Against the backdrop of the global semiconductor industry’s structural adjustment, Samsung Electronics and SK Hynix have been the most affected.
The Korea Institute for International Economic Policy (KIEP) pointed out in its report on ‘Global Semiconductor Supply Chain Structural Adjustment’ released on the 11th that Korean companies, especially those with factories in China, will face the greatest difficulties.
Last October, the U.S. Department of Commerce effectively banned the export of semiconductor equipment to Chinese semiconductor manufacturing companies. However, companies like Samsung Electronics, SK Hynix, and TSMC were granted a one-year grace period. The extension of this grace period will be decided this October.
KIEP stated: “Even if the U.S. grants permission, they can strengthen sanctions against China at any time, making the uncertainty faced by Korean companies in China more complex and extensive.”
While TSMC also requires U.S. permission, the sanctions on memory chips (which account for 90% of China’s advanced capacity) are more severe compared to logic chips (which account for only 10% of China’s advanced capacity). Memory wafer fabs need regular upgrades to remain competitive, making the impact of sanctions more significant.
Currently, SK Hynix’s production of DRAM at its Wuxi factory, operational since 2006, accounts for approximately 50% of its total output. In 2010, Hynix established a joint venture in Wuxi, creating a complete semiconductor wafer processing system. Samsung Electronics also established a comprehensive production system in Xi’an, China, including NAND flash production lines.
KIEP’s Chief Researcher, Zheng Hengkun, commented: “From 2005 to 2020, Korean semiconductor companies’ overseas investments were primarily focused on China, but the current situation is worrisome due to sanctions. While the U.S. may consider that suddenly tightening control over Chinese memory factories will lead to global chaos, it is expected to gradually tighten control, so it is necessary to be prepared.”
Zheng Hengkun emphasized that this development underscores the need to strengthen South Korea’s semiconductor manufacturing center strategy. Enhancing South Korea’s domestic semiconductor production capacity, such as strengthening measures to support semiconductor reshoring, is crucial not only for eliminating future uncertainty brought about by U.S. actions but also for the survival of South Korean companies.
Zheng Hengkun concluded: “The cost of establishing new factories in the United States is about 30% higher than in South Korea and Singapore (an average of $6 billion), and about 50% higher than in China.”
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