Samsung and SK Hynix rethink exposure to China following US chip law
Samsung Electronics and SK Hynix are reassessing their investments in China as major Korean chipmakers react to new US restrictions on the production of advanced semiconductors.
The Chips and Science Act passed by Congress last week, which provides $52 billion in grants to support advanced chip manufacturing in the United States, also contains qualified “safeguards” prohibiting recipients of funds Feds to expand or improve their advanced chip capability in China for 10 years.
The provisions have led Samsung and SK Hynix to rethink their exposure to China, according to people familiar with the views of both companies.
A senior Korean official added that over time, several Korean investments in chipmaking in China were at risk of being “discontinued”. “If China is not satisfied, it will have to discuss it with the United States,” the official said.
These moves suggest that Washington’s efforts to encourage major chipmakers to move away from China and into the United States are paying off.
“Guardrails against China will accelerate the movement of Korean chipmakers to the United States from China,” said Kim Young-woo, head of research at SK Securities in Seoul and adviser to the Korean government on policy. semiconductors.
“They re-strategized because of the US-China tech war and they are now leaning more towards the United States due to geopolitical risks.”
Kim added that Korean groups such as Samsung and SK Hynix “will build more American factories because they cannot mass-produce cutting-edge chips without American equipment and technology. If they have to choose between United States and China, they have no choice but to opt for the United States”.
The Biden administration has used export controls, investment screening and generous subsidies for non-Chinese companies in an effort to increase domestic chip production and make it harder for China to obtain advanced semiconductor technology.
The moves are part of a broader campaign to secure US supply chains and slow Beijing’s military modernization efforts.
Yeo Han-koo, a former Korean economics official who served as South Korea’s trade minister until May, said the “recalibration” of Korean chipmakers’ strategy toward the United States and China had already begun.
Samsung Electronics, the world’s largest memory chipmaker, announced last year that it was investing $17 billion in a new factory in Texas in a bid to catch up with Taiwanese rival TSMC in the foundry business. Joe Biden visited the Korean conglomerate’s Pyeongtaek facilities during a trip to South Korea in May.
Last month, Chey Tae-won, Chairman of SK Hynix Group, parent of SK Hynix, held a virtual meeting with the US President to announce $22 billion in investments in semiconductors, electric vehicle batteries and green technologies in the United States, including a new advanced chip packaging plant.
SK Hynix’s Dram memory chip factory in Wuxi, eastern China, is widely seen as the most vulnerable Korean factory to the effects of US restrictions.
“This new economic order is still being formulated, and companies are reassessing and recalibrating their strategy accordingly,” Yeo said.
Lee Jae-min, a law professor at Seoul National University and an expert in international trade disputes, said the United States was using subsidies to “pull” Korean chipmakers into its regulatory orbit.
“Once they receive US subsidies, they will be subject to stronger US control over their decision-making and business activities, which will limit their investment and production in China,” Lee said.
“Chipmakers like Samsung and SK Hynix have to constantly upgrade their factories to produce cutting-edge chips, but it’s hard to upgrade their Chinese facilities without introducing high-tech equipment.”
In a statement, SK Hynix said of the flea and science law: “As the legislation has recently passed the House and some details are not publicly disclosed, we are monitoring the situation closely. ”
Samsung declined to comment.