South Korean Chipmaker SK Hynix Worries About Future Exports to China

South Korean laptop chipmaker SK Hynix stated Wednesday it is likely to be compelled to promote its manufacturing operations in China if a US crackdown on exports of semiconductor expertise and manufacturing gear to China intensifies.

SK Hynix’s chief advertising officer, Kevin Noh, raised these considerations throughout a convention name on Wednesday after the corporate reported its working revenue dropped 60 p.c within the final quarter from 2021, a decline it blamed on a deteriorating enterprise atmosphere.

World inflation amplified by Russia’s conflict on Ukraine and rising rates of interest imposed by central banks to counter surging costs have slowed shopper spending on the sorts of high-tech merchandise requiring laptop chips. SK Hynix and different semiconductor makers are additionally navigating new US restrictions on exports of superior semiconductors and chipmaking gear to China. Such limits have been partially imposed to forestall the usage of American superior expertise in China’s army growth.

SK Hynix stated this month that the US Division of Commerce granted the corporate a one-year exemption from such necessities, permitting it to supply gear and different provides to its Chinese language factories making reminiscence chips.

Different main chip and chip-manufacturing gear makers like Samsung and TSMC are thought to have additionally gotten exemptions.

SK Hynix could discover it troublesome to equip its manufacturing line within the japanese Chinese language metropolis of Wuxi with probably the most superior chipmaking machines, together with excessive ultraviolet lithography (EUV) techniques, Noh stated. He stated SK Hynix does not anticipate main disruptions on the plant no less than till the late 2020s, however issues may rapidly flip for the more serious if Washington refuses to increase momentary exemptions sooner or later and begins to totally implement its export controls.

“If it turns into a state of affairs the place we must receive (US) license on a tool-by-tool foundation, that can disrupt the provision of apparatus…and we may face difficulties in working (Chinese language) fabrication amenities at a a lot earlier level than the late 2020s,” Noh stated.

“If we face issues that make it troublesome for us to function our Chinese language fabrication amenities together with the Wuxi plant, we’re contemplating varied eventualities, together with promoting these fabrication amenities or their gear or bringing them to South Korea,” Noh stated.

He stated these contingency plans would apply to a “very excessive state of affairs,” and the corporate hopes to keep away from such issues and function as regular.

Citing an “unprecedented deterioration” in market circumstances, SK Hynix stated it could lower its funding subsequent yr by greater than 50 p.c because it anticipates provide will proceed to exceed demand in the interim. The nation’s working revenue for the three months by means of September was at KRW 1.65 trillion (roughly Rs. 9,500 crore), in comparison with KRW 4.17 trillion (roughly Rs. 24,000 crore) throughout the identical interval final yr. Income fell 7 p.c to KRW 10.98 trillion received (roughly Rs. 63,500 crore).

Some specialists say that the US-China expertise standoff may drive SK Hynix and Samsung Electronics, one other main South Korean chipmaker, to considerably modify their Chinese language operations over the following few years.

In accordance with market evaluation agency TrendForce, SK Hynix’s Wuxi plant accounts for about 13 p.c of the world’s whole DRAM manufacturing capability. About 40 p.c of Samsung’s NAND flash chips are reportedly produced from its manufacturing facility within the Chinese language metropolis of Xi’an, accounting for round 10 p.c of worldwide manufacturing.

“The present (rules) we accepted as widespread sense, comparable to discovering a sure area the place we may produce most effectively on the least expensive value and transport these merchandise globally, have gotten more and more unsure as (our) choice making is being influenced by varied layers of things past simply enterprise,” Noh stated.

Samsung, the world’s largest supplier of reminiscence chips, is broadly believed to have obtained an identical exemption from the US restrictions, though the corporate has not publicly confirmed it. Noh through the name stated SK Hynix’s “opponents” have additionally been granted the US waivers, in a potential reference to Samsung and TSMC.