The United States is planning to limit the number of advanced chips made by South Korean companies in China. This move will likely affect South Korean tech giants like Samsung and SK Hynix who have significant investments in China.
According to a Reuters report, The United States Commerce Department undersecretary for Industry and Security, Alan Estevez said that Washington will likely add a cap to the number of chips that South Korean companies can make in China. Estevez who supervises the Chinese trade restrictions made this comment during an event hosted by the Center for Strategic and International Studies, in Washington.
South Korea’s Investment in Semiconductor Foundries in China:
South Korea is a world leader in memory chip production with a total market value of $70 billion. The South Korean semiconductor economy is mainly driven by two of the world’s largest semiconductor producers, Samsung Electronics and SK Hynix who have invested billions of dollars in key manufacturing facilities in China.
Samsung Electronics has two main production facilities in China, one for NAND (flash memory) which is located in Xi’an, and another for DRAM ( Dynamic Random Access Memory) which is located in Suzhou. Apart from these facilities, Samsung has also established three advanced R&D centers in China, which is more than it has in its home country. The Samsung Xi’an factory accounts for 42.5% of its total NAND production and 15.3% of its global capacity. It is also the tech giant’s largest overseas investment with an initial expenditure of $7 billion for the production facility.
When it comes to SK Hynix, though the company has no R&D centers in China, it has built its DRAM and NAND memory chip production facilities in Wuxi, Chongqing, and Dalian. The factory at Wuxi produces more than 40% of the company’s DRAM chips. Apart from these two tech companies, there are many other South Korean fabless semiconductor firms and startups that have established their base in China.
Why is South Korea in a Dilemma?
Right now, China is the largest market for South Korean semiconductor companies. According to data from the Korea International Trade Association, mainland China and Hong Kong account for about 60% of the country’s semiconductor exports. However, the ongoing US-China trade war has put South Korea in a difficult position.
If a chip production cap is put on South Korean companies in China, then the companies will face severe losses and the South Korean economy will take a downturn. South Korea’s Minister of Industry said that to date there have been no official discussions between South Korea and the United States for setting a limit on the technology and production levels.
He further added that both South Korea and the US have agreed to not let the sanctions and policies affect the current and future investments of Korean companies in China. Last year in October, both Samsung Electronics and SK Hynix received a one-year reprieve from US export restrictions. The country is now planning to enter into a discussion with the US to extend the reprieve.
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(source)
