"South Korea Could Become a Key Region for Investment and Technology Upgrades"
"Korean Companies to Partially Fill Micron's Void in China"
Global credit rating agency Fitch Ratings predicted that Korean companies with semiconductor factories in China, such as Samsung Electronics and SK Hynix, will suffer damage due to the U.S. restrictions on semiconductor equipment exports to China, but the damage will not last long.
According to CNBC, Fitch made this forecast in a report on the 7th (local time). Fitch viewed that Samsung Electronics and SK Hynix faced risks after the U.S. imposed restrictions last October on exporting semiconductor equipment to China. The U.S. took these measures over concerns that China might use semiconductors for military purposes, and countries with the world’s top five semiconductor equipment companies, Japan and the Netherlands, joined in.
Fitch issued this report because major domestic semiconductor companies have key production bases in China. Samsung Electronics has a NAND flash factory in Xi'an and a packaging factory in Suzhou, while SK Hynix has a DRAM factory in Wuxi and a packaging factory in Chongqing. Forty percent of Samsung’s total NAND production comes from its Chinese factories. SK Hynix also produces 40-50% of its DRAM and 20% of its NAND in Chinese factories.
Fitch stated, "We do not expect long-term supply disruptions," and forecasted, "If that happens, the main regions for the two companies’ expansion investments and technology upgrades will be Korea."
Considering this, the U.S. announced semiconductor equipment export regulations targeting China last year but gave domestic companies a one-year grace period. No follow-up measures have been announced for after the grace period ends this October. Regarding this, Fitch said, "If the U.S. cannot extend the grace period, we believe companies (Samsung Electronics, SK Hynix) will continue memory semiconductor production by utilizing the technology already installed in their Chinese factories."
Regarding market expectations that Samsung Electronics and SK Hynix will benefit as the U.S. largest memory semiconductor company Micron faces purchase bans in China, Fitch shared the same view, saying, "As a result, semiconductor prices in China will rise, providing benefits." However, Fitch added that the effect will not be significant, as Micron will sell memory semiconductors outside China, eventually causing global semiconductor prices to fall again, offsetting the benefits.
After China took retaliatory measures against Micron last month, opinions emerged repeatedly in the U.S., centered on the White House and Congress, that domestic companies should not fill the gap left by Micron in China.
In response, Fitch said Samsung Electronics and SK Hynix will fill part of the gap left by Micron, but "due to the nature of the memory semiconductor product, it will be difficult to determine whether Korean companies actually filled the space vacated by Micron." Nevertheless, Fitch added, "Due to the nature of this strategy, it takes time, but eventually the benefits gained by Samsung Electronics and SK Hynix could be offset."
Furthermore, Fitch expressed concerns that if the U.S. and China take additional extreme measures against each other, it could increase risks by affecting the cost and availability aspects of the semiconductor supply chain.
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