Korean chipmakers brace for heightened export controls under Trump 2.0
South Korean chipmakers are on high alert over stricter US regulations on China, where they operate and have heavily invested in semiconductor chip fabrication plants, also known as fabs.
Though tariff advocate US President Donald Trump has officially begun his second term, he has yet to clarify his pledges targeting China, including the proposed 60 percent tariffs on Chinese goods. Samsung Electronics and SK hynix are thus weighing options to switch production from their Chinese manufacturing plants in the case of strengthened US restrictions.
“Our fabs in China are operating normally, as Trump has not introduced any changes to regulations,” an industry official said. “Trump proposed high tariffs and restrictions against China during his campaign, but we have to see the details to know whether they really affect our business and fab operations in China.”
As Samsung Electronics and SK hynix produce large portions of their DRAM and NAND flash memory chips at their manufacturing facilities in China, Trump’s proposed 60 percent tariffs have raised concerns over whether they can maintain profitable operations there.
Samsung, the world’s largest memory chip maker, has been operating a NAND flash memory chip production facility in Xian, China, since 2006. This facility accounts for about 40 percent of its total NAND flash output. In Suzhou, the company has a chip packaging plant. Combined, the company has reportedly invested about 30 trillion won ($20.9 billion) in the Chinese fabs.
SK hynix, the second-largest memory chip maker, has been running a DRAM fab in Wuxi since 2006, producing about 40 percent of the company’s total DRAM chips. The chipmaker also acquired a NAND flash manufacturing plant in Dalian from Intel in 2020 and is producing about 20 percent of its memory chips at that facility. SK has also spent about 35 trillion won on its fabrication plants in China.
"Only if such tariffs or restrictions are introduced would we diversify our production in other fabs in Korea or elsewhere," an industry official said.
Aside from the approximately 40 percent of NAND flash chips produced in China, most of Samsung's memory products are produced at its Korean plants. Samsung has also reportedly decided to reduce the Xian fab's production volume by about 10 percent this year, cutting the monthly wafer input from 200,000 units to 170,000 units.
SK hynix has some room to produce more DRAM chips at its M16 fab in Icheon, Gyeonggi Province, and is expected to increase production there. According to market tracker Omnia, the Wuxi plant's share of SK's total DRAM output is likely to decline to 35 percent. The company is also constructing an M15x facility in Cheongju, set to be completed in the second half of this year.
There are also concerns about Trump reinforcing existing export controls against China related to chipmaking equipment.
The US government implemented the trade curbs against China under the Biden administration in October 2022 to prevent the transfer of critical technologies.
For Korean chipmakers needing to import chipmaking equipment critical to their fab operations in China, the Biden administration has granted Validated End-User status. This allows them to import certain equipment while prohibiting access to advanced tools for producing DRAM at 18 nanometers or below, NAND flash with 128 layers or more and system chips requiring a 14 nm or smaller process node.
If Trump decides to expand the restrictions, he may further tighten the criteria and limit Chinese plant production to cheaper legacy products. In addition, the Korean chipmakers are likely to continue facing restrictions in upgrading facilities or expanding capacity in China due to the existing guardrail provisions under the US Chips Act, which prohibits such development in China.
“Regardless of the possible strengthening of restrictions, shutting down the Chinese fabs is not a viable option for Korean chipmakers, since China is also an important market for them,” said Lee Jong-hwan, a system semiconductor engineering professor at Sangmyung University.
General-purpose chips, which are the main products the companies produce in China, are becoming less important as Chinese firms ramp up their production and increase supply to drive prices down. So the impact of Trump's heavy tariffs may not be too severe, Lee explained.
“The future lies in high-value AI chips, such as high bandwidth memory chips, and fostering a technological edge,” Lee said.
