRAM track takes shape.
- Construction and clean room build out at the Wuhan site
- Timing of tool move in and the share of domestically made equipment
- Pilot lines and early wafers during 2026
- First silicon from the third fab in 2027 and the first commercial products that follow
- Announcements on layer counts beyond 232 and any new Xtacking generation
- Formal steps toward DRAM research, TSV packaging, and trial HBM modules
- Qualification wins with major Chinese cloud or server customers
- Evidence of stable yields and partnerships with controller and SSD makers
Key Points
- YMTC has begun building a third memory factory in Wuhan, targeting first silicon in 2027
- China’s AI and cloud demand and a push for localization are driving the expansion
- United States export controls limit access to advanced tools, pushing YMTC toward domestic equipment
- A new Wuhan entity with about 20.7 billion yuan in registered capital underpins the project
- YMTC is exploring DRAM and high bandwidth memory, with potential collaboration with CXMT and a focus on TSV packaging
- Existing capacity was about 160,000 wafers per month at the end of 2024 with a planned 65,000 increase during 2025
- Analysts place YMTC at 7 to 8 percent of global NAND capacity and under 5 percent of revenue, with ambitions to move into the top tier
- Main risks include tool availability, yields, shifting export rules, and the challenge of enterprise qualification
