The Chinese company ChangXin Memory Technologies (CXMT) is a semiconductor manufacturer based in the city of Hefei. They produce, primarily, Dynamic Random Access Memory, or DRAM memory, for computers.
On Monday, the company went public, in one of the most surprising initial public offerings (IPOs) in history, with a smashing 466 percent gain in value on the first day.
CXMT’s shares surged 466% in their first day of trading. The company has become the most valuable one listed on a mainland Chinese exchange, with an estimated market capitalization of about 3.3 trillion yuan (more than $487 billion). But that’s still smaller than those of South Korean and American memory chipmakers like Samsung Electronics, SK Hynix and Micron Technology.
CXMT, or ChangXin Memory Technologies, is among many chipmakers that have profited mightily from the boom in artificial intelligence. Its business is thriving as China pushes for greater self-sufficiency in leading edge technologies while contending with limited access to advanced chipmaking machines due to American-led restrictions.
If that sounds suspicious to you, you aren't alone. Several American lawmakers are worried that this unusually profitable IPO is a de facto fundraiser for the Chinese military, and, according to a New York Post exclusive, they are calling on the Trump administration to look into what may be a national security issue.
Top US lawmakers want the Trump administration to launch a formal national security probe into Chinese memory chipmaker CXMT on suspicions that Beijing orchestrated the company’s blockbuster IPO to prop up a key military asset, The Post has learned.
Shares for the China-based chipmaker, also known as ChangXin Memory Technologies, skyrocketed 466% in Shanghai trading on Monday — raising $8.6 billion and instantly making the firm the most valuable on a China mainland exchange with a market capitalization of nearly $500 billion.
Beijing’s historic windfall — which sent shares of US chipmakers tumbling on competition fears on Monday — is setting off alarm bells in Washington, with a bipartisan group of at least a half-dozen members of Congress expected to send letters to the Trump administration in the coming days, sources close to the situation told The Post.
So, not only has a Chinese chip company seen a sudden windfall, but it's taking a bite out of American chipmaking companies' bottom lines, as well. Feature? Or bug?
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The Pentagon has already listed CXMT as a Chinese military company:
The Pentagon formally added CXMT to its list of Chinese military companies operating in the U.S. on June 8, but has so far stopped short of blacklisting it altogether.
A company qualifies for the list it is “engaged in providing commercial services, manufacturing, producing or exporting” and is either “directly or indirectly owned, controlled by, or acting as an agent of various Chinese government entities” or “identified as a “military-civil fusion contributor to the Chinese defense industrial base.”
Of course, the company is acting, directly or indirectly, as an "agent of various Chinese government entities." Very little happens in the Middle Kingdom without the Chinese Communist Party (CCP) having a say in it. The War Department seems to already have taken the first step into evaluating any national security issues here. Trouble is, there's not much Congress can do about it.
The problem is this: Congress, or even President Trump, has very little influence here. We can protest, we can send Chairman XI sternly worded letters until the cows come home, and China will carry on without much concern. The United States still has little influence over the CCP, and right now, the CCP, for all intents and purposes, is China.
We'll see what unfolds out of this. Economic parries like this aren't new; it's an old Cold War trick, like so many others, and the one takeaway of this is that we'd better be looking to do it to them, too.
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