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

The U.S.-China chip struggle might 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 Scores.

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

China accounts for 40% of Samsung’s complete flash reminiscence chips (NAND) manufacturing functionality, stated 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 assume there could be a significant long-term provide disruption, as it’s doubtless that Korea will change into the primary location for the 2 corporations’ expansionary funding and know-how upgrades,” the credit score scores company stated 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 observe 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 gadgets used in computer systems, smartphones and tablets.

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 lengthen the waiver, we anticipate the businesses to proceed producing reminiscence chips at their Chinese language crops utilizing already put in know-how,” stated Fitch Scores.

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

Fitch Scores stated Samsung and SK Hynix “could profit from increased chip costs inside China because of this. Nevertheless, the influence is prone to be small and may very well be offset if Micron redirects the sale of its reminiscence chips exterior of China, as this is able to most likely decrease world 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.

The Fitch report stated the 2 South Korean chipmakers will a minimum of partially fill Micron’s hole. “Will probably be troublesome 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 might take time, however might offset any constructive influence Samsung Electronics and SK Hynix could acquire from the ban on Micron inside China in mild of the world’s reminiscence chip oversupply,” the analysts stated.

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