TAIPEI -- Beijing's push for technological self-sufficiency is on the verge of a major breakthrough, with the country's nascent chip industry on track to produce around 5% of the world's memory chips by the end of 2020 from virtually zero last year, sources familiar with the matter told the Nikkei Asian Review.

Beijing, which has made artificial intelligence a strategic priority, has pumped billions of dollars into building out a viable semiconductor industry from scratch over the past few years. The initiative has gained extra urgency following Washington's ban on China using certain U.S. technologies, such as memory chips that can be used in military and security equipment.

Yangtze Memory Technologies Co., which makes NAND flash memory chips, expects to triple production to 60,000 wafers a month, or 5% of world output, by the end of next year at its new $24 billion plant in Wuhan. ChangXin Memory Technologies, meanwhile, expects to quadruple production of DRAM chips to 40,000 wafers a month, or 3% of world DRAM output, at its $8 billion facility in Hefei.

The current global output of NAND flash and DRAM chips, which China has not manufactured before, is around 1.3 million wafers a month for each type of chip. Both markets are dominated by U.S., South Korean and Japanese manufacturers such as Samsung Electronics, SK Hynix, Micron and Kioxia, formerly known as Toshiba Memory.

"Both Chinese projects are in small-scale output now, but the quality is improving," a person familiar with the progress of both projects said. "They are all expanding production from now through next year for sure."

Yangtze Memory declined to comment on output levels, only saying that it had begun production of 64-layer NAND flash memory chips in September and would increase production according to company plans, without specifying what these plans are. ChangXin Memory declined to comment.

NAND flash chips, which form a $56 billion-a-year market, and DRAM chips, which are a $95 billion market, are essential memory components used in a range of devices from smartphones and data center servers to self-driving cars.

Sources said orders for Yangtze Memory’s NAND flash chips had already been received from some flagship international and domestic companies such as Lenovo, which plans to install the chips in its computers for both local use and export.

Asked for comment, Yangtze Memory said it expected that its chips would be used for various applications. "As a global innovative memory product provider, Yangtze Memory’s goal is to serve the global market,” the company said.

"It's a milestone for China," said an executive at Lite-On Technology, which has a joint venture with Yangtze Memory's parent company, Tsinghua Unigroup. "Yangtze Memory's shipments may look like small peanuts compared to larger players like Samsung Electronics, SK Hynix and Toshiba [now Kioxia]. But China is a real threat because its concept of making profits is different from others."

That differing vision became apparent last week when accumulated financial losses at Tsinghua Unigroup prompted the state-backed chip manufacturer to issue a statement saying it continued to operate normally, had not defaulted on its debts, and counted on abundant cash as well as the support of key shareholders.

Losses at the group, which counts President Xi Jinping's alma mater Tsinghua University as a core shareholder, widened to 3.2 billion yuan ($460 million) in the first half of the year, up from a 631 million yuan loss in 2018.

"The next 12 months will be critical," said Mark Li, a veteran semiconductor analyst at Bernstein Research. "When these memory products become widely available on the market, people will be able to verify if they infringe the intellectual property of other market leaders."

An extra challenge lies in the continuing technological rivalry between the U.S. and China.

Washington has put more than 200 Chinese companies and organizations on an economic blacklist that bans their use of U.S. technology -- although Huawei, the world's largest telecom equipment maker, won another 90-day exemption this week that allowed U.S. companies "specific, limited engagements" with Huawei and its non-U.S. affiliates.

However, Advanced Micro Devices can no longer license new technology to its Chinese state-controlled joint venture partner Tianjin Haiguang Advanced Technology Investment, which was placed on the U.S. blacklist in June.

Fujian Jinhua Integrated Circuit, another Chinese DRAM chip maker, has almost gone out of business since it was cut off from American suppliers amid allegations that it had stolen intellectual property from U.S. semiconductor company Micron Technology last year.

"There are many challenges and uncertainties ahead for these Chinese newcomers, but its government will support them strongly as they have a key mission to cut the country's dependence on foreign technology," said Arisa Liu, a semiconductor analyst at Taiwan Institute of Economic Research. "Still, it will take some three years for these Chinese newcomers to start to close the technology gap with market leaders."