Exceptional: U.S.-China tech war clouds SK Hynix’s programs for a crucial chip manufacturing facility

The brand of SK Hynix is noticed at its headquarters in Seongnam, South Korea, April 25, 2016. REUTERS/Kim Hong-Ji

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SEOUL, Nov 18 (Reuters) – Designs by Korea’s SK Hynix (000660.KS) to overhaul a enormous facility in China so it can make memory chips extra efficiently are in jeopardy, sources common with the subject informed Reuters, mainly because U.S. officers do not want sophisticated products used in the method to enter into China.

The probable setback could make SK Hynix, one of the world’s major suppliers of DRAM memory chips that go into anything from smartphones to knowledge facilities, the subsequent victim of the geopolitical battle concerning the United States and China.

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SK Hynix manufacturing options connect with for the corporation to upgrade a mass output facility in Wuxi, China, with some of the latest intense ultraviolet lithography (EUV) chipmaking devices designed by Dutch company ASML (ASML.AS), three persons with information of the make any difference explained.

The United States in the previous has objected on the grounds that transport this kind of superior applications to China could be applied to fortify the country’s military services.

A senior White Household formal declined to comment particularly on the make a difference of whether or not U.S. officers would make it possible for SK Hynix to carry EUV instruments to China. But the formal advised Reuters the Biden administration remains targeted on preventing China from making use of U.S. and allied technologies to establish condition-of-the-artwork semiconductor producing that would help China modernize its military.

The Wuxi factory is vital to the international electronics field because it makes about 50 percent of SK Hynix’s DRAM chips, which amounts to 15% of the international total. Any significant variations could have an impact on world memory marketplaces, wherever analyst company IDC claims need is growing at 19% in 2021 alone.

As newer kinds of chips make up a higher share of SK Hynix’s generation in two to a few decades, the enterprise will want the EUV machines to control its fees and speed up production, a supply with awareness of the company’s operations in China mentioned.

The extent of the worries inside of SK Hynix have not been formerly described. If the situation is not fixed in the subsequent several years, SK Hynix could stand at a downside against rivals this sort of as No. 1 memory chipmaker Samsung Electronics Co Ltd (005930.KS) and the United States’ Micron Technology (MU.O), the other two major gamers in the DRAM sector. Both Samsung and Micron are also shifting to ASML’s EUV devices but are not using them at factory destinations where the devices encounter export constraints.

The query of the ASML equipment has drawn sufficient worry in SK Hynix that Main Executive Lee Seok-hee lifted the concern with U.S. officials in the course of a take a look at to Washington, D.C. in July, according to two people briefed on his pay a visit to.

SK Hynix declined to comment on the matter, introducing that it operates flexibly according to numerous marketplace environments and is undertaking its greatest to respond to market place and customer demands with out challenge.

The Trump administration successfully mounted an in depth campaign to block the sale of ASML’s technological innovation to China’s point out-backed Semiconductor Production Worldwide Corp (0981.HK), lobbying the Netherlands authorities with White Residence officers sharing a categorized intelligence report with the country’s Key Minister.

An ASML spokesperson claimed that the firm abides by all export regulate rules and views them as a “legitimate tool” for governments to make sure national protection. But the organization mentioned the overuse of people controls “may well effects the generation potential desired to remain in advance of the expanding demand of semiconductors.”

“It is likely that popular use of export controls could exacerbate microchip supply chain troubles, which are now a key concern of governments and coverage makers around the earth simply because of the spill-above outcome to other industries” this kind of as the automotive market, the spokesperson mentioned in a statement.

Analysts do not feel that U.S. officers would see SK Hynix’s endeavours to deliver an EUV resource into China any in different ways than before initiatives by Chinese firms.

“They are seriously caught concerning a Chinese rock and a U.S. tricky spot,” stated Dan Hutcheson, chief govt officer of VLSIresearch, who included that the principles would likely apply to any chip producing operations in China, international or domestically managed. “Everyone who puts an EUV tool in China offers China the capability. After it is there, you have no notion wherever it will go soon after that. The Chinese could constantly seize it or do whichever they preferred to do.”

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

Our Specifications: The Thomson Reuters Trust Principles.

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