Chinese manufacturers are increasingly putting used memory chips salvaged from discarded phones and computers into new smartphones and other information technology devices. DRAM that has already run for five to six years is being recovered rather than scrapped. The practice is spreading as the artificial intelligence boom deepens a memory chip shortage and makes cheap secondhand chips attractive, but analysts warn that the reduced reliability of aging semiconductors could cause devices to freeze or malfunction without warning.
Chinese smartphone makers are expanding their use of recycled DRAM, mainly in entry-level models, according to market research firm Counterpoint Research on the 21st. Some companies are even considering sourcing all of the DRAM in their budget smartphones from recycled supply, the firm said.
Recycled DRAM is harvested by detaching memory chips from the circuit boards of scrapped phones or computers, running performance tests and then mounting them in new products. A dedicated trading market for these chips has emerged in China. Memory chips pried from discarded handsets are changing hands briskly in Huaqiangbei, the country's largest electronics market district in Shenzhen, according to Taiwanese technology outlet TechNews and Chinese business magazine Caijing. Collected chips are cleaned, stripped of solder residue and otherwise reworked before being resold at 40% to 60% of the price of new parts.
The salvaged chips end up not only in ultra-low-cost smartphones but also in internet of things devices and automotive peripherals. It has not been confirmed, however, whether recycled DRAM has actually been installed in flagship models from major Chinese handset makers such as Xiaomi, Oppo and Vivo.
The concern is the reliability of aging silicon. In China, DRAM that has already been in service for five to six years is in some cases being recovered and installed in IT devices with the aim of running it for another five to six years, Counterpoint Research said. As internal elements degrade over years of use, DRAM can lose its ability to retain data. The heat applied when chips are desoldered from one circuit board and soldered onto another is another factor that can undermine component reliability.
In accelerated aging tests on commercial DRAM, researchers at the University of Florida and Florida International University found that data retention errors increased as chip degradation worsened. If such errors occur in an actual smartphone, running programs can shut down abruptly or the device can become unstable. No large-scale failures attributable to recycled DRAM have been documented so far.
Chinese manufacturers are accepting these quality risks because of the memory shortage. With major chipmakers including Samsung Electronics (005930.KS) and SK hynix (000660.KS) prioritizing high-bandwidth memory and server DRAM for AI data centers, even memory for smartphones has fallen into short supply.
Prices for LPDDR4 and LPDDR5, the low-power DRAM used in smartphones, jumped to roughly triple their fourth-quarter level of last year in the second quarter of this year, Counterpoint Research said. Amid surging component prices and supply shortages, global smartphone shipments fell 20% in the third quarter from a year earlier, the lowest third-quarter volume in 14 years.
Chinese vendors, which rely heavily on low-priced models, were hit hardest. Xiaomi's global smartphone market share slipped to 12% in the third quarter, while shipments at Oppo and Vivo each fell more than 20%. Smartphone shipments within China also declined 10%. Budget handset makers, which have little room to pass higher memory costs on to buyers, are turning to cheap used chips as an alternative.
The bigger problem is that the memory crunch is unlikely to ease soon. Counterpoint Research expects the shortage of smartphone memory to persist through next year, which could push demand for recycled DRAM even higher. Yet the usage history of secondhand chips is difficult to verify and their quality is hard to guarantee. Industry watchers say the push by Chinese device makers to cut production costs with cheap parts could erode product reliability over the long run.
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