"I Find Myself Cheering for China"... Even Apple Walks Away from CXMT

Apple and CXMT Talks Collapse Over Pricing
CXMT Retains Price Leadership Backed by Chinese Big Tech Demand
Samsung Electronics and SK hynix Expected to Benefit

Apple attempted to partner with Changxin Memory Technologies (CXMT), China’s largest DRAM supplier, to reduce costs. However, the negotiations effectively fell through due to disagreements over supply prices. Apple’s strategy to secure memory chips at prices lower than those offered by Samsung Electronics and SK hynix was ultimately blocked by CXMT’s firm pricing stance, which was supported by strong demand from big tech companies in China.

The balance of power in the semiconductor market is shifting as the global memory supply remains tight amid the ongoing artificial intelligence (AI) boom. Even Apple, which has long commanded strong negotiating power over component pricing due to its significant purchasing volume, faces difficulties exerting the same level of influence in the current supplier-favored market. As Apple’s options for alternative sources become more limited following the breakdown of these negotiations, industry observers expect Samsung Electronics and SK hynix to see an increase in their own bargaining power.

In front of the headquarters building of ChangXin Memory Technologies (CXMT) located in Hefei, Anhui Province, China. Photo by Reuters and Yonhap News Agency

According to China Fund Daily and other sources on August 6, Apple had been in negotiations with CXMT to supply LPDDR5X mobile DRAM in order to lower production costs for its next-generation iPhones and other smart devices.

It is reported that Apple considered adopting CXMT products to diversify its memory supply chain, which is primarily centered on Samsung Electronics and SK hynix, and to secure better price competitiveness. The recent surge in memory prices, driven by the expanding deployment of AI servers, has further increased the need to secure new suppliers.

However, pricing conditions became a stumbling block during negotiations. Apple requested a lower supply price from CXMT compared to Samsung Electronics and SK hynix, but CXMT reportedly declined the request.

LPDDR5, a model of CXMT. CXMT

The prices offered by CXMT were similar to, or in some cases higher than, those of Samsung Electronics and SK hynix. In effect, CXMT refused to assume the role of a “low-cost memory supplier” that Apple had anticipated.

Industry analysts note that this is linked to recent structural changes in the memory market. With growing demand for AI semiconductors and reduced capacity for DRAM supply, memory manufacturers have gained stronger bargaining power than before.

Backed by Chinese Big Tech: "Sufficient Demand Without Apple"

CXMT’s ability to reject Apple’s requests for price cuts is underpinned by strong domestic demand in China. Chinese companies are actively seeking locally produced memory, and a significant portion of CXMT’s production output is already secured.

In June, CXMT signed a supply agreement with Tencent worth about 3 billion US dollars (around 4.24 trillion won). The following month, ByteDance, the parent company of TikTok, entered into a long-term supply contract with CXMT worth up to 7 billion US dollars (about 9.91 trillion won) over a maximum period of five years.

Other major customers are said to include Huawei, Xiaomi, Alibaba Cloud, and Lenovo. China Fund Daily analyzed that high domestic demand for memory in China is reinforcing CXMT’s negotiating power over prices.

CXMT. Reuters Yonhap News

Moves to expand supply in overseas markets have also emerged. Global PC makers such as HP, Asus, and Acer completed quality accreditation for CXMT DRAM around the middle of the year and have begun limited adoption in certain notebook models.

As a result, observers note that CXMT had little incentive to lower its prices and shoulder the additional production burden necessary to pass Apple’s rigorous certification process.

U.S.–China Disputes Add Uncertainty Over Chinese Memory

The negotiations between Apple and CXMT were influenced not only by technological competition, but also by the ongoing U.S.–China rivalry. Apple is reported to have requested U.S. government approval to use products from CXMT and Yangtze Memory Technologies (YMTC) to diversify its supply chain.

However, the American political establishment remains opposed to increased use of Chinese semiconductors. On July 29, Democratic Senator Chuck Schumer and others sent a letter to Apple urging the company not to use CXMT and YMTC memory chips in its products.

CXMT and YMTC are included on the U.S. Department of Defense’s list of Chinese military-related companies. In this context, industry watchers suggest that Apple may have considered CXMT not so much as a true core supplier, but rather as a bargaining chip to strengthen its price negotiations with existing memory suppliers.

Historically, Apple has used supply chain diversification to negotiate prices with existing memory providers such as Samsung Electronics and SK hynix. Industry analysts believe that Apple’s outreach to CXMT was partly motivated by this same strategy.

Samsung Electronics and SK hynix Expected to Gain Bargaining Power

Now that negotiations between CXMT and Apple have fallen through, there are predictions that Samsung Electronics and SK hynix will benefit. With fewer alternative memory sources available to Apple, the negotiating power of the two Korean companies is likely to strengthen.

Apple. Reuters Yonhap News

Until now, Apple’s dominance as the world’s largest smartphone manufacturer gave it an edge in negotiating component prices. However, in the current memory market, suppliers are gaining greater leverage. Industry observers say that the breakdown of negotiations with CXMT goes beyond a mere failed supply agreement and illustrates a shift in the balance of power in the global memory market.

This content was produced with the assistance of AI translation services.