Samsung, SK Hynix shares fall as US makes China production harder

SEOUL (Reuters): Shares in South Korean chipmakers SK Hynix and Samsung Electronics suffered a blow on Monday after Washington revoked authorizations that allowed them to secure U.S. semiconductor manufacturing equipment for their chip plants in China.

The move will make it difficult for the South Korean chipmakers to upgrade their factories in China, potentially eroding their competitiveness.

SK Hynix and Samsung, which dominate the global production of memory chips that power smartphones, computers, and data centres, had, until now, benefited from exemptions to sweeping restrictions that the U.S. has imposed on chip-related exports to China. The revocation of the authorizations is scheduled to take effect in 120 days.

Shares in SK Hynix slid 4.8%. Analysts estimate that 30% to 40% of its DRAM and NAND production is based in China.

Samsung is seen as less affected, with all of its DRAM production outside China. Approximately one-third of its NAND chips are estimated to be produced in China. Its shares fell 3%.

In response to the move, SK Hynix said that it would maintain close communication with both the Korean and the U.S. governments and take necessary measures to minimize the impact on its business.

Samsung declined to comment.

Samsung Vice Chairperson Jun Young-hyun said in March that the company’s plants in China are important not only for Samsung but also for the global supply of memory chips.

The announcement was made shortly after U.S. President Donald Trump’s first meeting with South Korea’s new president, Lee Jae Myung. The two sides failed to produce a joint statement, with further discussions deemed needed on South Korea’s U.S. investment plans that were agreed on in return for tariff cuts.

A trade ministry official said that the issues were separate and the rescinding of the authorizations was in line with the Trump administration’s policy of reexamining export controls, which it believed were too lenient under the Biden administration.

Ryu Young-ho, a senior analyst at NH Investment & Securities, said he believed the short-term impact on South Korean chipmakers would be limited.

“Samsung and SK Hynix have planned their new production lines and processes primarily in South Korea, while maintaining the status quo in China,” he said.

But, he added that Washington’s action could ultimately benefit rivals like Micron, which relies less on China for its production sites.

Analysts also suggested that the two companies might expand their partnerships with Chinese equipment manufacturers to stabilize their operations in China better if U.S. machinery is not secured in time.

Shares in other South Korean chip assembly and product suppliers also retreated on Monday, amid concerns that they too would be affected. Hanmi Semiconductor, which counts SK Hynix as a major customer, tumbled 6.3% and Hana Micron fell 2.1%.

The licensing change is likely to reduce sales to China by U.S. equipment makers KLA, Lam Research, and Applied Materials.

Trump has also threatened a 100% tariff on imports of semiconductors.

While Samsung and SK Hynix could be spared due to an expected exemption for companies investing and building factories in the U.S., the tariffs would most likely disrupt a complex and global supply chain.