Still cold…Korean semiconductors tested by US-China spat

China has hit back at U.S. semiconductor sanctions. It has retaliated against U.S. memory chipmaker Micron by restricting its sales in China. There are observations that South Korean semiconductor companies will absorb the volume of Micron, but the pressure from the United States is also expected to intensify, raising tensions in the semiconductor industry.

China has bared its claws at the U.S. campaign to isolate Chinese semiconductors. On March 21, the Internet Security Review and Adjudication Center (CAC), part of China’s State Internet Information Commission, announced that “there are relatively serious security issues with Micron products” and that “operators of critical information facilities should stop purchasing Micron products.”

The U.S. State Department immediately responded, saying it was “deeply concerned about reports that China has restricted the sale of Micron semiconductors to certain industries.” “This action appears to be inconsistent with China’s assertion that it is committed to an open and transparent regulatory framework for business,” it added. As of last year, China (including Hong Kong) accounted for 16% of Micron’s revenue.

The CAC previously conducted a cybersecurity review of Micron’s products sold in China in late March. At the time, the CAC explained that the reason for the review was “to ensure the supply chain safety of critical information infrastructure and to protect national security by preventing potential product issues from causing internet security risks.” It was also the first time China had conducted a cybersecurity review of a foreign semiconductor company.

China’s sanctions on Micron are seen as a de facto response to U.S. restrictions on semiconductor equipment exports. In October of last year, the U.S. imposed export control measures that effectively banned Chinese companies from exporting semiconductor equipment. In December of the same year, it placed 36 Chinese companies on its export control list, including Yangtze Memory Technology (YMTC), China’s largest memory semiconductor maker.

At the recent Group of Seven (G7) summit, a series of security and economic pressure statements were issued against China. As a result of this organized pushback against China, China may have timed the announcement of the micron sanctions to coincide with the closing day of the G7.

As China’s micron sanctions materialize, Korean semiconductor companies are also on edge. Some have expressed mixed expectations that Samsung Electronics and SK hynix could benefit from the supply shortage of microns. However, the reality for Korean companies is more concerning.

On April 23, the Financial Times (FT) reported that the White House has asked South Korea not to fill the gap if China bans the sale of US semiconductor microns, causing a supply shortage. This was bad news just ahead of the US-Korea summit.

After the ban was announced, the U.S. Commerce Department said, “The United States will continue to work with our allies to prevent disruptions in the semiconductor industry,” further narrowing South Korean companies’ options.

Chinese Foreign Ministry spokeswoman Maoning ⓒAP

An industry that neither the U.S. nor China wants to give up… Time to make a choice

China is not sitting idly by. “Threatening other countries to restrict Chinese exports is a serious violation of market economy principles and international economic and trade rules,” Chinese Foreign Ministry spokesperson Maoning said at a regular briefing on April 22.

Sandwiched between the U.S.-China semiconductor battle, it is unclear whether South Korean companies will be able to continue to target the Chinese market. A one-year moratorium on U.S. export controls on semiconductor equipment to China is set to expire in October for Samsung Electronics and SK Hynix. Currently, the U.S. government, in consultation with the South Korean government, is considering separate equipment import standards for Korean companies with production activities in China. However, there are concerns that the Chinese sanctions have made it unclear whether a separate standard will be established.

Currently, Samsung Electronics produces 40 percent of its NAND flash in Xi’an메이저사이트, China. SK hynix produces 40 percent of its D-RAM in Wuxi and 20 percent of its NAND flash in Dalian. If they are unable to bring U.S. semiconductor equipment into China and upgrade their production facilities in China, they will likely face production disruptions.

“The situation puts South Korea in an uncomfortable position,” said the Wall Street Journal (WSJ), “South Korea’s semiconductor companies are so exposed to China that any pressure from the United States will be painful.”

The government says it hasn’t seen any unusual trends yet. “There is no primary damage to our companies,” said Jang Young-jin, First Vice Minister of Trade, Industry and Energy on April 22. He added, “China has raised concerns about Micron’s products, not our companies.”

However, it is unclear if the government will take an active role. Ahn Deok-geun, head of the trade negotiations division at the Ministry of Trade, Industry and Energy, emphasized at a recent press conference that even if the South Korean government is asked to intervene in the situation, all decisions are up to individual companies. “It’s difficult for the government to tell companies what they should or shouldn’t do,” he said. “It’s hard for the government to dictate what companies should and shouldn’t do.

“The Chinese government’s sanctions on Micron are likely the beginning of the end, not the end,” said an industry insider, adding that “the stakes are quite high for an industry that is going through a down cycle.” “We don’t know how and how much the sparks of the U.S.-China conflict will fly,” he said, adding that “it’s clear that we are in for a major headwind in the medium to long term.”

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