Samsung Electronics is moving to upgrade its Xian plant in China to a 286-layer (V9) NAND flash process to counteract the current market downturn and fend off growing competition from Chinese semiconductor companies like YMTC, which has recently begun mass-producing 294-layer NAND.

Since 2023, Samsung has been pushing for a transition of its mainstay 128-layer (V6) NAND process at the Xian plant to a 236-layer (V8) line. Yet, it has decided to go one step further by installing a V9 line. It plans to introduce new equipment necessary for this process in the first half of the year and aims to establish a production line with a capacity of 2,000 to 5,000 sheets of wafer per month by the second half.

The transition is part of Samsung’s broader strategy to maintain its technological leadership and secure long-term product competitiveness.

The Xian plant, Samsung’s only overseas memory production base, is crucial to the company’s global supply chain, producing about 40% of its total NAND output. The upgrade to a 286-layer NAND process, also known as the 9th generation (V9), is expected to enhance the plant’s production capabilities significantly.

The Biden administration’s decision to grant Samsung the status of a “Verified End User (VEU)” in 2023 has been pivotal. This status allows Samsung to produce NAND with more than 200 layers in China, providing some leeway amidst U.S. sanctions that limit the export of advanced semiconductor manufacturing equipment to China. This development is crucial as it enables Samsung to continue its advanced manufacturing processes in China, despite geopolitical tensions.

An industry insider commented, “While expanding advanced NAND processes domestically, the company is also upgrading its NAND processes in China.” This dual approach highlights Samsung’s commitment to maintaining its competitive edge both at home and abroad. The company has also been working on applying a 400-layer (V10) NAND to the mass production line at its Pyeongtaek Plant 1 (P1) since the second half of last year, with initial mass production potentially possible in the second half of this year.

The company announced its fourth-quarter results for the previous year last month, stating, “We plan to accelerate the transition to 236-layer and 286-layer NAND to secure long-term product competitiveness.”

Despite these advancements, Samsung is expected to produce 420,000 NAND units per month in the first quarter of this year, marking a 25% reduction from the previous quarter. This reduction reflects the current downturn in demand from the mobile and PC markets, influenced by economic factors such as rising prices and interest rates. However, there is a growing demand from sectors like AI data centers, which is driving companies like Samsung to focus on high-performance, high-capacity NAND production.