Korean Chipmakers Worry After China Kicks out Micron

China has banned computer chips from U.S. memory chipmaker Micron Technology, raising jitters among Samsung and SK Hynix as the IT technology war between the U.S. and China intensifies. 

Samsung produces 40 percent of its output of NAND flash chips in Xian, while SK Hynix's Wuxi plant rolls out 40 percent of its DRAM chips and 20 percent of its NAND flash output.

Under recent protectionist legislation in the U.S., there were fears that Samsung and SK might have to shut down their factories in China within the next 10 years. Under the CHIPS and Science Act, chipmakers that receive American subsidies are being pressured to move their production facilities out of China, but Korean companies won a reprieve that allows them to keep their factories as long as they do not build new facilities there.  

Then China launched a counteroffensive and banned Micron from selling computer chips to Chinese companies altogether. This was possible because Micron does not manufacture chips in China, whereas Korean companies have production facilities there and are safer for now. 

"China could limit sales of products made in factories outside its borders citing security concerns but could still use products made inside its borders," an industry insider said.

But even then the regulatory risk from the U.S. has increased. The U.S. gave Samsung and SK a one-year grace period when it banned exports of high-tech semiconductor manufacturing equipment to China last October.

One industry source said, "If the U.S. bans the export of cutting-edge equipment that is manufactured in Korea, Samsung and SK could face problems upgrading their production facilities in China and could then only produce chips at the current level of technology," which will quickly become obsolete.