U.S.-China chip war could damage Samsung, SK Hynix but not for extended: Fitch

The U.S.-China chip war could effect South Korea’s chip giants as China accounts for a big chunk of their creation capacity — but there shouldn’t be extended-term disruptions, according to Fitch Rankings.

Samsung Electronics and SK Hynix facial area challenges as the U.S. seeks to block China’s entry to innovative semiconductor chip products, according to the June 7 report.

China accounts for 40% of Samsung’s overall flash memory chips (NAND) generation capability, reported the analysts led by Matt Jamieson. It also accounts for 40%-50% of SK Hynix’s dynamic random access memory (DRAM) chips and 20% of its NAND capacity.

“We do not feel there would be a main extensive-term source disruption, as it is probably that Korea will grow to be the principal location for the two companies’ expansionary financial commitment and technological innovation upgrades,” the credit ratings agency reported in the June 7 report.

The U.S. in Oct released sweeping policies to reduce off China’s obtain to get or manufacture significant-tech semiconductor chips. They came as problems grew above China’s ability to use this sort of higher-tech chips to advance its navy capabilities. The Netherlands and Japan are reportedly poised to observe fit.

Samsung Electronics and SK Hynix are the two biggest brands of memory chips globally, followed by U.S.-based mostly Micron in 3rd position. Memory chips are storage products used in computers, smartphones and tablets.

The companies’ fabrication crops in China make superior chips as very well as more mature chips, which are exempted from the U.S. limitations. The memory chips are manufactured for Chinese use as very well as exports.

Even so, the two chip giants attained one-yr waivers from the U.S. to continue importing advanced resources for their China crops till Oct, according to the Korea Situations.

“Must the U.S. not lengthen the waiver, we count on the companies to keep on developing memory chips at their Chinese vegetation working with currently put in technologies,” mentioned Fitch Scores.

In what is viewed as a retaliatory shift, China banned the sale of merchandise from Micron for use in essential information infrastructure in May well.

Fitch Scores explained Samsung and SK Hynix “could gain from larger chip charges inside China as a outcome. Even so, the influence is most likely to be smaller and could be offset if Micron redirects the sale of its memory chips outside the house of China, as this would likely decreased global chip rates.”

The White House reportedly urged South Korea not to let its chipmakers fill Micron’s void in China. About 10% of Micron’s revenue arrive from China, in accordance to Micron’s fiscal 2022 report.

The Fitch report stated the two South Korean chipmakers will at least partly fill Micron’s gap. “It will be hard to keep track of what capability lost by Micron is in fact filled by the Korean companies, presented the commodity-like nature of memory chips.”

“The logistics of this tactic could just take time, but could offset any constructive impact Samsung Electronics and SK Hynix might get from the ban on Micron in just China in gentle of the world’s memory chip oversupply,” the analysts explained.

Having said that, dangers could additional maximize if the U.S. or China apply far more severe rulings and bans, as it will affect the price and availability of semiconductor offer-chain factors, they included.