Samsung and SK Hynix rethink exposure to China after US chip law

Samsung Electronics and SK Hynix are reassessing their investments in China, as leading Korean chip makers respond to incoming US restrictions on advanced semiconductor production.

The Chips and Science Act passed by Congress last week, which mandates $52 billion to support advanced chip manufacturing in the United States, also contains qualified “firewalls” that prevent recipients of US federal funds from expanding or upgrading advanced chip capacity in China for 10 years.

The rulings have prompted both Samsung and SK Hynix to rethink their exposure to China, according to people familiar with the companies’ views.

A senior Korean official added that over time, many Korean investments in chip manufacturing in China are likely to be “abandoned”. “If China is unhappy, they will have to deal with the United States,” the official said.

These moves suggest that Washington’s efforts to encourage the world’s leading chip makers to move away from China and toward the United States are paying off.

“Barriers against China will accelerate the shift of Korean chip makers to the United States from China,” said Kim Young-woo, head of research at SK Securities in Seoul and an adviser to the Korean government on semiconductor policy.

SK Hynix Semiconductor Factory in Icheon, South Korea. Referring to the US Chip and Science Act, the company said it is “closely monitoring the situation” © SeongJoon Cho / Bloomberg

“They have rethought their strategies because of the technological war between the US and China and they are now leaning more towards the US because of the geopolitical risks.”

Kim added that Korean groups such as Samsung and SK Hynix “will build more American factories because they cannot mass-produce advanced chips without American equipment and technology. If they had to choose between the United States and China, they would have no choice but to choose the United States.”

The Biden administration has used export controls, investment screening, and generous subsidies to non-Chinese companies in an effort to increase domestic chip production and make it difficult for China to obtain advanced semiconductor technology.

These measures are part of a broader campaign to secure US supply chains and slow Beijing’s military modernization efforts.

Yoo Han Koo, a former Korean economic official who served as South Korea’s commerce minister until May this year, said a “recalibration” of Korean chipmakers’ strategy toward the United States and China had already begun.

Samsung Electronics, the world’s largest maker of memory chips, announced last year that it was investing $17 billion in a new plant in Texas in a bid to catch up with Taiwanese rival TSMC in the plumbing sector. Joe Biden visited the Korean conglomerate’s Pyeongtaek facility during a visit to South Korea in May.

Last month, Chey Tae-won, president of parent SK Hynix Group SK Group, held a virtual meeting with the US president to announce $22 billion in new chips, EV batteries and green technology investments in the US, including a new advanced foil packaging plant. .

SK Hynix’s DRAM factory in Wuxi, eastern China, is widely seen as the Korean-owned facility most vulnerable to the effects of US restrictions.

“This new economic order is still being crafted, and companies are reassessing and re-adjusting their strategy accordingly,” Yu said.

Lee Jae-min, a law professor at Seoul National University and an expert on international trade disputes, said the US is using subsidies to “lure” Korean chip makers into its regulatory orbit.

“Once they receive US subsidies, they will come under stronger US control over their decision-making and business activities, which will limit their investment and production in China,” Li said.

“Chip makers such as Samsung and SK Hynix have to constantly update their factories to produce high-end chips, but it is difficult to upgrade their Chinese facilities without introducing high-tech equipment.”

In a statement, SK Hynix said of the Chips and Science Act: “Since the legislation recently passed in the House and some details remain undisclosed, we are monitoring the situation closely.”

Samsung declined to comment.

Related Posts

Leave a Reply

Your email address will not be published.