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South Korean chipmakers are facing increased pressure amid the intensifying US-China chip war, with Washington reportedly asking the Korean government to hold back from filling China’s shortfalls in chips. According to a report from the Financial Times, the US government has made the request as South Korean President Yoon Suk Yeol prepares to travel to Washington for a state visit.
It is not clear what the exact meaning of the US request is, but some industry watchers believe the US may be seeking to put direct pressure on China’s consumer appliances market. Additionally, the US is making clear its intent to involve the world’s two largest memory chipmakers, Samsung Electronics, and SK Hynix, in its chip battle with China. Both companies have denied receiving any such request from the Korean government.
Korean chipmakers, which produce in China and gain meaningful sales from the market, would also feel great pressure if the US government officially makes such a request to not expand their production volume. While all are only assumptions for now, some also view that the US move as designed to secure leverage against Korean chipmakers in future negotiations drawing near on the export of chips and equipment to Beijing.
The US imposed export controls to cut China from certain semiconductors made with US equipment in October last year, and it granted the South Korean companies, which operate chip manufacturing facilities in China, a one-year exemption.
China launched a national security probe into Micron earlier this month, which generated 25 percent of its total revenue from China and Hong Kong last year. The US interprets the probe as Beijing’s retaliation against the series of trade restrictions that US President Joe Biden imposed to contain Beijing’s clout in the chips industry. China has not yet concluded its review of the American chipmaker, and it is also not clear whether it would take punitive action after the probe.
As the semiconductor battle between the US and China intensifies, SK Hynix and Samsung are slated to make their earnings announcement this week. The US appears to be asking the two companies to join its memory chip sanctions against China, which may affect the stock prices of the two chipmakers. Kim Young-gun, an analyst at Mirae Asset Securities, said, “At the same time, the two companies may take more conservative approaches to their chip productions and capital expenditure plans.”
The intensifying US-China rivalry is putting South Korean chipmakers under increasing pressure as Washington has reportedly requested the Korean government to hold back from filling China’s shortfalls in chips.
The US government allegedly made the request as South Korean President Yoon Suk Yeol prepared to travel to Washington for a state visit. While Seoul’s presidential office refused to comment on the report, both Samsung Electronics and SK Hynix denied receiving any such request from the government.
The US is making clear its intent to involve Samsung and SK Hynix, the world’s two largest memory chipmakers, in its chip battle with China. “China does not have a memory chip supplier as competitive as Samsung or SK Hynix, and seeing how the White House mentioned the two memory chipmakers, Washington may be trying to press China’s consumer appliances market by limiting the chip supply,” an industry official said under the condition of anonymity.
While all are only assumptions for now, some also view the US move as designed to secure leverage against Korean chipmakers in future negotiations drawing near on the export of chips and equipment to Beijing. The US imposed export controls to cut China from certain semiconductors made with US equipment in October last year and granted the South Korean companies a one-year exemption.
The US interprets China’s probe into Micron, the world’s third-biggest memory chip maker, as Beijing’s retaliation against the series of trade restrictions that US President Joe Biden imposed to contain Beijing’s clout in the chips industry. China has not yet concluded its review of the American chipmaker, and it is also not clear whether it would take punitive action after the probe.
The US is also putting indirect pressure on China’s consumer appliances market by requesting the Korean government to urge its chipmakers to “not fill any market gap” in China if Beijing bans US-based Micron Technology from selling chips. In the case of DRAM, the Chinese market would suffer a severe shortage if Micron is suspended.
Mirae Asset Securities said Samsung and SK Hynix would likely make passive supply plans as the semiconductor battle between the two superpowers intensifies. “The US appears to be asking Samsung Electronics and SK Hynix to join its memory chip sanctions against China, and this may affect the stock prices of the two chipmakers,” said Kim Young-gun, an analyst at Mirae Asset Securities.
The two companies are slated to make their earnings announcement this week, and some analysts believe that they may take more conservative approaches to their chip productions and capital expenditure plans, as they face mounting pressure amidst the escalating US-China tensions.
