Potential Negative Spotlight
As tensions intensify between the U.S. and China over smartphones equipped with Huawei’s self-developed 5G chips, uncertainty surrounding the Chinese plants of Samsung Electronics and SK hynix is expected to deepen.
According to industry sources and foreign media on Sept. 10, after Huawei unveiled two new smartphones, the Mate 60 Pro+ and the foldable Mate X5, on Sept. 8, the U.S. Department of Commerce commenced an official investigation into the 7-nm Kirin 9000S chip used in the Mate 60 Pro+. The Department emphasized that it “will not hesitate to take appropriate measures for the sake of U.S. national security,” hinting at potential additional sanctions based on the investigation results.
This can potentially harm the South Korean semiconductor industry. Notably, the Mate 60 Pro+ was found to use SK hynix’s DRAM and NAND flash. SK hynix hasn’t dealt with Huawei since U.S. sanctions began in May 2020. However, it was revealed that Korean-made memory semiconductors could reach Huawei through alternate routes, suggesting that stricter regulations may be applied.
According to market research firm Omdia, South Korean companies hold a 70.1% share (Samsung Electronics 38.2% and SK hynix 31.9%) of the global DRAM market in this year’s second quarter. This means 7 out of every 10 smartphones contain South Korean-made DRAM. It’s practically impossible to produce millions of smartphones without DRAM from Korean companies. While Huawei mainly used Chinese components for the Mate 60 Pro+ chipset, display, and moldings, they couldn’t replace memory semiconductors with Chinese alternatives.
A semiconductor industry insider noted, “From the U.S.’ perspective, seeing SK hynix products in the Mate 60 Pro+ might suggest that memory semiconductors are an effective sanction tool against China.” Particularly, the Chinese factories of Samsung Electronics and SK hynix might come into the spotlight. It’s known that Samsung Electronics produces about 40% of its NAND flash in Xi’an, China. SK hynix reportedly manufactures 20% of its DRAM and about 40% of its NAND flash in Wuxi and Dalian, China, respectively.
Last October, the U.S. Department of Commerce announced semiconductor equipment export restrictions targeting China but granted a one-year reprieve to South Korean companies. The South Korean government and businesses have been lobbying for an extension. However, with the Huawei incident, concerns are mounting about a potential change in the U.S. government’s stance.