Korean Semiconductor Investment Concentrated in China... Inevitable Impact from US-China Conflict

[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Dongwoo Lee] As the United States has banned semiconductor equipment exports to China, concerns are rising about the potential impact on South Korea's semiconductor industry, which has heavily invested in China.

According to data submitted by the Ministry of Trade, Industry and Energy to Kim Hoe-jae, a member of the National Assembly's Industry, Trade, Energy, Small and Medium Enterprises Committee from the Democratic Party, Samsung Electronics invested $3.8 billion in the U.S. from 1997 to 2020, which is one-fifth of its investment scale in China ($17.06 billion).

Samsung Electronics established a DRAM back-end process facility in Suzhou, China in 1996, followed by setting up semiconductor and display sales corporations in Shanghai in 2006. In 2012, it expanded investment by building a NAND flash factory in Xi'an, China.

In the U.S., Samsung established a System LSI and foundry production line in Austin, Texas, and semiconductor and display sales and R&D corporations in San Jose, California, but the total investment scale is much smaller than in China.

SK Hynix, which has no factories in the U.S., has invested $24.9 billion solely in China. SK Hynix established a DRAM factory in Wuxi, China in 2005 and expanded production lines and back-end processes in 2019. In 2018, it also began construction of an analog semiconductor foundry factory. Additionally, in 2013, it built a NAND back-end process facility in Chongqing, China.

On the other hand, SK Hynix currently has no plans to build new semiconductor fabs in the U.S., with only plans to establish an R&D center in San Jose, California by 2026.

Recently, the U.S. government announced export control measures on semiconductor equipment to China, allowing Samsung Electronics and SK Hynix's Chinese factories to import semiconductor equipment without case-by-case approval for one year.

However, the industry consensus is that the one-year grace period is too short, making it inevitable that long-term equipment plans for the Chinese factories, where Samsung Electronics and SK Hynix have made large-scale investments, will face disruptions.

Concerns are also growing that tensions between the U.S. and China in sectors such as semiconductors will escalate following the confirmation of Xi Jinping's third term as China's president.

Battery companies such as LG Energy Solution, SK On, and Samsung SDI, which have invested over 10 trillion won in China over the past decade to build factories, are also expected to see reduced investment effects due to the U.S. Inflation Reduction Act (IRA). Over the past 10 years, their investments in China amount to 6.5 trillion won for LG Energy Solution, 3.42 trillion won for SK On, and 290 billion won for Samsung SDI.

However, the battery companies are in a relatively better position than the semiconductor industry, as they have aggressively expanded their investments in the U.S. as well.

LG Energy Solution's investment in the U.S. is 9.8934 trillion won, and SK On's is 7.13 trillion won, both exceeding their investments in China. Samsung SDI does not have its own U.S. factory but plans to build an electric vehicle battery production plant by 2025 in partnership with Stellantis.

Assemblyman Kim Hoe-jae said, "To protect the value of investments worth trillions of won, the government must take a more proactive trade policy stance to prevent discriminatory measures by the U.S. related to secondary batteries and semiconductors."

This content was produced with the assistance of AI translation services.