US & china are allies and enemies at the same time

How US Waiver of Korean Firms is A Crushing Blow to Chinese Companies?

The recent granting of indefinite waivers to South Korean firms, Samsung and SK Hynix, for advanced chip-making equipment in mainland China has set the stage for TSMC's potential strategic shift.
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Introduction:

The recent US government decision granting an indefinite waiver to South Korea’s Samsung Electronics and SK Hynix, permitting the purchase of advanced manufacturing equipment for their semiconductor plants in mainland China, has sent ripples through the semiconductor industry. The implications of this waiver are substantial, particularly impacting rival domestic memory chip makers like Yangtze Memory Technologies Co (YMTC). This blog post explores the repercussions of the waiver on the market, major players, and the evolving global semiconductor dynamics.

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1. Background and Context:

The US government’s waiver decision comes at a critical juncture, with China currently holding a significant share of the global NAND Flash memory and DRAM market. This waiver is aimed at consolidating the market share and competitive advantage of Samsung and Hynix in China’s semiconductor supply chain. It’s essential to understand the dynamics of the semiconductor market and the role China plays as a major player in this industry.

Read More: US Exempts South Korea, Taiwan Chipmakers from China Export Curbs

China’s Semiconductor Market Dynamics:

China’s semiconductor market has been expanding rapidly, representing a vital hub for memory chip manufacturing. The country’s semiconductor industry has been strategically growing, and the waiver has the potential to reshape its landscape.

Currently, China accounts for about a third of the global NAND Flash memory and DRAM market. The waiver has the potential to significantly impact this market share and disrupt the competitive equilibrium among key industry players.

Providers of sophisticated chip manufacturing equipment and materials are expected to anticipate advantages from the exemption.

Liang Zhenpeng from the Kandong research institute expects this move to bring significant benefits to the two firms in the largest semiconductor market globally.

Liang emphasized that it will secure their market share and uphold their competitive edge within China’s semiconductor supply chain.

Conversely, it places Chinese rival memory chip manufacturer YMTC, which is blacklisted by the US, at a disadvantage, as stated by Wang Lifu, an analyst at semiconductor consultancy ICWise.

Wang highlighted that if the US had not granted the waiver to the two South Korean companies, YMTC would have experienced benefits from the local market demand.

Read more: China: Too large, Too important & Too strategic to walk away from

2. Effects on Chinese Chip Makers:

The US government’s waiver intentionally disadvantages Chinese chip manufacturers, especially YMTC, in their home market. It favors South Korean companies like Samsung and SK Hynix by granting them access to advanced chip-making equipment in mainland China. This tilts the playing field in favor of the South Korean firms, creating an imbalance in the market.

This exacerbates challenges for Chinese chip makers, especially YMTC. They were already contending with restrictions on accessing critical chip-making machinery due to prior US export controls. These controls severely limit crucial components necessary for chip production in China. As a result, Chinese chip manufacturers struggle to keep up with technology advancements and meet the rising demand for semiconductor products worldwide.

Export controls on chip-making machinery hinder China’s semiconductor industry, impeding progress and growth. This curtails innovation, disrupts self-sufficiency, and impacts competitiveness. The US waiver compounds these issues by favoring foreign competitors in China, amplifying the competitive imbalance and affecting the long-term prospects of domestic chip makers like YMTC.

YMTC has been actively working to forge closer ties with domestic tool suppliers to replace US components in its manufacturing equipment. This initiative is aimed at mitigating the adverse effects of US restrictions on its operations.

3. TSMC’s Uncertain Future:

The uncertainty surrounding whether Taiwan Semiconductor Manufacturing Co. (TSMC) will obtain a comparable indefinite waiver to that granted to South Korean companies, Samsung and SK Hynix, presents a pivotal juncture for TSMC’s future operations and investments within China.

TSMC, being the world’s largest contract chip maker, has a significant interest in the Chinese market. The Chinese semiconductor market is massive and rapidly expanding, making it a crucial arena for semiconductor manufacturers globally. However, with the imposition of export controls on chip-making machinery to China by the US government, TSMC, like other international companies, faced obstacles in continuing its operations smoothly within the Chinese mainland.

If TSMC is granted a similar indefinite waiver, it would mark a crucial turning point for the company. This waiver would potentially reshape the trajectory of TSMC’s long-term investment strategies and operational decisions in China. The waiver might prompt TSMC to invest and expand operations in China, strengthening its market presence.

Conversely, without the waiver, TSMC may need to reconsider investments and future plans in China, potentially revising their strategy to navigate US export controls. Essentially, TSMC’s waiver outcome will significantly impact its operations and strategic outlook in China, potentially reshaping its role and impact in the semiconductor industry.

4. Future Outlook:

Samsung and Hynix can breathe a sigh of relief with the waiver, but uncertainties regarding US tech restrictions may discourage further investments. Even with a competitive edge in China, it’s unlikely these Korean firms will invest in new factories soon.

Conclusion:

The US waiver enables Samsung and SK Hynix to access advanced manufacturing equipment for their Chinese semiconductor plants. This has major implications for the global semiconductor market. It showcases the strategic maneuvering of key industry players and highlights the intricate relationship between governments, industry, and market dynamics.

Reference:

[1] South China Morning Post

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