US-China tech war: Seoul walks fine line as Washington puts pressure on South Korean firms’ chip manufacturing on mainland
- Seoul is said to be helping memory chip giants Samsung Electronics and SK Hynix steer clear of geopolitical conflicts that may damage their businesses
- Both Samsung and SK Hynix have made hefty investments to build and operate chip foundries in mainland China
“If Samsung and SK Hynix tap into [Washington’s] funding, it is almost certain that it would affect their expansion in China, especially given their dependence on US [chip manufacturing] equipment,” said Gary Ng, senior economist for Asia-Pacific at investment bank Natixis.
Subsidy recipients are barred from expanding production in China beyond “legacy semiconductors” – defined as chips made with 28-nanometre process technology or older – for 10 years. The US government has the discretion to decide what would be classified as a legacy device in the memory chip market segment, where Samsung and SK Hynix are the world’s two largest manufacturers.
Both Samsung and SK Hynix have made hefty investments to build and operate chip foundries in mainland China. It would be unlikely for the two companies, according to the South Korean expert, to simply walk away from those assets and related business interests in the world’s second-largest economy.
“Compared with Taiwan, South Korea is under greater pressure mainly because Samsung’s investment in China since 2012 has reached US$25.8 billion,” said Arisa Liu, a senior semiconductor research fellow at the Taiwan Institute of Economic Research.
“If these two major factories in China can no longer continue to use more advanced [chip manufacturing] processes, they may gradually lose their competitiveness,” Liu said.
SK Hynix, meanwhile, has a fab in Wuxi, a city in eastern Jiangsu province, that accounts for 45 per cent of the company’s total dynamic random-access memory production capacity.
Keeping those manufacturing operations in China relevant in the global semiconductor industry reflects how senior Seoul government officials have their work cut out for them, as they navigate the choppy diplomatic waters between the US and China.
Chinese Foreign Minister Wang Yi, who met with his South Korean counterpart Park Jin, said China opposes “politicisation of the economy and weaponising of trade”, in a veiled criticism of the new US law.
“Relevant government agencies will study and discuss the issue in a way to preserve national interests,” Yoon said. “People don’t have to worry about it too greatly.”
Still, both Samsung and SK Hynix have already hedged their bets with major new semiconductor manufacturing plans in the US.