SK Hynix in South Korea caught in a battle between the United States and China for semiconductors

US opposition to South Korean chipmaker SK Hynix’s plans to modernize a plant in China threatens the company’s competitiveness, underscoring the challenge facing a sector trapped in the growing technology rivalry between Washington and Beijing.

SK Hynix, the world’s second-largest memory chip maker, wants to retrofit its Wuxi plant in eastern China, where it makes about 40 percent of its Dram memory chips, which enable short-term storage for graphics, mobile and server chips.

The company wants to install its Intense Ultraviolet Waxing Machines, or EUV, the next generation equipment made by Dutch company ASML. Analysts said EUV machines should be installed within the next three years so that SK Hynix can keep pace with other global chip makers, such as Samsung Electronics and Micron Technology, in the race to boost productivity and reduce costs.

S Paul Choi, founder of political risk advisory group Stratwise based in Seoul, said US efforts to secure access to key technologies while refusing to transfer them to China are raising concerns in South Korea.

He said US demand in September for semiconductor companies to provide detailed information on supply and demand for chips, inventory and various customer segments was of particular concern.

“The United States is concerned about technology transfer to China, but many Koreans are equally concerned about transferring their technology to the United States,” Choi said. “The Koreans don’t want to be armed by the Chinese but they don’t want to be heavily armed by the Americans either.”

The United States intensified its campaign to limit technology transfer to China. The Biden administration on Wednesday put dozens of Chinese groups working in quantum computing and other advanced technologies on an export blacklist.

US Trade Representative Catherine Tae told Korean Radio this week that the issue is “extremely sensitive” and “there are legitimate concerns about risks to national security in terms of where this technology ends up”. Analysts said the United States may block ASML’s sale of EUV machines to China because the equipment includes US technology.

US President Joe Biden has been looking for ways to make it difficult for China to obtain advanced technology, especially for semiconductors, in an effort to slow Beijing’s military modernization efforts.

In addition to talks with South Korea, Washington has discussed with the Dutch government whether ASML, the world’s most advanced manufacturer of chipmaking equipment, should be allowed to sell cutting-edge EUV technology to a Chinese chipmaker.

SK Hynix has tried to allay US security concerns by saying it has no immediate plan to bring EUV machines into its Wuxi plant and is in the early stage of producing Dram chips using next-generation equipment at its Korean plant.

Lee Seok-hee, CEO of SK Hynix, told reporters Monday that his company will respond to US concerns “prudently while cooperating with relevant parties.”

A Korean industry official has warned that SK Hynix competitors such as Samsung may face similar problems when they try to bring other high-end equipment into their Chinese factories, even though Samsung did not need EUV machines at its chip maker in China.

While it works to limit the transfer of high-tech to China, the Biden administration has been pushing foreign chip makers to increase production in the United States. Samsung announced Wednesday that it is building a $17 billion high-end chip factory in Taylor City, Texas.

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