DRAMeXchange Assistant Vice President Sean Yang said that the Dalian fab began operation in 2010 and its main products were CPUs made from 12-inch wafers using the 65nm process technology. Since the fab was not yielding profits at the expected level, Intel has decided to upgrade the fab so it can produce the more advanced 3D-NAND Flash chips. Besides raising the profitability of the Dalian fab, the global chip maker can take advantage of China’s soaring NAND-Flash demand.

More importantly, Intel would be able to participate as a partner in the Chinese government’s efforts to establish a domestic memory industry. This fab conversion project is therefore a timely and mutually beneficial solution for all parties involved.

Based on DRAMeXchange’s analysis of the capital investment and the plant’s capacity, the Dalian fab’s 3D-NAND Flash capacity in the initial period will be around 30,000~40,000 wafer starts per month. As the strategic alliance between Intel and Micron becomes ever tighter with their collaborations on 3D-NAND Flash and 3D X Point technologies, the Dalian fab will offer greater flexibility for their camp in capacity planning so that they can meet the exploding demand for SSD products.

Yang added that even though the NAND Flash market will still be in oversupply from the fourth quarter of this year to the first quarter of next year, the Chinese government intends to continue and greatly accelerate the development of domestic supply chains for NAND Flash and SSDs during this slump.

Notable examples include major Chinese memory module maker Netcom’s collaboration with U.S.-based controller chip designer Marvell and XMC’s recent efforts in developing its own 3D-NAND Flash technology. The Chinese government is also eagerly courting major international memory suppliers such as Samsung, which plans to raise its Xian fab’s capacity to 100,000 wafer starts per month in 2016.

DRAMeXchange expects the Chinese NAND Flash market to see a much larger boom when Intel completes the conversion of its Dalian fab in the first half of next year.