EXCLUSIVE U.S.-China tech war clouds SK Hynix’s plans for a key chip factory

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SEOUL, Nov 18 (Businesshala) – Korea’s SK Hynix (000660.KS) plans to overhaul a major facility in China so it can make memory chips more efficiently, sources familiar with the matter told Businesshala, Because US officials don’t do that. Want advanced equipment used in the process of entering China.

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The potential setback could make SK Hynix one of the world’s largest suppliers of DRAM memory chips, which go into everything from smartphones to data centers, the next victim of a geopolitical conflict between the United States and China.

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The SK Hynix production plan calls for the company to upgrade a large-scale production facility in Wuxi, China, with some of the latest extreme ultraviolet lithography (EUV) chipmaking machines made by Dutch firm ASML (ASML.AS), which is the case. There are three people with information. said.

The United States has objected in the past on the grounds that sending such advanced equipment to China could be used to strengthen the country’s military.

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A senior White House official declined to comment specifically on whether US officials would allow SK Hynix to bring EUV equipment to China. But the official told Businesshala that the Biden administration is focused on preventing China from using US and allied technologies to develop cutting-edge semiconductor manufacturing that will help China modernize its military.

The Wuxi factory is important to the global electronics industry as it manufactures nearly half of SK Hynix’s DRAM chips, which accounts for 15% of the global total. Any major change could have an impact on global memory markets, where analyst firm IDC says demand is growing at 19% in 2021 alone.

Since the new style of chips will make up a substantial portion of SK Hynix’s production in two to three years, the company will need EUV machines to control its costs and accelerate production, given the knowledge of the company’s operations in China. A source said.

The range of concerns inside SK Hynix has not been previously stated. If the situation is not addressed over the next several years, SK Hynix could stand at a disadvantage against rivals such as No. 1 memory chipmaker Samsung Electronics Co. Ltd. (005930.KS) and United States Micron Technology (MU.O). The other two major players in the DRAM market. Both Samsung and Micron are also shifting to ASML’s EUV machines, but not using them at factory locations where the machines face export restrictions.

The question of ASML machines has caused enough concern within SK Hynix that Chief Executive Lee Seok-hee raised the issue with US officials during a visit to Washington, D.C. in July, two people briefed on his visit. Was.

SK Hynix declined to comment on the matter, saying that it operates flexibly according to different market environments and is doing its best to respond to market and customer demands without any problems.

The Trump administration successfully launched a massive campaign to block the sale of ASML’s technology to China’s state-backed Semiconductor Manufacturing International Corp (0981.HK), lobbying the Netherlands government with White House officials and the country’s prime minister. Shared a classified intelligence report with

An ASML spokesperson said the company complies with all export control laws and sees them as a “legitimate tool” for governments to ensure national security. But the company said overuse of those controls “could impact the production capacity needed to stay ahead of rising demand for semiconductors.”

“It is likely that widespread use of export controls could exacerbate microchip supply chain issues, which are already a major concern for governments and policy makers worldwide because of spill-over effects for other industries”. automotive industry, the spokesman said in a statement.

Analysts don’t expect US officials to see SK Hynix’s efforts to bring EUV equipment to China any different from earlier attempts by Chinese firms.

“They’re really stuck between a Chinese rock and an American hard spot,” said Dan Hutchson, chief executive officer of VLSIResearch, who said the rules would likely apply to any chip manufacturing operation in China, controlled overseas or domestically. “Whoever puts EUV equipment in China gives China the capability. Once he’s there, you don’t know where he’ll go after that. The Chinese can always seize it or do whatever they want to.”

Reporting by Stephen Nellis in San Francisco, Joyce Lee and Hekyong Yang in Seoul, Toby Sterling in Amsterdam and Alexandra Alper in Washington; Editing by Peter Henderson, Chris Sanders and Edward Tobin

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