At the end of May, Taiwan’s Investigation Bureau cracked a case that made major headlines. A Chinese IC design house had set up a company in New Taipei registered in the name of a Taiwanese to poach local engineers.

Much of the media’s focus was on the company’s real boss, a former representative to China’s National People’s Congress from Anhui province.

His name – Zhu Yiming (朱一明) – is one that Taiwan and its semiconductor sector should be worried about.

Recognized as the leader of China’s DRAM “national team,” Zhu is the chairman and CEO of Anhui-based ChangXin Memory Technologies and the founder of the world’s third largest NOR Flash design company, Shenzhen-listed GigaDevice Semiconductor. 

When semiconductor insiders bring up Zhu, who has yet to hit 50, they compare him to another member of the Tsinghua University gang heavily involved in the sector –Tsinghua Unigroup Chairman Zhao Weiguo. Zhu started at Tsinghua University in 1989, four years after Zhao, to study physics.  

Zhao is known for the whirlwind he created a few years ago when he tried taking over or buying stakes in top Taiwanese semiconductor companies, an episode that remains etched in the minds of local businesspeople. 

Zhao, who got his start in business by investing in real estate in Xinjiang, became the face of China’s ambitions to build a semiconductor empire, and he pursued merger and acquisition opportunities in China, the United States, and Taiwan.

“If you won’t allow China to invest [in your semiconductor sector], I’ll have to go to Taiwan and poach talent,” Zhao threatened at the time, a boast that created a commotion in Taiwan.

His Tsinghua Unigroup, however, has fallen on hard times, declaring bankruptcy last year to undertake a restructuring plan. It suspended plans for large investments in memory chip companies, and Zhu, who has never sought media exposure, is taking up the slack. 

Taiwanese business people who have come in contact with Zhu generally praise him as somebody who “is not wolflike,” “values friends,” and “understands technology.” That image is in stark contrast to Tsinghua Unigroup’s Zhao, known as the “semiconductor tyrant.”

Zhu did postgraduate work at Stony Brook College in New York, but he left for a job in Silicon Valley before finishing his Ph.D. Later with the help of Tsinghua University alums, he returned to China to found GigaDevice.   

A senior executive at a big semiconductor company familiar with Zhu said his style is more American than Chinese, pointing to the example of Zhu sporting a backpack and riding the Shanghai subway during the company’s early stages. 

Apple supply chain breakthrough

A few months after Zhao was whipping up a storm in Taiwan, GigaDevice Semiconductor listed as an A-share in August 2016 at a time when Chinese tech stocks were hot commodities. GigaDevice shares rose to their daily limit 17 consecutive days, and its market capitalization soared above that of well-established Taiwanese rivals Macronix International and Winbond Electronics.

The stock’s sudden surge stunned Zhu, who wondered “how can the company be worth so much?”

GigaDevice achieved a major milestone last year when it became the exclusive supplier of NOR Flashes for Apple’s AirPods, pushing aside Taiwan’s Winbond.

It was the first product from a Chinese IC design company to find its way into a popular Apple product, symbolizing the growing strength of China’s semiconductor industry.

When the news of GigaDevice’s coup emerged, it stunned many companies in the Apple supply chain, for good reason. 

Apple puts a high priority on a supplier’s delivery capacity. It sells more than 10 million mobile phones and AirPods a month and often requires suppliers to rapidly increase shipments on a moment’s notice. Given those needs, why would Apple cast aside Macronix and Winbond, which both have their own 12-inch wafer foundries, in favor of a pure play IC design house that has to scramble to find production capacity? 

The answer revealed itself not long after. The Information, an American technology publication, reported in December 2021 that Apple CEO Tim Cook signed a secret deal with China in 2016 pledging to invest US$275 billion in China’s supply chain in exchange for keeping China’s market open to Apple and regulatory action against the company at bay. 

With Apple’s support, GigaDevice’s business took off. Revenue grew 89 percent in 2021 to 8.51 billion renminbi, and profit totaled 2.34 billion renminbi, numbers that approached those of Taiwan’s fourth largest IC design house, Himax Technologies. 

NOR Flash is a niche product in the memory chip sector with a relatively low threshold for entry. Major players Samsung and Micron have pulled out of the market, and in the few years since GigaDevice entered the market, it has squeezed out American chipmaker Spansion from the top echelon of suppliers and now holds one of the top three spots along with Winbond and Macronix.

A Macronix executive admitted that the company has been unable to hold its own in a price war with GigaDevice over the past few years and has decided to shift its focus to the automotive chip market.

Beyond that niche market, Zhu entered mainstream chip markets when he took over ChangXin Memory Technologies in 2018, and the results have been just as good.

Taiwan-threatening technology

In February 2022, Morgan Stanley said in a research report that ChangXin’s yield on its 17-nanometer DRAMs had reached 40 percent, putting it in position to mass produce them this year. 

That has major implications for the DRAM sector, because while ChangXin remains far behind industry leaders Samsung and Micron, it now poses a serious threat to second-tier Taiwanese foundries Nanya Technology, Winbond and Powership Semiconductor Manufacturing as it ascends to the top in China.

China has formed three “national teams” to carry out its semiconductor import replacement policy, and has nurtured stable entities to lead two of them – Semiconductor Manufacturing International (SMIC), at the top of the semiconductor foundry sector, and Yangtze Memory Technology, leading the way on NAND Flash technologies. 

But the most challenging DRAM sector has been in limbo in recent years, until Zhu’s companies stepped up. 

How has Zhu managed to turn the situation around in this difficult industry?

“He has had a much better feel for people than those who came before him,” said a Taiwanese industry insider, who cited Zhu’s reliance on former Inotera Memories vice president David Liu (劉大維) even though Liu was not originally part of Zhu’s team. 

An analyst with a foreign brokerage who visited ChangXin’s headquarters in Hefei came away very impressed by the company’s professionalism. The whiteboards in the offices of top executives were filled with circuit diagrams, indicating that they were directly involved in the process, a hands-on approach far different from China’s state-owned semiconductor ventures. 

In addition, many of the company’s top technical people were recruited from top American schools such as Stanford University and the University of California at Berkeley.

“They are all the best people from the best labs and could all work in Silicon Valley,” the analyst said.

These people have decided instead to work in Hefei, located about 400 kilometers inland from Shanghai to take on the DRAM challenge.

“Only if you were patriotic would you take this path,” the analyst said, recalling that he saw the same sense of mission when he visited ICT infrastructure and smartphone provider Huawei Technologies a few years ago.

As with Huawei, Zhu has taken on the lowest of profiles as the technology war between China and the United States has escalated, not appearing at even one public event for nearly two years, the complete opposite of the bombastic Zhao Weiguo.

He represents a new group of highly pragmatic, internationally-oriented Chinese semiconductor stars who are much more worthy of attention – and quite likely more dangerous – than their louder predecessors.

As one longtime industry insider put it: “The quiet ones are the most terrifying.”  

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Translated by Luke Sabatier
Uploaded by Penny Chiang