As the second term of the Trump administration is set to officially begin, it is expected that strict sanctions against the Chinese semiconductor industry will be imposed. Meanwhile, Samsung Electronics and SK hynix, which operate NAND flash and DRAM production bases in China, are also preparing for this. Both companies are accelerating the transition of their processes to reduce their dependence on production in China and to halt the expansion of their production capacities while improving efficiency.
According to industry sources on the 21st, Samsung Electronics is reducing the production scale at its NAND flash factory in Xi'an, China, amid increased uncertainty in the Trump administration. The company is also hastening the transition of its processes in anticipation of potential restrictions on the import of advanced equipment. It is rapidly upgrading equipment that is currently at the 100-layer level to the 200-layer level to enhance production efficiency. However, it is reported that additional investments in production capacity are not being considered.
A person familiar with Samsung Electronics stated, "The equipment at the Xi'an plant that corresponds to the old process is currently being upgraded within the limits allowed by the sanctions against China," adding, "There is a possibility that some lines may stop due to the transition of processes, which will lead to a temporary reduction in NAND production."
In fact, it is expected that the scale of NAND production at Samsung Electronics' Xi'an plant will significantly decrease compared to last year. Previously, Samsung Electronics had decided to reduce the quantity of NAND wafers input at its largest NAND production base, the Xi'an plant in China, by more than 10% compared to the previous level. Accordingly, the wafer production volume at the Xi'an plant, which was about 200,000 units per month, is projected to decrease to about 170,000 units.
SK hynix is also halting the expansion of production capacity at its largest DRAM production base in Wuxi, China, while deciding to expand the production capacity at its Icheon M14 and M16 plants. Internally, it is anticipated that the DRAM production volume at the M16 plant will equal that of the Wuxi plant by the end of this year. According to market research firm Omdia, the share of DRAM production from the Wuxi plant is expected to decrease from about 40% last year to 35% this year.
A source familiar with SK hynix said, "This year, SK hynix plans to expand its DRAM production by more than 10% compared to last year, but it has decided that only the Wuxi plant will maintain its production capacity," adding, "We are focusing on strengthening domestic DRAM production capacity in anticipation of the possibility of additional sanctions on equipment to be imported to China."
In the industry, it is expected that it will be difficult to relax regulations on the import of semiconductor equipment to China during Trump's term. The U.S. government has implemented export controls since October 2022 that effectively prohibit American companies from exporting semiconductor equipment necessary for producing semiconductors above a certain technology level in China to curb the development of China's semiconductor industry.
As a result, the Chinese plants of Samsung Electronics and SK hynix are currently permitted to import equipment as 'verified end users' (VEU) by the U.S. Department of Commerce. However, the importation of certain items, such as extreme ultraviolet (EUV) lithography equipment, remains under control. Consequently, both companies are facing increased difficulties in upgrading facilities for advanced semiconductor production in China.
Moreover, there are concerns that the Trump administration may expand the scope of semiconductor regulations applicable to the Chinese market from '7 nanometers or less' to 'mid-10 nanometers.' Additionally, if U.S. production facility subsidies determined by the Biden administration are received, new investments in China could be subject to the 'guardrail' provision. This creates inevitable challenges for advanced memory production plans in China.
Meanwhile, the exodus of global corporations from China is accelerating. Last year, IBM eliminated its research and development (R&D) division in China, and Microsoft (MS) decided to completely close its offline stores in the country. Amkor Technology, the world's largest semiconductor packaging company, is also expediting its exodus from China by investing $1.6 billion (approximately 2.25 trillion won) to build a 200,000 square meter packaging plant in Vietnam.