China Is Coming For Micron’s Thick Margins

The memory industry is in the middle of an unprecedented boom.

AI servers are driving up unprecedented demand for high-bandwidth memory; supply remains tight, and DRAM prices have surged, forcing PC and smartphone makers to look beyond their traditional suppliers. That search is increasingly leading them to China. Apple has reportedly sought approval to source DRAM chips from blacklisted ChangXin Memory Technologies (CXMT), while Dell Technologies, HP Inc., Acer, and ASUS are reportedly considering similar moves.

For companies like Micron (MU), which recently posted gross margins above 84%, the real question is whether today’s extraordinary profitability can survive China’s entry into the market. See how Micron’s margins have trended

And if history is any guide, investors should start paying close attention.

China has followed this playbook before. Solar panels, batteries, EVs, and shipbuilding all went through the same cycle: state-backed investment, reverse-engineered technology, and relentless manufacturing scale until established global players could no longer compete on cost. Until now, memory chips seemed immune. For nearly three decades, the DRAM market has been dominated by Samsung Electronics, SK Hynix, and Micron, whose technological lead and manufacturing expertise kept challengers at bay.

But the current shortage may be creating the opening China has been waiting for. If this shortage gives Chinese memory makers their first meaningful foothold with global OEMs, it could mark the biggest competitive shift the DRAM industry has seen in 30 years.

The Squeeze That Created An Opening

The proximate cause is the AI memory supercycle. Conventional DRAM contract prices surged between 93% and 98% QoQ over the first quarter of this year.

Samsung, SK Hynix, and Micron are shifting wafer capacity toward high-bandwidth memory, the premium high-speed memory that sits besides Nvidia (NVDA) AI accelerators, because that’s where the margin is. This is having a major side effect: commodity DRAM, the kind that goes into laptops and phones, is getting squeezed out. Apple just raised MacBook and iPad prices by between $100 and $300, citing component costs, while simultaneously shopping for a cheaper Chinese alternative. Both moves point to the same conclusion: management sees this as structural, not a passing cycle.

That’s the opening companies like China’s CXMT could step into. And the speed of its rise is notable. The company began volume DRAM production in 2020. By 2026 its global revenue share had reached 8%, up from 3% a year earlier, making it the fourth-largest DRAM maker. CXMT currently has two 12-inch DRAM fabrication plants with a combined capacity ⁠of about 300,000 ​wafers per month. There are reports that with a new Shanghai facility as well as other new capacity, CXMT will double its ​DRAM wafer output to approximately 600,000 wafers per month. ^[1]  This compares to Micron’s own 385,000 capacity. Revenue is on pace for roughly 700% year-over-year growth in early 2026, with the company posting its first-ever profitable quarter. Its DDR5 chips are already inside Lenovo laptops shipping today.

Investors are betting that Micron will see a multi-year upcycle, driven by long-term contracts for memory. But there could be a catch. Here’s why

There Are Still Challenges

Still, China’s memory push has a problem that its other sectors, such as solar and EVs, did not. Those industries were won mostly by building factories faster and cheaper than anyone else on technology that was largely available to whoever could afford it. Memory is different because of a single piece of equipment: extreme ultraviolet (EUV) lithography machines, made only by the Dutch company ASML, which are not essential for DRAM production but are critical for manufacturing the most advanced chips efficiently. Washington has blocked ASML from selling these machines to Chinese firms, so CXMT is stuck building chips with older tools, no matter how much capital Beijing throws at it.

That shows up clearly in the numbers. CXMT’s DDR5 die is roughly 40% larger than Samsung’s equivalent, which means fewer usable chips per wafer and a structurally worse cost base, not a better one. The larger die size is itself a byproduct of working without EUV: older lithography tools can’t pack circuits as densely, so CXMT needs more silicon to do the same job. Its cost per bit remains more than 30% above the three leading suppliers, suggesting its current profitability is a function of unusually strong pricing across the whole market, not genuine product superiority.

The gap is starker in HBM, the high-bandwidth memory used in AI accelerators and the segment driving SK Hynix’s and Samsung’s surge. CXMT has only sampled HBM2 and HBM3 chips with customers like Huawei; commercial-volume production keeps slipping, even as rivals are already shipping HBM4. Unlike DDR5, catching up in HBM requires far more than manufacturing scale and capital investment.

What It Means for Micron, Samsung, and SK Hynix

For the likes of Micron, Samsung, and SK Hynix, China’s rise is a challenge, but not an existential one. CXMT is emerging as a credible competitor in commodity DRAM, where it could pressure pricing in PCs and smartphones. But the real investment story has shifted to HBM, where demand from AI accelerators remains strong and technological barriers are much higher. As long as China lacks access to EUV lithography and advanced HBM manufacturing, the incumbents are likely to maintain their lead in the industry’s fastest-growing and most profitable market.

That said, the industry’s trajectory will depend not just on technology, but also on regulation. Export controls, licensing decisions, and trade policy could determine how quickly Chinese suppliers expand globally and how much of the memory market ultimately becomes contestable.

Opportunities like DRAM manufacturers highlight how individual semiconductor stocks can surge dramatically during technology transitions, but they also carry concentrated exposure to industry cycles, capacity expansion, and execution risk. A disciplined portfolio approach helps smooth these risks while still participating in long-term growth themes. The Trefis High Quality (HQ) Portfolio has consistently outperformed its market benchmark since inception, delivering cumulative returns of over 105%.

1. Reuters [↩]