2023-10-10 13:23:57
Published on Oct. 10, 2023 at 2:25 p.m. Updated on Oct. 10, 2023 at 3:23 p.m.
Good news for Samsung Electronics and SK Hynix. The two South Korean semiconductor giants have just learned with relief that they will be able to strengthen their large memory chip factories installed in China, by delivering equipment and new technologies.
This green light was issued, following long negotiations, by the American government which is nevertheless trying to restrict as much as possible Chinese production or design capacities for cutting-edge components intended for the strategic industries of telecommunications, defense and intelligence. artificial or transport.
Contain Beijing
To curb Beijing’s ambitions, Washington unveiled in October 2022 a set of trade rules complicating the export to China of solutions making it possible to manufacture semiconductors engraved in less than 14 nanometers. These restrictions concern in particular the delivery of lithography devices, control equipment, or industrial gases that are very complex to produce.
Due to the extraterritoriality of American law, these restrictions apply to American companies exporting to China but also to foreign companies such as Samsung Electronics, SK Hynix or TSMC. However, the latter need to regularly send cutting-edge equipment to their Chinese factories, often incorporating American technologies.
Worried, these Asian companies negotiated an initial one-year exemption last year. They then promised to take the time to think regarding a possible reorganization or relocation of their production capacities. Samsung Electronics operates a giant foundry in Xi’an that accounts for regarding 40% of its entire NAND flash chip production and serves customers around the world. For its part, SK Hynix controls a large industrial site in Wuxi which generates almost half of its global production of DRAM chips.
A breath of fresh air
In this context, Washington’s decision to extend this exemption, without time limit, offers a breath of fresh air. “The US government’s decision means that the biggest trade problem for Korean chipmakers has been resolved,” said Choi Sang-mok, the South Korean presidential adviser on economic affairs.
If this announcement will provide relief to Korean groups in the short term – the Taiwanese TSMC should obtain its own exemption in the coming days – it will not call into question their long-term strategy of reducing their dependence on China. While boosting its investments in South Korea, Samsung Electronics is building a foundry costing $17 billion in Taylor, near Austin. SK Hynix has promised the upcoming start of a $15 billion factory in the United States.
“These companies are at the heart of a deep dilemma. They must arbitrate between their economic interests in China and the political interests of the South Korean government which maintains very good relations with the United States,” Chi Ung Song, an expert from the Science and Technology Policy Institute of South Korea, recently explained.
Chinese catching up
To obtain a new American exemption, Samsung Electronics and SK Hynix were able to prove that deliveries to their Chinese factories would not serve Beijing’s objectives of building a fully autonomous semiconductor industry.
Taking advantage of gigantic subsidy plans, Chinese foundries, and particularly the state giant Semiconductor Manufacturing International Corporation (SMIC), have imported more than $100 billion worth of foreign equipment over the past four years. This allowed them to move upmarket. But China has still not caught up with the Korean or Taiwanese industry leaders.
“The SMIC chip engraved in 7 nanometers that we find in Huawei’s latest 5G smartphone is now at the level of that which the Taiwanese TSMC produced around five years ago”, summarized a few days ago, Dan Hutcheson, the vice-president of the TechInsights firm.
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