Amid the global restructuring of the semiconductor supply chain, Samsung Electronics and SK hynix are likely to be the most affected by decisions related to U.S. licenses.

On Sept. 11, the Korea Institute for International Economic Policy (KIEP) reported in its Global Semiconductor Supply Chain Restructuring study that Korean companies, especially those with factories in China, would likely face the greatest setbacks.

Last October, the U.S. Department of Commerce effectively banned the export of semiconductor equipment to Chinese semiconductor manufacturing companies. However, a grace period of one year was granted to companies like Samsung Electronics, SK hynix, and TSMC of Taiwan. The extension of this grace period will be decided this coming October.

KIEP expressed concerns, stating, “Even if the U.S. grants licenses, it can still intensify sanctions against China at any time, complicating and amplifying uncertainties for our businesses operating there.”

Although TSMC must also obtain a license from the U.S., the sanctions are relatively stronger against memory chips (constituting 90% of China’s advanced capacity) compared to logic chips (only 10% of China’s advanced capacity). Memory fabs need regular upgrades to maintain competitiveness, making the impact of the sanctions more significant.

Currently, SK hynix produces approximately 50% of its entire DRAM output at its Wuxi factory, which commenced operations in 2006. In 2010, a post-processing joint venture was established in Wuxi, resulting in a complete semiconductor wafer processing system. In 2018, SK hynix systems IC established a foundry in Wuxi, managing the outsourced production of system semiconductors. Samsung Electronics also has a consolidated production system, including a post-processing line for NAND flash, operational in Xi’an, China.

KIEP Senior Research Fellow Jung Hyung-gon stated, “While overseas investments by Korean semiconductor companies were predominantly in China from 2005 to 2020, the current situation is cause for serious concern due to sanctions.” He further explained that although the U.S. might consider the global disruption that would ensue from a sudden tight control on China’s memory fabs, a gradual tightening of controls is anticipated, necessitating preparedness.

This development underscores the increasing need for reinforcing semiconductor manufacturing hub strategies in Korea. Enhancing domestic semiconductor production capabilities, like strengthening semiconductor reshoring support measures, is essential not just for removing future uncertainties arising from U.S. actions, but also for the survival of our enterprises.

Jung advised, “Building a new fab in the U.S. costs about 30% more (an average of 6 billion dollars) than in Taiwan, Korea, or Singapore, and up to 50% more than in China.” He stressed the continuous nature of the U.S.-China semiconductor supremacy battle, emphasizing the need to expand domestic semiconductor production capacities and strengthen the semiconductor hub strategy.