Samsung and SK Ponder Implications
As competition is heating up between the United States and China to seize hegemony in the semiconductor industry, Korean companies’ concerns are deepening. The U.S. government has recently expanded the ban on semiconductor manufacturing equipment exports to China to equipment that can make chips more advanced than 14 nanometers. Previously, the ban was applied to equipment that can make chips better than 10-nm products.
Washington's move followed the passage of the CHIPs Act by U.S. Congress last week, which banned investment in high-tech semiconductors and factory expansion in China.
SMIC, the No. 1 foundry company in China, began mass-production of 14-nm products last year. Recently, rumors went around that it had successfully developed a 7-nm ultra-micro fabrication process. A 14-nm process can produce all semiconductors except for smartphone application processors.
The strengthening U.S. move to keep the Chinese semiconductor industry in check is weighing on Korean companies. China is highly dependent on South Korea for semiconductors, which are used for its finished products. This also means that Korean semiconductor companies depend on China for a significant portion of their sales. Samsung Electronics logged 26.1 percent of its sales in the Chinese market in the first quarter.
Samsung Electronics has a NAND flash plant in Xian, China, and SK Hynix runs a DRAM plant in Wuxi, China. The Xian plant is responsible for about 40 percent of Samsung Electronics’ total NAND production. The Wuxi plant is a core facility responsible for half of SK Hynix’s total DRAM production. A Korean semiconductor industry insider said that the current level of U.S. restrictions against China does not have a significant impact on Korean companies, but if the scope of U.S. control further expands, it may make it difficult for them to maintain production lines and introduce next-generation processes.
Some analysts say that the U.S. checks on China can benefit Korean semiconductor companies in the long term. “To Korean chipmakers, the U.S. moves are negative in the short term, but positive in the long term,” said Kim Yang-jae, a stock analyst. “A technology gap between Korea and China in the memory market is still wide, but China has recently been increasing the use of its own memories in Chinese smartphones and Apple was also considering the adoption of Chinese companies’ memories.”