The Joe Biden administration in the US is increasing its restrictions on the Chinese semiconductor sector. This move apparently has triggered the worst fears in the minds of South Korean memory chipmakers—Samsung and SK Hynix—that the US government would cripple their China-based manufacturing businesses in its effort to halt China's rise.
As per new reports by Business Korea, the US government is all set to announce new curbs on semiconductor technology and equipment exports to China. Notably, these semiconductor restrictions are likely to be based on the Foreign Direct Product Rule (FDPR). However, sources reveal that with this new restriction, the Biden administration wants to thwart China's military and technological advancements.
The US government applied FDPR to Huawei in 2020
The FDPR is in place to prevent a product based on US software, technology, or equipment from entering a certain country, regardless of the place of its production. This is the same rule that the US imposed on Huawei in 2020, causing its smartphone shipments to plummet dramatically. Amidst semiconductor restrictions, Samsung Electronics and SK Hynix are fearing major repercussions.
Last year, South Korea exported $69 billion in memory chips, 48% of which went to China. Regarding numbers, around “40% of Samsung Electronics' NAND flash output is from Xian, and half of the DRAM chip output of SK Hynix is from Wuxi.” Samsung's Q3 2022 earnings show that the company is already struggling with lower memory chip prices and the fall in demand for memory and storage chips.
The US ban is also aimed at hitting China's YMTC, which is a rising power in NAND technology. Founded in 2016, it poses a serious threat to US-based Micron Technology Inc. and Western Digital, as YMTC is expanding rapidly and offering low-price solutions. In fact, YMTC is already under investigation by the Commerce Department over whether it violated US export controls by supplying chips to Huawei Technologies Co., Ltd.
So, this could be a bittersweet outcome for Samsung as YMTC could one day challenge the South Korean firm in the NAND flash market.
