August 15, 2022
US chip export restrictions to China could hurt global supply chains, experts say

Export sanctions being considered by Washington to halt China’s progress in semiconductor manufacturing could cost enough to potentially disrupt fragile global chip supply chains and hurt US businesses, experts say .

Reuters reported on Monday that the United States is considering limiting shipments of American chipmaking equipment to memory chip producers in China, which make advanced semiconductors used in everything from smartphones to data centers.

The sanctions would prevent chip makers such as South Korean giants Samsung Electronics and SK Hynix from sending new technology equipment to factories operating in China, preventing them from upgrading plants that serve customers around the world.

Samsung and SK Hynix, which control more than half of the global NAND flash memory chip market, have invested heavily in China in recent decades, serving as customers including tech giants Apple, Amazon, Facebook owner Meta and Google. are important for. As well as computers and phones, chips are used in products such as electric vehicles that require digital data storage.

“Samsung’s China production alone accounts for more than 15 percent of global NAND flash production … If there is a production disruption, it will drive up chip prices,” said BNK Securities analyst Lee Min-hee.

The prospect of fresh upheaval – sanctions yet to be approved – comes as a global chip supply crunch that has disrupted businesses ranging from autos to consumer devices for more than a year, eventually Showing signs of ease. Supply chain adjustments and weak consumer demand amid a slowing global economy have combined to repair the damage.

But so far the shortfall has not been completely addressed. Any sign of fresh disruption could rekindle supply uncertainty, triggering a price hike – as seen earlier this year when China imposed COVID-19 restrictions in Xian where Samsung manufactures chips.

Chipmaking equipment has to be installed and thoroughly tested months before production begins. Any delay in sending gear to China will be a real challenge for chip makers as they seek to manufacture more advanced chips in China’s facilities.

“Many US companies, such as Apple, Samsung and SK Hynix use memory chips. No matter which strategy (South Korean firms) choose, it will have global implications,” said BNK Securities analyst Lee.

Samsung and SK Hynix declined to comment. Apple, Amazon, Meta and Google did not respond to emails seeking comment outside of regular US business hours.

ambitions, complications

One of the largest overseas chip projects in the country, Samsung’s memory chip operation in Xian, central China, has invested a total of $26 billion (about Rs 2,05,310 crore) since the company broke ground at the site in 2012. Including chip production as well as testing and packaging.

The tech giant manufactures 128-layer NAND flash products in Xian, analysts said, chips that store data in devices such as smartphones and personal computers as well as in data centers.

According to Trendforce at the end of last year, Samsung accounts for 43 percent of global NAND flash memory production capacity and 15 percent of total global production capacity.

The US action, if approved, could also complicate SK Hynix’s ambition to expand its presence in the NAND market, where it ranks third behind Samsung and Japan’s Kioxia Holdings, ousted from Toshiba. It was done

SK Hynix completed the first phase of a $9 billion (about Rs 71,070 crore) purchase of Intel’s NAND business, including its Dalian, China NAND manufacturing facility, late last year.

China’s Strategies

The move being considered by the United States is one of several recent signs of deepening tensions between Beijing and Washington over the tech sector.

Congress last week approved legislation to subsidize semiconductor production in the United States. It prohibits any company receiving federal subsidies from investing in certain chip technology in China during the subsidy period.

Analysts and industry sources said deepening tensions could leave Samsung and SK Hynix to review strategies on China’s investments.

“Until now, companies used to invest in countries like China, where costs were cheaper,” said Kim Yang-jae, analyst at Daol Investment & Securities.

“It’s not going to be the only consideration anymore. The biggest change in these potential limits will be where the next chip factories will be built.”

They could also potentially face diminishing returns from their multi-billion-dollar China plants, which could be mired in making older technology, less attractive chips.

SK Hynix hasn’t been able to upgrade its DRAM memory chip production facilities in Wuxi, China, with the latest extreme ultraviolet lithography (EUV) chipmaking machines made by Dutch firm ASML as US officials enter the country to use the process. Those who do not want advanced equipment. ,

EUV machines are used to make more advanced and smaller chips that are used in high-end devices such as smartphones.

© Thomson Reuters 2022

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)

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