If they have the runway, they can try the tried and true method of undercutting competitors until they fold, and then capture the market for themselves.
Investors have the stomach for this tactic, surely a company with the state's backing can remain solvent even longer than those funded by private investors.
I think the economics are wrong for this, at least so far. CXMT seems to be scaling up as fast as they can, and they have maybe 5% market share. They can’t flood the market with cheap DRAM because they don’t have enough DRAM yet — I’m not convinced they could materially impact anyone else’s profits even if they literally gave away their entire output. At best selling their product cheaply might help them gain some mindshare as integrators test it and hopefully discover that it meets the spec and works fine. What they need is capital and time with which to scale, and selling at a profit-maximizing price will get them the most capital, and this benefit may well exceed the actual profit on goods sold: the stock market might appreciate that they are profitable, thus making it easier for them to obtain funding under favorable terms.
If they actually want to try to destroy their competitors by undercutting them, they need to be able supply enough DRAM to actually drive down the price. At the rate that the big buyers are buying DRAM, that will take several more years at least.
I’m curious whether their presumed inability to buy ASML machines might actually help them. If they can meet the target DDR5 and HBM specs without EUV while maintaining decent yield and acceptable power consumption of the finished product, they may well be able to out-scale their competitors. I imagine it’s a lot easier to procure the equipment for additional DUV lines than EUV lines, especially with other Chinese vendors doing their best to supply semiconductor manufacturing equipment.
Undercutting the competitors is done when a business is working close to cost and a slight anomaly (eg. competitor that doesn't have to make profit, is subsidized or is cheaper for some artificial reason) makes them go out of business.
A stick of ram, made for $10, that used to cost $20 is now $100 due to the AI bubble (numbers pulled out of my ass)... you'd have to bring the prices down to $15 or even less to make those companies fold, but you can earn much more if you sell your ram at $80.
Investors have the stomach for this tactic, surely a company with the state's backing can remain solvent even longer than those funded by private investors.