Since China supplies a sizable portion of the South Korean chip industry’s production capacity, the U.S.-China chip war may have an effect on these companies, but Fitch Ratings predicts no long-term difficulties.

According to the June 7 article, Samsung Electronics and SK Hynix are at risk as the US tries to deny China access to sophisticated semiconductor chip equipment.

According to the experts lead by Matt Jamieson, 40% of Samsung’s total flash memory chip (NAND) production capacity is located in China. Additionally, it accounts for 40%–50% of SK Hynix’s DRAM chips and 20% of its NAND capacity.

“We do not think there would be a major long-term supply disruption, as it is likely that Korea will become the main location for the two companies’ expansionary investment and technology upgrades,” the credit ratings agency said in the June 7 report.

The U.S. unveiled extensive regulations in October to deny China access to or production of advanced semiconductor chips. They appeared as worries mounted about China’s capacity to enhance its military capabilities using such cutting-edge processors. According to reports, Japan and the Netherlands plan to do the same.

Globally, Samsung Electronics and SK Hynix are the top two memory chip producers, with Micron, based in the United States, coming in third. Storage components called memory chips are found in computers, cellphones, and tablets.

The businesses manufacture both modern and traditional chips in their factories in China, which are immune from U.S. restrictions. The memory chips are made both for Chinese domestic use and for export.

According to the Korea Times, the two chip titans did manage to secure one-year waivers from the U.S. that allowed them to keep importing cutting-edge tools for their Chinese factories until October.

“Should the U.S. not extend the waiver, we expect the companies to continue producing memory chips at their Chinese plants using already installed technology,” said Fitch Ratings.

China banned the sale of Micron goods for use in crucial information infrastructure in May in what is perceived as retaliation.

Samsung and SK Hynix “may benefit from higher chip prices within China as a result,” according to Fitch Ratings. However, if Micron moves the selling of its memory chips outside of China, the effect would presumably be minimal and would even be offset because a lower worldwide chip price would result.

According to reports, the White House asked South Korea to prevent its chipmakers from filling Micron’s vacancy in China. According to Micron’s fiscal 2022 report, China contributes about 10% of the company’s revenue.

The two South Korean chipmakers will at least partially replace Micron’s void, according to the Fitch study. “Given the commodity-like nature of memory chips, it will be difficult to monitor what capacity lost by Micron is actually filled by the Korean companies.”

“The logistics of this strategy could take time, but could offset any positive impact Samsung Electronics and SK Hynix may obtain from the ban on Micron within China in light of the world’s memory chip oversupply,” the analysts said.

They said that risks might rise further if the U.S. or China enact harsher regulations and prohibitions because that would have an impact on the cost and accessibility of supply-chain components for semiconductors.

(Adapted from FlipBoard.com)

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