The U.S. Department of Commerce announced an indefinite extension of exemptions for Samsung Electronics and SK Hynix from China’s semiconductor-related equipment export control measures, while TSMC is applying for an indefinite exemption.
In order to hinder China's semiconductor development, the United States continues to strengthen its technology export controls on China, hoping to hinder the development of China's chip industry through comprehensive new export rules. The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce issued a set of export control measures in October last year, prohibiting semiconductor equipment manufacturers from exporting related equipment to Chinese chip manufacturers to prevent theft. However, the U.S. gave Samsung and Hynix the green light.
However, the Biden administration believes that there are loopholes in China's semiconductor restrictions and is currently working to fill them. It is expected to launch an updated version of export control measures soon, which will further restrict China's access to advanced semiconductors and wafer manufacturing tools.
The United States released Samsung and Hynix, but continued to tighten its policies. How could the two Korean companies get indefinite exemptions? Some analysts believe that the United States has granted such rights because South Korean semiconductor companies are also major customers of U.S. semiconductor equipment manufacturers, and Korean companies must purchase production equipment in advance so that U.S. semiconductor equipment manufacturers can cooperate with production.
Use South Korea to control China to prevent the growth of China's storage industry
In addition, technology expert Xu Meihua emphasized on Facebook on September 27 that Samsung and SK Hynix produce memory chips in China, not chips with computing power, and the U.S. sanctions on Chinese semiconductors are mainly aimed at the development of artificial intelligence, etc. High-end computing chips with advanced technology, so the United States’ indefinite exemption this time should be based on this consideration.
Some analysts believe that the United States may want to use South Korea to suppress China's storage market share. According to research agency TrendForce, as of the end of June this year, the two Korean companies controlled nearly 70% of the global DRAM and 50% of the NAND flash storage market. , almost dominate the entire market.
However, in the past few years, the market share of Chinese companies in the global storage industry has been increasing. In 2022, China's market share in the DRAM industry will reach 15%, while South Korea's market share will be 61%. In addition, South Korea's global NAND Flash market share is 41% in 2022, and is estimated to drop to 33% in 2023. China's NAND Flash market share is expected to reach 31% in 2023, from 21% in 2022. , approaching South Korea.
After the United States tightens controls on Chinese semiconductors, South Korea's NAND Flash market share is expected to rise to 39% in 2024, while China's will decline to 24%. It is a good thing for the United States to allow South Korea to smoothly obtain equipment in Chinese factories, give Korean businessmen a taste of the sweetness, and also deal a blow to the rising Chinese storage industry.
China market revenue is important to Samsung and Hynix
The extension of the exemption period by the United States strongly implies that it wants to win over its ally South Korea. The United States has always wanted to win over South Korea to join the Chip 4 alliance to confront China, but South Korea has never nodded in agreement because it is afraid of retaliation from China if it agrees, but it is also afraid of offending. U.S.
Samsung and SK Hynix have spent more than US$52 billion on their local businesses in order to develop in China. For a long time, Chinese business has accounted for a large part of the sales of these two companies.
The New York Times reported that South Korea's employment and revenue rely heavily on the semiconductor industry, which accounts for 20% of South Korea's exports. In the technology trade war between the United States and China, South Korea is caught in a dilemma.
Financial information disclosed by Samsung's two chip-related subsidiaries in China showed that chip and display sales fell 35% in the first half of this year, partly due to falling chip demand and China's economic slowdown. The proportion of SK Hynix's revenue from China reached a peak of nearly 47% in 2019. Although it shrank to 27% last year, it is still an important part of the company's business.
"Abandoning the big market of China? We can't make up for the gap." SK Group Chairman Chey Tae-won said.
South Korean President: Geopolitics is the biggest risk to business
The United States needs allies to fight China, and it must also take care of the commercial interests of its allies. Therefore, the United States extends the exemption period of the chip export control policy and shows goodwill to South Korea in a timely manner. It can be interpreted as "paving the way for South Korea to get closer to the United States."
Despite this, the memory chips produced by Samsung and SK Hynix in China are still restricted by the U.S. Entity List and cannot be sold to Chinese companies on the list. Therefore, even if the U.S. government decides to extend the exemption, U.S. exports The intention to regulate and restrict China's technology supply chain may cause Samsung and SK Hynix to change their business strategies in China.
Although the United States has given the green light, under various pressures, it may be difficult for Samsung and SK Hynix to make large-scale investments in Chinese factories in the future. In the end, they will have to choose sides.
South Korean President Yoon Seok-yue said: "Geopolitical issues have become the biggest risk that companies need to deal with."
Kim Yang-paeng, a researcher at the South Korea Institute of Industrial Economics and Trade, said: "Samsung and SK Hynix have no measures to counter this pressure because Washington has the greatest power in the semiconductor industry." South Korean lawmakers believe that technological competition between the United States and China is destined to change the global supply chain of chip manufacturing, and South Korea must accept this reality.