As US Eyes New Chinese Chip Restrictions, Global Market Turbulence Ahead

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SEOUL — Export restrictions that Washington is considering to halt China’s advances in semiconductor manufacturing could come at a substantial cost, experts say, potentially disrupting fragile global chip supply chains and hurting U.S. companies. .

Reuters reported on Monday that the United States is considering limiting shipments of American chipmaking equipment to memory chip producers in China that make advanced semiconductors used in everything from smartphones to data centers.

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The restrictions would prevent chipmakers such as South Korean giants Samsung Electronics and SK Hynix from shipping new technology tools to factories operating in China, preventing them from upgrading plants serving customers around the world.

Samsung and SK Hynix, which control more than half of the global market for NAND flash memory chips, have invested heavily in China in recent decades to produce chips that are vital to customers including tech giants Apple, Amazon, the owner from Facebook, Meta and Google. In addition to computers and phones, the chips are used in products such as electric vehicles that require digital data storage.

“Samsung’s production in China alone accounts for more than 15% of global NAND flash production… If there is any interruption in production, chip prices will rise,” said Lee Min-hee, an analyst at BNK Securities.

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The potential for further turmoil (restrictions have yet to be passed) comes just as the global chip supply shortage that has plagued businesses from cars to consumer devices for more than a year is finally showing signs of easing. . Supply chain adjustments and weakening consumer demand amid a slowing global economy have combined to repair the damage.

But the shortage has not yet been fully resolved. Any sign of a further disruption could reignite supply uncertainty, causing prices to rise, as seen earlier this year when China imposed COVID-19 restrictions on Xian, where Samsung makes chips.

Chip manufacturing equipment must be fully installed and tested months before production begins. Any delay in shipping equipment to China would pose a real challenge for chipmakers as they look to make more advanced chips at facilities in China.

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“Many US companies, such as Apple, use Samsung and SK Hynix memory chips. No matter what strategy (South Korean firms) end up choosing, it will have global implications,” said Lee, an analyst at BNK Securities.

Samsung and SK Hynix declined to comment. Apple, Amazon, Meta and Google did not respond to emails seeking comment outside of regular US business hours.


At Samsung’s memory chip operation in Xian, central China, one of the country’s largest foreign chip projects, the company has invested a total of about $26 billion since construction began on the site in 2012, including chip production, as well as testing and packaging.

The tech giant makes 128-layer NAND flash products in Xian, analysts said, chips that store data in devices such as smartphones and personal computers, as well as in data centers.

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The facility represents 43% of Samsung’s global NAND flash memory production capacity and 15% of overall global production capacity, according to TrendForce late last year.

The US crackdown, if passed, could also complicate SK Hynix’s ambition to expand its presence in the NAND market, where it ranks third since the first quarter behind Samsung and Japan’s Kioxia Holdings, which was spun off. from Toshiba Corp.

SK Hynix late last year completed the first phase of its $9 billion purchase of Intel’s NAND business, including its NAND manufacturing facility in Dalian, China.


The move the United States is considering is one of several recent signs of deepening tensions between Beijing and Washington over the tech sector.

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Congress last week passed legislation to subsidize semiconductor production in the United States. It prohibits any company that receives federal subsidies from investing in certain chip technology in China during the period of the subsidy.

The rising tensions could leave Samsung and SK Hynix having to review strategies on investments in China, analysts and industry sources said.

“Until now, companies tended to invest in countries like China where costs were low,” said Kim Yang-jae, an analyst at Daol Investment & Securities.

“That will no longer be the only consideration. The biggest change these potential limits will bring will be where the next chip factories are built.”

They could also face potentially diminishing returns from their multibillion-dollar plants in China, which could get stuck making less lucrative, older technology chips.

SK Hynix has been unable to upgrade its DRAM memory chip production facility in Wuxi, China, with the latest extreme ultraviolet lithography (EUV) chipmaking machines made by Dutch company ASML, as US officials do not want advanced equipment is used in the process to enter the country. .

EUV machines are used to make smaller, more advanced chips used in high-end devices like smartphones. (Reporting by Joyce Lee; Editing by Miyoung Kim and Kenneth Maxwell)



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