TAIPEI -- A Chinese company founded in 2016 is about to become the country's first mass producer of locally designed key memory chips, competing with giants Samsung Electronics and Micron Technology in a $100 billion a year market, as Beijing steps up its drive for self-sufficiency in core technologies.

Changxin Memory Technologies, previously known as Innotron Memory, has redesigned its dynamic random access memory chips to minimize the use of U.S. technology, in a bid to avoid infringing patents and potentially falling victim to the U.S. crackdown on China's rising tech industry, according to two sources with knowledge of the matter.

While Changxin will not be able to eliminate the threat entirely as its production will still rely on American equipment and design tool suppliers, the redesign will insulate the company against potential U.S. allegations of intellectual property theft, the sources told Nikkei Asian Review.

The company, which has invested $8 billion in a chip production plant in the eastern Chinese city of Hefei, intends to start production of these crucial memory components by the end of the year, they said. DRAM chips are the working memory of billions of devices, from laptops to smartphones, data center servers and connected cars.

The Chinese company will initially produce some 10,000 wafers a month, one of the sources said. "It will need to undergo some kind of learning curve, but the company plans to have some output by the end of this year," he said.

While the output will still be small compared with the 1.3 million DRAM wafers a month currently produced globally, the start of production would still mark a major breakthrough for China as the country currently has no homemade DRAM chips, said Sean Yang, an analyst at market research company CINNO.

The global DRAM market was worth some $99.65 billion in 2018, and three companies -- Samsung Electronics, SK Hynix of South Korea and Micron Technology of the U.S. -- control around 95% of output.

"The Chinese company...aims to match the [output] level and technology of the big three, rather than just making specialized DRAM for fragmented niche markets," one of the sources said. However, meeting this goal depended on the quality and consistency of production as it ramped up, he added.

Another source familiar with Changxin Memory's plans said the company was expecting capital expenditure of $1 billion to $1.5 billion a year, which already exceeds last year's $650 million spending by Nanya Technology, the world's No.4 DRAM chipmaker.

Other Chinese chipmakers are also slated to start mass production of chips such as NAND flash memory units, which save data when power is off. The country's first NAND flash memory project by state-backed Yangtze Memory Technologies Co. will begin producing by the end of the year and will challenge Samsung, Toshiba, Western Digital and Micron, Nikkei has reported.

Changxin Memory decided to redesign its chips in an effort to avoid the fate of smaller local peer Fujian Jinhua Integrated Circuit Co, which never began production and was almost forced out of business earlier this year when Washington barred its access to U.S. technology and accused it of intellectual property theft.

Changxin was widely seen as the next potential target for Washington's campaign and has taken extra steps to avoid infringing U.S. patents, sources familiar with the matter said. "The company also asked legal counsel to sit in on external business meetings to make sure staff was extremely careful when communicating with partners and suppliers," one of the two people said.

Zhu said last month that Changxin Memory's DRAM design was based on technology from Qimonda, an affiliate of German chipmaker Infineon that filed bankruptcy in 2009.

But like the world's leading semiconductor manufacturers it still needs to use equipment from U.S. companies such as Applied Materials, Lam Research, KLA-Tencor, as well as materials from Dow Chemical and electronic design automation tool providers from Cadence and Synopsys.

The company's CEO Zhu Yiming traveled to Europe last October to meet the management of ASML, the biggest European chip equipment provider, and also visited Belgium's IMEC, a pioneering research institute that specializes in nano-electronics and digital technology. He was seeking support from suppliers outside the U.S. and wanted to signal the company's ambition to challenge market leaders, Nikkei Asian Review reported at the time. Changxin Memory's website says it was founded in 2016 and its LinkedIn page says it employs several thousands people.

Depending on how quickly Changxin accelerates production, the company's entry into an already depressed DRAM market could hit prices even further over the next two years, analysts suggested. The average DRAM price has more than halved since the peak in the third quarter last year as the U.S.-China trade war takes its toll on the global economy, said CINNO's Yang said. "We expect the DRAM price will continue to drop in the second half of this year," Yang added.

Research group Trendforce expects DRAM prices to plunge by up to 15% in the third quarter of 2019, with a further drop of up to 10% in the final three months of this year when the U.S. blacklisting of Huawei Technologies could be expected to hit demand.

Changxin Memory is also referred to as Heifei Rui-li Integrated Circuit Manufacturing. "Changxin Memory has no information to share so far regarding Nikkei Asian Review's request for comments," said a company spokesperson.

Nikkei staff writer Lauly Li contributed to this report.