US Rules Drive Samsung, SK Hynix NAND Supremacy

Samsung , SK hynix NAND Technology

Samsung Electronics and SK hynix are likely to benefit from the US’s regulatory expansion of Chinese general-purpose chips. Focusing on SK Hynix NAND flash, where China has less technological advantage, is expected to expedite inventory depletion and price rebound, potentially bringing domestic enterprises back to profitability sooner.

According to industry sources on Dec. 26, the Bureau of Industry and Security (BIS) under the U.S. Department of Commerce will survey over 100 companies in automotive, aerospace, and defense starting January next year to assess their dependence on Chinese general-purpose semiconductors. After the study, the Commerce Department will likely impose duties on Chinese chips. Also being explored is banning U.S. defense corporations from importing Chinese semiconductors.

The U.S. Commerce Department’s increased semiconductor industry regulation has hurt China’s exports. U.S. corporations may minimize their use of Chinese semiconductors to avoid further requirements. SMIC, Yangtze Memory Technologies (YMTC, for NAND), Changxin Memory Technologies (CXMT, for DRAM), and others are directly affected by the restrictions. YMTC’s aggressive pricing threatens Western Digital and Micron, according to a June 2022 White House assessment. Through competitive pricing and government subsidies, Chinese manufacturers are rapidly extending their impact in the mid-to-low-end semiconductor sector.

However, Samsung and SK Hynix should benefit. U.S. general-purpose semiconductor purchases will likely shift to South Korean devices over Chinese ones. The industry expects export limitations to be waived for Samsung Electronics and SK Hynix NAND, which have semiconductor plants in China. In its decisions, the U.S. government should examine the global semiconductor supply chain. Based on “Verified End User” (VEU) laws, the U.S. government allowed Samsung Electronics and SK hynix’s Chinese facilities to import U.S. semiconductor equipment without license or time constraints in October.

Domestic NAND enterprises, which have been hurt by the IT demand slowdown, are expected to benefit from this development, unlike DRAM, which has benefited from the AI growth. A plentiful supply of SK Hynix NAND, including solid state drives and other data storage devices, is due to severe competition and minimal technological difference between businesses. Samsung Electronics and SK Hynix NAND are expected to expand supply and deplete inventories faster as YMTC’s NAND price-lowering approach fails.

KB Securities analyst Kim Dong-won said, “Samsung Electronics and SK hynix’s NAND business is expected to turn profitable from the second half of next year due to supply reduction and price increases. Along with profitable DRAM, Samsung Electronics and SK Hynix NAND are likely to improve significantly in the second part of next year.

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