YMTC's Wuhan Expansion Signals China's 3D NAND Push Amid Tooling Restrictions

China's Yangtze Memory Technologies Co. (YMTC) is poised to begin operations at its Phase 3 Wuhan fab by late 2025, marking a significant milestone as the first leading-edge memory plant built to comply with Beijing's unwritten requirement that new Chinese fabs source at least half their equipment from domestic suppliers.

According to three sources familiar with the plans who spoke to Reuters, more than 50% of Phase 3's tooling has been sourced inside China. The facility alone will reach 50,000 wafers per month by 2027 and 100,000 wafers per month at full capacity, effectively doubling YMTC's current 200,000 wafers per month of combined capacity at its first two Wuhan fabs.

The 50% Domestic Tooling Mandate

Chinese authorities have begun rejecting state approval for new fab construction unless applicants can prove through procurement tenders that at least half their equipment will be Chinese-made. While this rule isn't published in any formal regulation, officials have told applicants that 50% is a baseline, not a target, with the long-term objective being exclusively domestic wafer fab equipment.

Applications below the threshold are typically rejected, with waivers granted only for advanced production lines where domestic alternatives don't yet exist. YMTC's Phase 3 is now understood to be the first leading-edge memory project that'll clear that bar.

The company aims to add two more fabs of equivalent scale on top of the Phase 3 plant, though these follow-on facilities are not yet committed to specific dates or locations. Each will need to clear the 50% domestic tooling threshold before breaking ground.

Why 3D NAND Fits China's Tooling Strategy

(Image credit: YMTC)

YMTC's focus on 3D NAND technology positions it perfectly to meet these domestic sourcing requirements. Unlike planar NAND, 3D NAND scales vertically rather than horizontally, which shifts the manufacturing bottleneck away from lithography (where China's domestic toolchain is weakest) and toward high-aspect-ratio etch, deposition, and wafer bonding (where it's strongest).

Each new generation of 3D NAND adds layers rather than shrinking features, meaning the same lithography node can support 128, 232, or 300+ layer stacks, provided the etch tools can cleanly cut channel holes through 7-to-10-micron dielectric stacks.

In China, it's Advanced Micro-Fabrication Equipment (AMEC) that provides these critical tools. Its Primo HD-RIE dielectric etch platform, launched in 2015, was designed for high-aspect-ratio contact applications and was qualified for 6nm flash production a decade ago. AMEC has been working on 3D NAND etch ever since.

Meanwhile, Naura Technology Group, China's largest chip equipment maker by revenue, is supplying etching tools for chips with more than 300 layers and is testing its etch tools on SMIC's 7nm logic line after deploying them at 14nm. Naura filed 779 patents in 2025, more than double what it filed in 2020, while AMEC filed 259 patents.

Remaining Dependencies and Challenges

Despite progress in etch and deposition tools, YMTC still depends on imported tools for lithography—a significant vulnerability given that U.S. lawmakers are now looking at extending the ban on EUV lithography tools to the older DUV machines that YMTC relies on heavily.

Chinese alternatives exist but face deployment challenges. Shanghai Micro Electronics Equipment's SSA800-10W is nominally 28nm-capable but is barely deployed in any production fab. The Yuliangsheng immersion DUV scanner that SMIC began testing in late 2025 is years from supporting volume manufacturing.

For Phase 3 to clear 50% domestic tooling without leading-edge domestic lithography, YMTC has had to substitute deeply elsewhere: in etch, deposition, CMP, photoresist removal, cleaning, and metrology. Analysts estimate that Chinese suppliers have reached roughly 50% self-sufficiency in cleaning and photoresist-removal tools alone.

(Image credit: ASML)

DRAM and HBM Ambitions

The expansion isn't limited to NAND production. Part of each new fab's capacity will be dedicated to DRAM rather than NAND, with the proportion contingent on YMTC's progress in qualifying its low-power DRAM samples currently with customers.

YMTC has decided to allocate 50% of its Phase 3 capacity specifically to DRAM, with one YMTC supplier telling Nikkei Asia in February that the company "started to develop their own DRAM more than two years ago" and now has "the technological foundation and the market" to scale.

That foundation includes a back-end stack that no other Chinese DRAM contender has matched. Wuhan Xinxin Semiconductor Manufacturing, the foundry subsidiary YMTC controls, began developing HBM packaging capacity using hybrid bonding and other IP from YMTC roughly two years ago and bought equipment for a monthly capacity of around 3,000 wafers. XMC is also working on its own through-silicon via process technology, though development stages are not public.

When YMTC moves from LPDDR samples to volume DRAM and eventually to HBM stacking, it'll benefit from having the assembly side already (partly) in-house. CXMT, China's other HBM contender, still needs to build that infrastructure or buy it from XMC.

Geopolitical Timing and Implications

The timing of YMTC's expansion plans is particularly significant, coming less than two weeks after a bipartisan group of U.S. lawmakers introduced the Multilateral Alignment of Technology Controls on Hardware Act (MATCH Act).

Introduced in the House of Representatives on April 2nd by Michael Baumgartner with Senate companion legislation expected later in the month, the MATCH Act would impose a country-wide export ban on immersion DUV lithography tools and cryogenic etch systems to China and require allies, including the Netherlands and Japan, to align with U.S. controls within 150 days.

The bill explicitly names YMTC, alongside CXMT, Hua Hong, and Huawei, for additional restrictions beyond the country-wide ban. Bernstein analysts called the proposal "far stricter" than previous restrictions and warned it could effectively cap China's advanced chipmaking capacity at current levels.

If the MATCH Act passes in something close to its current form, the stockpiled foreign tools currently keeping YMTC's first two fabs running become harder to maintain over time, and the case for accelerating Phase 4 and Phase 5 on a domestic foundation will grow stronger, not weaker.

The two unannounced fabs are conditional on Phase 3 yields clearing acceptable margins, but the regulatory environment around them is moving in one direction—toward greater restrictions on foreign technology and increased pressure on Chinese manufacturers to develop domestic alternatives.