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Samsung and SK Hynix rethink China exposure following US Chips act

Samsung Electronics and SK Hynix are reassessing their investments in China as the top Korean chipmakers respond to incoming U.S. restrictions on advanced semiconductor production.

The Science and Chips Act passed by Congress last week, which provides $52 billion in grants to support advanced US chip manufacturing, also contains authorized “safety rails” that prohibit recipients of US federal funds from expanding or upgrading their advanced chip capacity in China to 10 years

The directives have led Samsung and SK Hynix to rethink their exposure to China, according to people familiar with the views of the two companies.

A senior Korean official added that over time, a number of Korean investments in chip manufacturing in China may be “abandoned.” “If China is not satisfied, they will have to deal with the US,” the official said.

Moves indicate that Washington’s efforts to encourage the world’s leading chip makers to move away from China and towards the US are bearing fruit.

“Safeguards against China will accelerate the shift of Korean chip makers to the US from China,” said Kim Young-woo, head of research at SK Securities in Seoul and an adviser to the Korean government on semiconductor policy.

SK Hynix semiconductor plant in Icheon, South Korea. The company said in reference to the American Chip and Science Act that it is “closely monitoring the situation” © SeongJoon Cho/Bloomberg

“They have rethought their strategies because of the technology war between the US and China and they are now leaning more towards the US because of geopolitical risks.”

Kim added that Korean groups such as Samsung and SK Hynix “will build more factories in the US because they cannot produce state-of-the-art chips without American equipment and technology.” If they have to choose between the US and China, they have no choice but to choose the US.”

The Biden administration has used export controls, investment screening and generous subsidies to non-Chinese companies in an effort to increase domestic chip production and make it more difficult for China to obtain advanced semiconductor technology.

The measures are part of a broader drive to secure US supply chains and slow Beijing’s military modernization efforts.

Yeo Han-ko, a former Korean economic official who served as South Korea’s trade minister until May this year, said the “recalibration” of Korean chipmakers’ strategy vis-à-vis the US and China has already begun.

Samsung Electronics, the largest manufacturer of memory chips in the world, Announced last year It invested $17 billion in a new plant in Texas in order to catch up with Taiwanese rival TSMC in the foundry field. Joe Biden visited the Korean conglomerate’s Pyeongtaek facility during a visit to South Korea in May.

Last month, Chey Tae-won, chairman of SK Hynix parent SK Group, held a virtual meeting with the US president to announce $22 billion in new investments in chips, EV batteries and green technology in the US, including a new advanced chip packaging plant.

SK Hynix’s Dram memory chip plant in eastern China’s Wuxi is considered the Korean-owned facility most vulnerable to the effects of US sanctions.

“This new economic order is still being formulated, and companies are reassessing and recalibrating their strategy accordingly,” Yao said.

Lee Jae-min, a law professor at Seoul National University and an expert on international trade disputes, said the U.S. is using the subsidy to “lure” Korean chipmakers into its regulatory path.

“Once they receive American subsidies, they will be under stronger American control for their decision-making and business activities, which will limit their investment and production in China,” Li said.

“Chip makers like Samsung and SK Hynix have to constantly upgrade their factories to produce new edge FriesBut it is difficult to upgrade their Chinese facilities without introducing hi-tech equipment.”

In a statement, SK Hynix said about The chip law and science: “Since the legislation was recently passed in the House and some details remain undisclosed publicly, we are closely monitoring the situation.”

Samsung declined to comment.

Samsung and SK Hynix rethink China exposure following US Chips act Source link Samsung and SK Hynix rethink China exposure following US Chips act

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