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U.S.-China chip struggle may damage South Korea’s tech giants — however not for lengthy, Fitch says

Samsung Electronics Co. 8GB Double-Information-Fee (DDR) four reminiscence modules.

SeongJoon Cho | Bloomberg | Getty Photos

The U.S.-China chip struggle may influence South Korea’s chip giants as China accounts for a big chunk of their manufacturing capability — however there should not be long-term disruptions, in line with Fitch Rankings.

Samsung Electronics and SK Hynix face dangers because the U.S. seeks to dam China’s entry to superior semiconductor chip gear, in line with the June 7 report.

China accounts for 40% of Samsung’s whole flash reminiscence chips (NAND) manufacturing functionality, mentioned the analysts led by Matt Jamieson. It additionally accounts for 40%-50% of SK Hynix’s dynamic random entry reminiscence (DRAM) chips and 20% of its NAND capability.

“We don’t suppose there could be a serious long-term provide disruption, as it’s probably that Korea will develop into the principle location for the 2 corporations’ expansionary funding and know-how upgrades,” the credit score rankings company mentioned within the June 7 report.

The U.S. in October launched sweeping guidelines to chop off China’s entry to acquire or manufacture high-tech semiconductor chips. They got here as issues grew over China’s capability to make use of such high-tech chips to advance its navy capabilities. The Netherlands and Japan are reportedly poised to comply with swimsuit.

Samsung Electronics and SK Hynix are the 2 largest producers of reminiscence chips globally, adopted by U.S.-based Micron in third place. Reminiscence chips are storage units used in computer systems, smartphones and tablets.

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The businesses’ fabrication crops in China make superior chips in addition to older chips, that are exempted from the U.S. restrictions. The reminiscence chips are produced for Chinese language consumption in addition to exports.

Nevertheless, the 2 chip giants obtained one-year waivers from the U.S. to proceed importing superior instruments for his or her China crops till October, in line with the Korea Occasions.

“Ought to the U.S. not prolong the waiver, we count on the businesses to proceed producing reminiscence chips at their Chinese language crops utilizing already put in know-how,” mentioned Fitch Rankings.

Profit from Micron ban

In what’s seen as a retaliatory transfer, China banned the sale of merchandise from Micron to be used in vital info infrastructure in Might.

Fitch Rankings mentioned Samsung and SK Hynix “could profit from greater chip costs inside China consequently. Nevertheless, the influence is prone to be small and could possibly be offset if Micron redirects the sale of its reminiscence chips exterior of China, as this could in all probability decrease international chip costs.”

The White Home reportedly urged South Korea to not let its chipmakers fill Micron’s void in China. Round 10% of Micron’s income come from China, in line with Micron’s fiscal 2022 report.

Micron shares dip following chip ban from China over 'national security risks'

The Fitch report mentioned the 2 South Korean chipmakers will no less than partially fill Micron’s hole. “It will likely be tough to observe what capability misplaced by Micron is definitely stuffed by the Korean corporations, given the commodity-like nature of reminiscence chips.”

“The logistics of this technique may take time, however may offset any constructive influence Samsung Electronics and SK Hynix could acquire from the ban on Micron inside China in gentle of the world’s reminiscence chip oversupply,” the analysts mentioned.

Nevertheless, dangers may additional improve if the U.S. or China implement extra excessive rulings and bans, as it should have an effect on the fee and availability of semiconductor supply-chain parts, they added.

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