Musk on chip production: China's large-scale manufacturing capacity often exceeds the sum of all other regions worldwide

Musk's latest remarks on China's manufacturing scalability have further fueled competitive anxiety already present in the chip industry.

Overnight, news of a major technological breakthrough from Chinese memory chip maker CXMT rattled the US chip sector— with the Philadelphia Semiconductor Index plunging 2.7% on Monday, hitting a three-week low. Memory-related stocks such as Micron, SanDisk, and SK Hynix ADR led the losses, as market concerns mounted over Chinese makers accelerating their entry into the high-margin AI server memory market.

Addressing this trend, AI analyst Melvin stated that he could not understand the wave of memory stock sell-offs, believing the market overreacted and that this sell-off was not justified.

Subsequently, Musk responded on social platform X, stating, Once China masters the manufacturing method for a given product, its ability to scale production often exceeds that of all other regions combined, citing lithium batteries and solar panels as examples. He also expressed clear concerns about China’s catching-up speed in the memory chip arena, noting that general standard specs such as LP5 and LP6 "seem to be being rapidly conquered by China."

Musk: China’s Scalability Is a Systemic Advantage

Musk characterized China’s manufacturing scalability as a systemic advantage, not an isolated case. He wrote: "When China figures out how to make a product, their scalability often exceeds all other regions combined. We have witnessed this in lithium batteries and solar panels."

He used SpaceX as a reference, pointing out that it is one of the few exceptions—with its total payload to orbit being an order of magnitude higher than all other launch rockets in the world combined. However, he immediately added that even so, China currently occupies most of the non-SpaceX payload share, stating, "SpaceX is an outlier in the matrix."

In the memory chip field, Musk’s judgment was even more direct. He stated that RAM was still just a low-profit commodity three years ago, and that LP5 and LP6 adopt general standard designs which "China appears to be rapidly addressing". He further pointed out that the next-generation HBM architecture, the SRAM layer underneath the logic layer, as well as 3D stacked RAM with thermal solutions above the logic layer, would be even tougher technical challenges to overcome.

CXMT’s Technological Breakthrough Triggers Market Sell-Off

Musk’s remarks were not made out of thin air. Just over the past weekend, CXMT president Dr. Cao Kanyu announced at an industry event that the company achieved a key breakthrough in next-generation 4F² memory cell architecture and plans to launch DDR5 server memory products based on this architecture by the end of 2026.

The core advantage of the 4F² architecture lies in its smaller memory cell area. In conventional DRAM with the common 6F² design, F refers to the minimum process linewidth, and theoretically, the 4F² design allows about one-third more bits per unit area, reducing unit cost and being more suitable for high-capacity modules needed in AI servers. Cao Kanyu noted that the design uses proprietary vertical gate-all-around transistors to suppress leakage, directly targeting the high-margin AI server DRAM market.

This announcement sharply intensified market fears over Chinese companies accelerating their penetration into the high-end memory chip market, acting as a direct catalyst for Monday’s chip stock plunge. Tech stocks turned out to be the worst-performing US sector on Monday, with memory-related stocks bearing the brunt. Micron fell below the $1000 mark, closing down about 4%; SanDisk closed down nearly 6%; SK Hynix ADR and Super Micro Computer both dropped over 4%; Seagate Technology tumbled over 3%; Quantum sank over 9%; and Corning also fell heavily.

The rationale for the sell-off is clear: if Chinese makers can enter the high-end memory chip market—previously dominated by US and South Korean firms—at lower costs and larger scales, the profit margins of related firms will face substantial pressure. Musk’s public remarks have, to some extent, reinforced investor expectations of this evolving competitive landscape.