Shares in South Korean chip-making giants Samsung Electronics (SSNLF) and SK Hynix were lower today because of new U.S. restrictions on imports to China.
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AI Battle
President Trump, as part of his ongoing battle for AI supremacy with China, has ditched exemptions for the two Korean firms that had allowed them to ship U.S. semiconductor equipment to their huge factories in mainland China. SK is a key AI chip partner of Nvidia (NVDA).
The move will put huge pressure on both firms because they produce a large proportion – believed to be around a third – of their chips in China, although it could give a boost to U.S. rival Micron (MU).
It has already had a strong last 12 months as can be seen below:
According to the Yonhap news agency, South Korea’s trade ministry said it had been in communication with US officials about the announcement and said it had stressed “the importance of smooth operations of our chipmakers’ Chinese facilities for global semiconductor supply chain stability.”
The US Commerce Department, when announcing the move, said it did not intend to grant licences that would allow companies to “expand capacity or upgrade technology” at China-based manufacturing facilities. It said it was closing loopholes that “put US companies at a competitive disadvantage.”
U.S. Impact
However, analysts pointed out that some U.S. firms would be impacted by the move given that KLA, Lam Research (LRCX) and Applied Materials (AMAT) all sell high-end semiconductor manufacturing equipment to SK Hynix and Samsung Electronics in China.
What it could be is another boost to domestic Chinese companies making chip equipment. They are already getting support from the government which sees AI as a key economic battleground with the U.S. It has recently urged domestic firms to buy locally produced AI chips instead of semiconductor giant Nvidia following the ban on its exports of H20 chips earlier this year.
“The China question is looming large for US chip makers as US tariffs and a push from the Chinese government for domestic chip production weigh on their stock prices,” said Kathleen Brooks, research director at XTB. “Investors could switch to Chinese chip makers if they think that Nvidia won’t be able to capitalize on Chinese demand, and this is a developing theme worth watching.”
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