US-China chip war to hit Korean tech giants but no lasting damage, says Fitch
Samsung and SK hynix may even benefit from higher chip prices as China bans Micron products.
The ongoing chip dispute between US and China poses a risk to Chinese operations of South Korea’s chip giants, Samsung Electronics and SK hynix, although there will likely be no long-term adverse impact according to Fitch Ratings.
Fitch expects both Samsung and SK hynix will continue to produce memory chips in their facilities in China using existing installed technology, as the US allows the two companies to continue importing advanced tools for their fabrication plants until October when the 12-month waiver expires.
If the waiver is not extended, it said the companies will eventually find it challenging to maintain or expand production and may choose to boost their production capacity elsewhere.
“We do not think there would be a major long-term supply disruption, as it is likely that Korea will become the main location for the two companies’ expansionary investment and technology upgrades,” the rating agency said in a report published Wednesday.
Currently, Fitch said Samsung manufactures about 40% of its total NAND memory production in China.
The country also hosts less than half of SK hynix’s dynamic random-access memory (DRAM) chip production capacity and about a quarter of its overall NAND production.
While production risks loom, it said the Korean giants may even benefit from the potential increase in chip prices within China, as a result of the mainland banning the sale of US-based Micron Technology products for its critical information infrastructure last month.
The Micron ban was a major retaliatory response to US prohibitions on China’s access to advanced chip technology equipment amid escalating geopolitical tensions between the world’s two largest economies.
South Korea-based semiconductor firms have already requested America to extend its waiver for another year until October 2024.
“We expect both companies to keep their credit profiles intact amid the current cyclical downturn,” Fitch said, noting that Samsung has a solid financial flexibility and strong net cash position while SK hynix’s financial structure remains robust.
Risks to their credit ratings include the chip war escalating with more extreme rulings by either the US or China.
