US supply chain review to boost Korean chip sales: analysts

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The US government’s survey on its semiconductor supply chain would likely boost sales for Korean chipmakers, with the heightened surveillance on the usage of Chinese chips raising uncertainties for US tech giants, according to an analysis, Tuesday.

Last week, the US Department of Commerce said it will start the survey in January to identify how US companies are sourcing so-called legacy chips -- the current-generation and mature-node semiconductors.

The purpose of the analysis is to “promote a level playing field for legacy chip production and reduce national security risks posed by the People’s Republic of China,” the department said, referring to China by its official name.

Market observers here say the US measure is likely to benefit Korean chipmakers, especially Samsung Electronics and SK hynix, in reducing their large inventory of legacy chips. The two companies are the world's top two memory chip manufacturers.

"The purpose of the investigation is to protect the US semiconductor supply chain from dumping and infiltration by imposing tariffs on Chinese legacy semiconductors in the US. It is to prevent the industry from following the footsteps of its solar and steel industries," Kim Dong-won, an analyst at KB Securities said in his report.

Kim explained that the US Department of Commerce will use the findings of the survey when choosing the beneficiaries of its Chips Act subsidy program, and it is also reportedly considering banning US defense firm contractors from importing Chinese chips.

“Even if the department does not take any further measures against Chinese semiconductors, US firms are likely to reduce their reliance on Chinese semiconductors with the rising uncertainties,” Kim said.

The analyst also said Samsung Electronics and SK hynix, which run local manufacturing facilities in China, will likely be exempt from the latest measures, with envisioned regulations likely to target Chinese firms such as YMTC, CXMT and SMIC.

While the Korean chipmakers are suffering from losses in NAND memory chips, they will likely see turnovers in the second half of next year with the chip prices expected to increase with the Chinese suppliers eliminated in the supply chain, Kim added.

This year, the two Korean chip manufacturers are expected to log a loss of about 20 trillion won in their NAND memory chip businesses, when combined.

The US Commerce Department said its Bureau of Industry and Security will launch the survey, which focuses on the use and sourcing of China-manufactured legacy chips in the supply chains of critical US industries.

“Legacy chips are essential to supporting critical US industries, like telecommunications, automotive and the defense industrial base. Addressing non-market actions by foreign governments that threaten the US. legacy chip supply chain is a matter of national security,” US Secretary of Commerce Gina Raimondo said.

Following the announcement, the Chinese Embassy in Washington said Thursday the United States "has been stretching the concept of national security, abusing export control measures, engaging in discriminatory and unfair treatment against enterprises of other countries, and politicizing and weaponizing economic and sci-tech issues."

By Jo He-rim(herim@heraldcorp.com)