- Any US export bloc may affect global chip supply: analysts
- The move would hamper the upgrade of Samsung and SK Hynix plants in China
- Samsung and SK Hynix together supply more than 50% of global NAND chips
- Curbs could change where future chip plants are built: analyst
SEOUL, Aug 3 (Reuters) – Export restrictions being considered by Washington to halt China’s advances in semiconductor manufacturing could come at a substantial cost, experts say, potentially disrupting fragile global chip supply chains. and harm American businesses.
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. read more
Curbs would stop chipmakers like South Korean giants Samsung Electronics (005930.KS) and S.K. Hynix (000660.KS) from shipping new technology tools to factories operating in China, preventing them from upgrading plants serving customers around the world.
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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. (AAPL.O)Amazon (AMZN.O)facebook meta owner (META.O) and google (GOOGL.O). 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.
The possibility of a new upheaval (restrictions are 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. read more
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. read more
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.
“Many US companies, such as Apple, use Samsung and SK Hynix memory chips. No matter what strategy they (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.
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. read more
The US crackdown, if passed, could also complicate SK Hynix’s ambition to expand its presence in the NAND market, where it ranked third in the first quarter behind Samsung and Japan’s Kioxia Holdings, which was spun off. from Toshiba Corp. (6502.T).
SK Hynix completed the first phase of its $9 billion purchase of Intel late last year. (INTC.O) NAND, including its NAND manufacturing facility in Dalian, China. read more
The move the United States is considering is one of several recent signs of deepening tensions between Beijing and Washington over the tech sector.
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. read more
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. (ASML.AS) since US officials do not want advanced equipment to be used in the process of entering the country. read more
EUV machines are used to make smaller, more advanced chips used in high-end devices like smartphones.
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Information from Joyce Lee; Edited by Miyoung Kim and Kenneth Maxwell
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