SK Hynix and Samsung Decline as U.S. Tightens Restrictions on Chip Production in China

Impact of U.S. Export Controls on South Korean Chipmakers

• Revocation of Authorizations: SK Hynix and Samsung Electronics experienced a decline in their stock prices after the U.S. revoked their authorizations to acquire semiconductor equipment for operations in China. This change will take effect in 120 days.
• Licensing Requirements: The U.S. Commerce Department previously granted waivers from 2022 export controls, but now the companies must obtain licenses for equipment purchases in China. Intel is also affected, although it has already sold its Dalian plant.

Market Reactions and Financial Implications

• Stock Price Declines: Following the announcement, SK Hynix's shares fell nearly 5%, while Samsung's shares dropped by 2.6%.
• Market Share: The two South Korean companies dominate the global memory chip market, holding approximately 70% of the DRAM market and 54% of the NAND market, both critical for data centers and AI applications.

Production and Supply Chain Concerns

• Dependency on China: Analysts estimate that 30%–40% of SK Hynix’s DRAM and NAND production is sourced from China, while Samsung's NAND production in China accounts for about one-third of its output.
• Sales Impact on U.S. Equipment Makers: The licensing changes are expected to negatively affect sales to China for U.S. semiconductor equipment manufacturers such as KLA Corp, Lam Research, and Applied Materials.