The US will make it harder for Samsung Electronics Co. and SK Hynix Inc. to manufacture chips in China and upgrade production facilities there, threatening the two global memory chip leaders’ businesses in the world’s top semiconductor market.
The Commerce Department said on Friday that it was revoking waivers for Samsung and SK Hynix to use US technologies in their Chinese operations. The government had granted South Korean semiconductor giants exemptions to restrictions imposed in October 2022 on the sale of US semiconductor equipment to China.
“The Department of Commerce’s Bureau of Industry and Security (BIS) closed a Biden-era loophole that allowed a handful of foreign companies to export semiconductor manufacturing equipment and technology to China license-free,” the department said in a statement in the US Federal Register.
“Now these companies will need to obtain licenses to export their technology, putting them on par with their competitors.”
Samsung and SK Hynix have 120 days until the waiver expires, according to the posting.
NO CAPACITY EXPANSIONS, UPGRADES
The bureau plans to allow Samsung and SK Hynix to purchase US equipment and technologies solely to operate their existing fabs in China.
“BIS does not intend to grant licenses to expand capacity or upgrade technology at fabs in China,” the department said.
The move is expected to force Samsung and SK Hynix to keep manufacturing only legacy chips in China, industry sources in Seoul said.
Their Chinese facilities are strategic production bases of general-purpose semiconductors rather than advanced products such as high-bandwidth memory (HBM) chips, which are essential for artificial intelligence (AI).
Samsung produces about 35-40% of its total NAND flash memory chips at its facility in Xi’an, Shaanxi, while SK Hynix manufactures about 40% of its DRAM in Wuxi, Jiangsu, and 20% of NAND flash chips in Dalian, Liaoning. SK Hynix’s plant in Wuxi, Jiangsu, China (File photo by SK Hynix) The US restriction on the capacity upgrades and technological progress of Samsung and SK Hynix in China will likely cause China's domestic semiconductor industry to seek its own growth, industry sources in Seoul said.
Samsung Executive Chairman Jay Y. Lee said on Sunday that the company has to work hard when asked about the impact of the US measure on its Chinese business.
NEED STRUCTURAL CHANGE IN CHINESE PRODUCTION
Samsung and SK Hynix are expected to change their long-term strategy on their Chinese businesses as the US move is likely to disrupt their production there, industry sources in Seoul said.
The companies will have to spend three to nine months to procure equipment, which requires regular replacement and maintenance, as they need approvals each time from the US government, they added.
"Delays in equipment will inevitably require us to strategically adjust production lines in China," said one of the sources.
Samsung and SK Hynix may have to consider gradually relocating facilities from China to South Korea in the medium to long term, sources said.
