Kingston and Lexar parent company teams up to address Chinese memory market amidst US sanctions

Kingston
(Image credit: Kingston)

Kingston, the world's No. 1 supplier of retail memory modules and storage devices, has formed a joint venture with Longsys Electronics to operate in China. The move will combine the strengths of Kingston and Longsys, and lower risks for the former. In addition, the partnership will better address the Chinese retail memory market and avoid any potential problems caused by the U.S.-China tensions. 

Under the terms of the deal, Kingston will hold a 49% stake in the joint venture, whereas Longsys will own the majority with a 51% stake. The joint venture will function as an independent entity with full corporate governance and management capabilities. Its focus will be on offering 'diverse and high-end embedded storage solutions' to customers in mainland China. The joint venture will handle its own product planning, R&D management, supply chain management, and sales. Meanwhile, Longsys will conduct R&D and technical support, whereas Kingston will be responsible for core resource procurement and branding.

By forming a joint venture with a Chinese company, Kingston opens its doors to work with virtually any entity in China that needs embedded storage. Given how keen the U.S. government is to place China-based companies in its Entity List, Kingston saves time and effort by not directly working with certain China-based customers and partnering with a local company to handle these clients. 

Kingston is the world's No. 1 supplier of branded memory modules and solid-state drives. Its lineup also has plenty of embedded storage and memory products, though it is hard to say how successful the company is in this territory.

This joint venture is a response to the ongoing political and business tensions between the U.S. and China. DigiTimes says this represents a bigger trend where American tech companies are teaming up with local firms to stay strong in China. This partnership could also be great news for the supply chain, with companies like Phison Electronic, which works with Longsys, likely to benefit from the deal.

Anton Shilov
Freelance News Writer

Anton Shilov is a Freelance News Writer at Tom’s Hardware US. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.

  • AndrewJacksonZA
    Can someone please explain in legal terms how this is a work-around the sanctions, and why other companies like Nvidia can't/won't do the same?
    Reply
  • deesider
    AndrewJacksonZA said:
    Can someone please explain in legal terms how this is a work-around the sanctions, and why other companies like Nvidia can't/won't do the same?
    It's this bit "The joint venture will function as an independent entity with full corporate governance and management capabilities".

    The US sanctions aren't applied generally to any company simply because it is in China - that can't really happen legitimately because it would be in breach of WTO agreements. The 'entity list' comprises companies that are said to be under the effective control of the Chinese government, which supposedly poses a threat to US national security.

    A completely independently run company can't be under the control of the Chinese government, so in theory, it can't be placed on the entity list.
    Reply
  • wr3zzz
    AndrewJacksonZA said:
    Can someone please explain in legal terms how this is a work-around the sanctions, and why other companies like Nvidia can't/won't do the same?

    Trade sanction and entities lists are two different kinds of US "judicial long arm", i.e. extending US domestic laws to jurisdictions of other countries. The writer of this article has a long trail showing zero clue of how to do business reporting, or write proper headlines for that matter, and Tomshardware apparently no longer has editorial oversights over its writers.

    The one this article deals with is the entities list. Companies do business with or in US cannot do any business with persons or companies on the US entities list. For example, Huawei is on the list but by spinning its handset business into Honor, an independent company not controlled by Huawei, Honor can continue to use Qualcomm chips and Google services. You might ask how is Huawei still making notebooks using Intel CPU. Intel has obtained special licenses to keep selling CPU to Huawei.

    The other one is trade sanctions. Sanctions are about products/services. Companies that do businesses in or with US cannot sell or purchase certain goods/services to/from specific countries under specfic sanctions. This has nothing to do with ownership of companies but rather with goods/services and sources/detinations.

    Nvidia has to navigate both. It cannot ship any GPU equal or better than 4090 to anyone in China because those GPU falls under sanctions. Nvidia also cannot sell anything, not just 4090 or better, to Huawei or buy anything from Huawei without US government approval because of entities list.

    Per this article, while the mentioned Chinese memory maker Longsys is not on the US entities list AFAIK, two leading Chinese memory makers are added recently. By forming the joint venture, IF US decides to add Longsys to the entities list as well Kingston can ensure its business won't be interrupted because it likely has shifted the business from directly dealing with Longsys to the new joint company.
    Reply
  • AndrewJacksonZA
    Thank you.
    Reply
  • Co BIY
    wr3zzz said:
    Trade sanction and entities lists are two different kinds of US "judicial long arm", i.e. extending US domestic laws to jurisdictions of other countries. The writer of this article has a long trail showing zero clue of how to do business reporting, or write proper headlines for that matter, and Tomshardware apparently no longer has editorial oversights over its writers.

    The one this article deals with is the entities list. Companies do business with or in US cannot do any business with persons or companies on the US entities list. For example, Huawei is on the list but by spinning its handset business into Honor, an independent company not controlled by Huawei, Honor can continue to use Qualcomm chips and Google services. You might ask how is Huawei still making notebooks using Intel CPU. Intel has obtained special licenses to keep selling CPU to Huawei.

    The other one is trade sanctions. Sanctions are about products/services. Companies that do businesses in or with US cannot sell or purchase certain goods/services to/from specific countries under specfic sanctions. This has nothing to do with ownership of companies but rather with goods/services and sources/detinations.

    Nvidia has to navigate both. It cannot ship any GPU equal or better than 4090 to anyone in China because those GPU falls under sanctions. Nvidia also cannot sell anything, not just 4090 or better, to Huawei or buy anything from Huawei without US government approval because of entities list.

    Per this article, while the mentioned Chinese memory maker Longsys is not on the US entities list AFAIK, two leading Chinese memory makers are added recently. By forming the joint venture, IF US decides to add Longsys to the entities list as well Kingston can ensure its business won't be interrupted because it likely has shifted the business from directly dealing with Longsys to the new joint company.

    Thanks for the clear explanation of an opaque subject .
    Reply