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

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


© Reuters. FILE PHOTO: The brand of SK Hynix is seen at its headquarters in Seongnam, South Korea, April 25, 2016. REUTERS/Kim Hong-Ji

By Stephen Nellis, Joyce Lee and Toby Sterling

SEOUL (Reuters) – Plans by Korea’s SK Hynix to overtake a big facility in China so it may well make reminiscence chips extra effectively are in jeopardy, sources accustomed to the matter instructed Reuters, as a result of U.S. officers don’t need superior tools used within the course of to enter into China.

The potential setback might make SK Hynix, one of many world’s largest suppliers of DRAM reminiscence chips that go into all the pieces from smartphones to information facilities, the following sufferer of the geopolitical wrestle between the United States and China.

SK Hynix manufacturing plans name for the corporate to improve a mass manufacturing facility in Wuxi, China, with among the newest excessive ultraviolet lithography (EUV) chipmaking machines made by Dutch agency ASML, three folks with data of the matter mentioned.

The United States up to now has objected on the grounds that delivery such superior instruments to China might be used to strengthen the nation’s army.

A senior White House official declined to remark particularly on the matter of whether or not U.S. officers would permit SK Hynix to convey EUV instruments to China. But the official instructed Reuters the Biden administration stays targeted on stopping China from utilizing U.S. and allied applied sciences to develop state-of-the-art semiconductor manufacturing that may assist China modernize its army.

The Wuxi factory is important to the worldwide electronics trade as a result of it makes about half of SK Hynix’s DRAM chips, which quantities to fifteen% of the worldwide complete. Any main modifications might have an effect on international reminiscence markets, the place analyst agency IDC says demand is rising at 19% in 2021 alone.

As newer kinds of chips make up a higher share of SK Hynix’s manufacturing in two to a few years, the corporate will want the EUV machines to regulate its prices and speed up manufacturing, a supply with data of the corporate’s operations in China mentioned.

The extent of the considerations inside SK Hynix haven’t been beforehand reported. If the state of affairs just isn’t resolved within the subsequent a number of years, SK Hynix might stand at a drawback in opposition to rivals reminiscent of No. 1 reminiscence chipmaker Samsung Electronics (OTC:) Co Ltd and the United States’ Micron Technology (NASDAQ:), the opposite two main gamers within the DRAM market. Both Samsung (KS:) and Micron are additionally shifting to ASML’s EUV machines however are usually not utilizing them at factory areas the place the machines face export restrictions.

The query of the ASML machines has drawn sufficient concern inside SK Hynix that Chief Executive Lee Seok-hee raised the difficulty with U.S. officers throughout a go to to Washington, D.C. in July, in accordance with two folks briefed on his go to.

SK Hynix declined to touch upon the matter, including that it operates flexibly in accordance with varied market environments and is doing its greatest to reply to market and buyer calls for with out subject.

The Trump administration efficiently mounted an in depth marketing campaign to dam the sale of ASML’s expertise to China’s state-backed Semiconductor Manufacturing International Corp, lobbying the Netherlands authorities with White House officers sharing a labeled intelligence report with the nation’s Prime Minister.

An ASML spokesperson mentioned that the corporate abides by all export management legal guidelines and views them as a “valid tool” for governments to make sure nationwide safety. But the corporate mentioned the overuse of these controls “might impact the production capacity needed to stay ahead of the increasing demand of semiconductors.”

“It is likely that widespread use of export controls could exacerbate microchip supply chain issues, which are already a major concern of governments and policy makers around the world because of the spill-over effect to other industries” such because the automotive trade, the spokesperson mentioned in a assertion.

Analysts don’t imagine that U.S. officers would view SK Hynix’s efforts to convey an EUV instrument into China any otherwise than earlier efforts by Chinese companies.

“They’re really caught between a Chinese rock and a U.S. hard spot,” mentioned Dan Hutcheson, chief govt officer of VLSIresearch, who added that the foundations would possible apply to any chip manufacturing operations in China, overseas or domestically managed. “Anyone who puts an EUV tool in China gives China the capacity. Once it’s there, you have no idea where it will go after that. The Chinese could always seize it or do whatever they wanted to do.”

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