SK Hynix’s Chief Marketing Officer (CMO) Kevin Noh said the firm may sell its Chinese fab in Wuxi, Jiangsu province, if Washington’s latest export controls make it too difficult to sustain production, suggesting a potential decoupling between China and South Korea in the semiconductor industry. “We are looking into various scenarios, but again, this would amount to a contingency. So this would be an extreme situation,” he said. It was the first time that the company had put forward the possibility of ending manufacturing in China. But in a statement to the South China Morning Post, SK Hynix said the company had never mentioned any plans to quit operations or shut down its facilities in China. “SK Hynix will do its best to ensure stable operation of its facilities in China,” the company added.
In October, the U.S. Commerce Department unveiled sweeping updates to its regulations, strengthening export controls on advanced semiconductors and certain chip-making tools for China-based entities. Wafer fabs in China owned by foreign businesses, including SK Hynix’s 300-millimeter DRAM wafer fabrication plant, have been granted a one-year grace period, during which they can continue to import equipment from the U.S. Samsung Electronics and Taiwan Semiconductor Manufacturing Co (TSMC) have also received exemptions for their fabs in China. Still, the U.S. restrictions have cast a shadow over the long-term prospects of these firms’ Chinese operations because they would eventually lose access to upgraded versions of key technologies and equipment, which would hurt their competitiveness.
SK Hynix was forced to halt a plan to upgrade its Wuxi facility last year because U.S. officials did not allow advanced equipment to enter China. Analysts said SK Hynix and Samsung had to reconsider the costs and benefits of operating in China under the new U.S. regulations. These companies have “no choice but to assess the risks of their plants in China”, said Gary Ng, Senior Economist for Asia-Pacific at investment bank Natixis. “It is possible to see more firms selling or relocating their assets out of China to mitigate such risks. Given that the U.S. goal is to freeze China’s advances, there may be some flexibility in keeping the existing fabs eventually, but further expansion will be increasingly tricky.” A closure of SK Hynix’s Chinese plant would deal a heavy blow to China’s position in the global semiconductor supply chain.
The Wuxi factory is currently the largest foreign investment project in Jiangsu. It is critical to the global electronics industry, as it is responsible for about half of SK Hynix’s DRAM chip output and roughly 15% of the world’s production. The Wuxi government built an entire industrial estate with SK Hynix with USD20 billion in investments over 15 years. The company is so important to the local economy that a hospital and primary school were named after SK Hynix, the South China Morning Post reports.
A report by Fathom China, an internal research team at Gavekal Dragonomics, concluded that many of China’s most important semiconductor companies will be “destroyed, damaged, or circumscribed” by the latest U.S. measures. “No Chinese company, even peripherally involved in the semiconductor industry, is untouched,” the researchers said.
Meanwhile, Chinese group Sai Microelectronics said that it has not received any official document approving its acquisition of Elmos' auto chip production line in Dortmund after media reports said Germany plans to approve the deal. In December last year, Elmos said in a press release that it will sell the wafer fabrication activities in Dortmund to Silex Microsystems for around €85 million.
China’s semiconductor imports fell 12.8% to 417.1 billion units in the first nine months of the year, Chinese customs data showed and production of locally made chips plunged 16.4% in September to 26.1 billion units, according to the National Bureau of Statistics (NBS).
