The landscape of the global semiconductor industry is expected to be reshaped following the recent decisions by the Netherlands and Japan to join the U.S. in tightening chip controls on China, which will have an influence on the future strategies of South Korea’s Samsung Electronics Co. and SK hynix Inc.
According to foreign media reports on Friday, Japan and the Netherlands agreed to toughen restrictions on the export of chip manufacturing technology to Chinese companies, which is in extension of a similar move by the U.S. in October last year. At the time, the U.S. Commerce Department issued licensing rules for advanced U.S. chip equipment and technology exported to China, relevantly DRAM memory chips of 18-nanometer half-pitch of less and NAND flash memory chips with 128 layers or more.
The additional controls will have not only U.S. companies like Applied Materials Inc., Lam Research Corp. and KLA Corp. but also those based in Japan and the Netherlands to be tough on China. Dutch company ASML and Tokyo Electron Ltd. will not be able to supply advanced equipment to China.
The export control involves restrictions on supply of extreme ultraviolet lithography (EUV) machines, an advanced equipment used in advanced 7-nm, 5-nm and 3-nm chips. The equipment is supplied exclusively by ASML. The Dutch company has not yet exported the equipment to China.
Other equipment includes immersion lithography equipment among the older deep ultraviolet lithography (DUV) machines that are widely used to produce extensive chips for smartphones and personal computers. Chinese foundry firm SMIC is known to produce 7-nm chips with DUV equipment.
The immersion lithography equipment developed by Japan’s Nikon Corp. is a DUV equipment but is also used in the production of 5-nm chips. The latest chip control on China is expected to affect ultrafine processing in Beijing and eventually competitiveness of Chinese players.
Industry insiders note that Korean semiconductor companies like Samsung Electronics and SK hynix will benefit from the export control in the long run. The restrictions, however, can also have negative impact on the operations of Korean companies’ chip factories in China, which accounts for more than 60 percent of Korea’s chip exports.
Samsung Electronics runs a NAND flash production factory in Xi’an and a packaging factory in Suzhou in China. SK hynix also operates a DRAM facility in Wuxi, a packaging facility in Chongqing and a NAND plant in Dalian, which it acquired from Intel Corp.
Samsung Electronics and SK hynix had not been affected greatly after the U.S. announcement on China restrictions last year as Washington allowed a one-year waiver for their chip-making factories in China.
Concerns rise as there is uncertainty about whether the waiver will be extended for Korean companies. The latest U.S.-led restrictions can also accelerate China’s chip independence and have Beijing to spur its own industry through massive government spending.