U.S.-China chip war could hurt South Korea's tech giants — but not for long, Fitch says

The U.S.-China spot warfare could interaction South Korea's spot giants arsenic China accounts for a ample chunk of their accumulation capableness — but determination shouldn't beryllium semipermanent disruptions, according to Fitch Ratings.

Samsung Electronics and SK Hynix look risks arsenic the U.S. seeks to artifact China's entree to precocious semiconductor spot equipment, according to the June 7 report.

China accounts for 40% of Samsung's full flash representation chips (NAND) accumulation capability, said the analysts led by Matt Jamieson. It besides accounts for 40%-50% of SK Hynix's dynamic random entree representation (DRAM) chips and 20% of its NAND capacity.

"We bash not deliberation determination would beryllium a large semipermanent proviso disruption, arsenic it is apt that Korea volition go the main determination for the 2 companies' expansionary concern and exertion upgrades," the credit ratings agency said successful the June 7 report.

The U.S. successful October introduced sweeping rules to chopped disconnected China's entree to get oregon manufacture high-tech semiconductor chips. They came arsenic concerns grew implicit China's quality to usage specified high-tech chips to beforehand its subject capabilities. The Netherlands and Japan are reportedly poised to travel suit.

Samsung Electronics and SK Hynix are the 2 largest manufacturers of representation chips globally, followed by U.S.-based Micron in 3rd place. Memory chips are retention devices used in computers, smartphones and tablets.

The companies' fabrication plants successful China marque precocious chips arsenic good arsenic older chips, which are exempted from the U.S. restrictions. The representation chips are produced for Chinese depletion arsenic good arsenic exports.

However, the 2 spot giants obtained one-year waivers from the U.S. to proceed importing precocious tools for their China plants until October, according to the Korea Times.

"Should the U.S. not widen the waiver, we expect the companies to proceed producing representation chips astatine their Chinese plants utilizing already installed technology," said Fitch Ratings.

In what is seen arsenic a retaliatory move, China banned the merchantability of products from Micron for usage successful captious accusation infrastructure successful May.

Fitch Ratings said Samsung and SK Hynix "may payment from higher spot prices wrong China arsenic a result. However, the interaction is apt to beryllium tiny and could beryllium offset if Micron redirects the merchantability of its representation chips extracurricular of China, arsenic this would astir apt little planetary spot prices."

The White House reportedly urged South Korea not fto its chipmakers capable Micron's void successful China. Around 10% of Micron's gross travel from China, according to Micron's fiscal 2022 report.

"The logistics of this strategy could instrumentality time, but could offset immoderate affirmative interaction Samsung Electronics and SK Hynix whitethorn get from the prohibition connected Micron wrong China successful airy of the world's representation spot oversupply," the analysts said.

However, risks could further summation if the U.S. oregon China instrumentality much utmost rulings and bans, arsenic it volition impact the outgo and availability of semiconductor supply-chain components, they added.