South Korean chipmaker SK Hynix is ​​worried about China’s future

SEOUL, South Korea (AP) – South Korean computer chip maker SK Hynix said Wednesday it could be forced to sell its manufacturing operations in China if a U.S. crackdown on semiconductor technology and manufacturing equipment exports in China it will intensify.

SK Hynix chief marketing officer Kevin Noh raised these concerns during a conference call Wednesday after the company reported that its operating profit fell 60% in the final quarter from 2021, a decline he attributed to deteriorating business. business environment.

Global inflation amplified by Russia’s war on Ukraine and rising interest rates imposed by central banks to counter rising prices have slowed consumer spending on the types of high-tech products that require computer chips . SK Hynix and other semiconductor manufacturers are also facing new US restrictions on exports of advanced semiconductors and chip manufacturing equipment to China. These limits were in part imposed to prevent the use of advanced American technology in China’s military development.

SK Hynix said this month that the U.S. Department of Commerce has granted the company one year of exemption from those requirements, allowing it to supply equipment and other supplies to its Chinese memory chip factories.

Other major chip makers and chip manufacturing equipment such as Samsung and Taiwan’s TSMC are also thought to have obtained exemptions.

SK Hynix may have difficulty equipping its production line in the eastern Chinese city of Wuxi with the most advanced chip-making machines, including extreme ultraviolet lithography (EUV) systems, Noh said. He said SK Hynix doesn’t expect major disruptions to the plant until at least the late 1920s, but things could quickly get worse if Washington refuses to extend the temporary exemptions at some point and begins enforcing its controls fully. on exports.

“If it becomes a situation where we would have to get licensed (US) tool by tool, that will stop supplying equipment … and we could run into difficulties managing (Chinese) manufacturing facilities at a time much earlier than the end of the 2020s, “Noh said.

“If we face issues that make it difficult for us to manage our Chinese manufacturing facilities, including the Wuxi plant, we are considering various scenarios, including selling those manufacturing facilities or their equipment or transporting them to South Korea. “Noh said.

He said those contingency plans would apply to a “very extreme situation” and the company hopes to avoid such problems and operate normally.

Citing an “unprecedented deterioration” in market conditions, SK Hynix said it will cut its investments by more than 50% next year as it expects supply to continue to outstrip demand for the time being. The country’s operating profit for the three months to September was 1.65 trillion won ($ 1.16 billion), compared to 4.17 trillion won ($ 2.92 billion) in the same period. of last year. Revenue fell 7% to 10.98 trillion won ($ 7.7 billion).

Some experts say the tech stalemate between the US and China could force SK Hynix and Samsung Electronics, another major South Korean chip maker, to significantly change their Chinese operations in the coming years.

Samsung, the world’s largest supplier of memory chips, is believed to have received a similar exemption from US restrictions, although the company has not publicly confirmed this. No, he said during the call that SK Hynix’s “competitors” have also obtained the US waivers, in a possible reference to Samsung and TSMC of Taiwan.

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