The big picture: Samsung and SK Hynix are two powerhouses in the global semiconductor industry. Although initially spared from the geopolitical tensions between the US and China, the South Korean companies are now set to face the negative consequences of Washington's tariff-driven "diplomacy."
US authorities have revoked exemptions that previously allowed Samsung and SK Hynix to purchase chip manufacturing equipment in the US and transport it to China. The two South Korean companies, which control a significant share of the global memory chip market, will now need to reconsider their investments.
The previous US administration had permitted them to export chip-making equipment from US companies such as KLA, Lam Research, and Applied Materials. Without these exemptions, the firms would be unable to use the devices to expand or upgrade their manufacturing capabilities in China.
With the exemptions revoked, the South Korean corporations must now apply for licenses from federal authorities like any other company. The revocation will take effect in 120 days. The Department of Commerce confirmed that it plans to issue licenses allowing companies to continue operating their existing Chinese plants, but will not permit further development or upgrades of these facilities.
Stock market valuations for Samsung and SK Hynix fell sharply on Monday after US authorities confirmed they were revoking the Biden-era export exemptions. SK Hynix was hit the hardest, dropping 4.8 percent, as 30 – 40 percent of its DRAM and NAND Flash chips are manufactured in Chinese facilities. Samsung saw a three percent decline in market value, with only a third of its NAND production taking place in China.
The export exemptions were rescinded shortly after President Donald Trump met with Lee Jae-myung, the newly elected president of South Korea. The negotiations were inconclusive, though the two leaders agreed to meet again in the future.
Analysts are assessing the potential impact of the policy change. Ryu Young-ho, a senior analyst at NH Investment & Securities, noted that Samsung and SK Hynix are now likely to focus on strengthening their domestic manufacturing capabilities. Their Chinese plants will remain operational, primarily to maintain a presence in the country.
The companies may also expand partnerships with China-based equipment manufacturers. Further complications could arise if Trump follows through on his threat of a 100 percent tariff on semiconductor imports. While Samsung and SK Hynix might be spared due to their planned investments in the US, the global chip supply chain could still face significant disruption.