It would be almost impossible for Samsung Electronics and SK Hynix to produce next-generation memory chips in China in 3-5 years at the latest as a result of the US tightening semiconductor trade sanctions against Chinese chip industry, a South Korean economic security expert has warned.
Wonho Yeon, head of the economic security team under Korea Institute for International Economic Policy (KIEP), told Korea-based Chosun Biz that the US is planning to totally block Chinese semiconductor industry from developing new technologies, generating great uncertainties for both Korean makers' memory manufacturing operations in China.
The US Department of Commerce (DOC) is slated to announce enforcement rules of its Chips and Science Act by the end of February 2023. The Act includes a guardrail provision that bans a corporate entity receiving US subsidy and tax credits in chip production investment from making sub-28nm chips or expanding chip manufacturing capacity in China or any other foreign country of concern for 10 years. The DOC will, within two years, introduce separate investment restriction standards for Samsung and SK Hynix concerning their memory production and packaging operations in China.
In response, Yeon noted the enforcement rules of the Chips Act basically will be no more stringent than the tough export curbs announced by the DOC in October 2022, but for Samsung and SK Hynix - the bigger question is how to deal with the impacts to emerge after relief measures granted to them expire.
Under the curbs, products and manufacturing equipment such as sub-18nm DRAM chips, NAND flash above 128 layers, and logic ICs below 16nm must be licensed by the DOC before being shipped to China. Fortunately, Samsung, SK Hynix, TSMC and Intel were immediately given a one-year grace period, allowing them to bring in related chip manufacturing equipment into China without export permits till the end of October 2023. But it remains unknown whether the grace period will be extended then.
Yeon warned that after the relief period expires, Samsung and SK Hynix could lose their market competitiveness for failing to produce next-generation memory in China. Currently, Samsung operates a NAND flash plant in China's Xi'an that commands 40% of its total NAND production, and also maintains a packaging plant in Suzhou. SK Hynix relies on its DRAM fab in Wuxi to support some 50% of its total DRAM output, and it also runs a NAND flash plant in Dalian, northeastern China, acquired from Intel.
Yeon stressed that the Korean government should foresee the situations that may rise after the relief measure expires, and actively present positive views in favor of Korean semiconductor firms in its negotiations with the US on the implementation of export controls against China.
Article translated by Willis Ke
