Samsung, SK Hynix Test Chinese Chip Tools to Mitigate U.S. Curbs Risk

Samsung Electronics and SK Hynix have been testing chipmaking equipment from Chinese suppliers at their factories in China, a move aimed at securing a backup plan amid the risk of tightening U.S. export controls. The tests, which reportedly began around two years ago, involve tools from China's Advanced Micro-Fabrication Equipment (AMEC), according to a Reuters report citing people familiar with the matter.

Following the report, shares in the South Korean chipmakers advanced, with SK Hynix gaining 4.9% and Samsung Electronics rising 2.5%, outperforming the wider KOSPI index.

A Contingency for Supply Chain Stability

The primary driver for these evaluations is the growing concern that future U.S. restrictions could disrupt operations at the companies' Chinese facilities. The risk extends beyond access to new Western-made equipment to include the potential loss of maintenance support and replacement parts for tools already installed.

Sources cited in the report clarified that the trials are a precautionary measure to sustain existing production levels, not to expand capacity. The move underscores an unintended consequence of Washington's semiconductor strategy: pushing global manufacturers operating in China to consider local equipment suppliers to mitigate geopolitical risks.

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Regulatory Uncertainty and Market Impact

Samsung and SK Hynix operate major memory chip plants in China and navigate a complex regulatory environment. In 2023, the U.S. designated their China plants as "validated end users," allowing them to import certain American equipment. While this status was later adjusted, the companies have received annual licenses to cover necessary imports, but the long-term outlook remains uncertain.

A significant order from either Samsung or SK Hynix would serve as a major commercial endorsement for China's domestic chip-equipment industry. However, any widespread adoption of Chinese tools faces several hurdles, including:

• Lengthy and rigorous qualification processes
• Smaller service and support networks compared to Western incumbents
• Concerns over intellectual property protection
• Potential political pressure from Washington