The trade relationship between China and South Korea is very peculiar. For this last country, the Chinese market is very important due to its size. If we stick to the semiconductor industry we must not overlook that South Korean companies sell to their Chinese customers lithography equipment and integrated circuitsespecially memory chips made by Samsung and SK Hynix. In this area everyone wins. The companies that Buy and those that sell.
However, this is not the only interaction that is taking place between these two countries in the field of integrated circuits. In fact, the US is about to plant a seed that will probably trigger a war between China and South Korea that will involve memory chips. The US Commerce Department is preparing an imminent sanctions package that will prohibit US chipmakers from selling HBM memory (High Bandwidth Memory) to its Chinese clients.
This measure will especially affect Micron Technology, which is the leading American manufacturer of memory chips. However, the presence of this company in the HBM memory market is anecdotal. The South Korean companies Samsung and SK Hynix have an approximate market share of these high-performance memories of 48%. Each one of them. And it is very likely that the South Korean government will follow in the US’s footsteps and also prohibit its companies from selling HBM chips to their Chinese customers.
In all likelihood the memory war is about to begin
An important note before moving forward: HBM memory chips are relevant because they work hand in hand with the latest generation GPUs for artificial intelligence (AI). Currently no Chinese memory manufacturer has the resources necessary to produce these integrated circuits on a large scale. Not even Changxin Memory Technologies (CXMT), which is the largest Chinese memory chip producer. However, this particular company is increasing its presence in the market by deploying a very aggressive pricing policy.
The Chinese government is financially supporting its memory chip manufacturers in response to the sanctions deployed by the US and its allies
CXMT has increased its DRAM chip production capacity almost five times over the last four years, allowing it to increase its global market share to a very worthy 9%. On the other hand, the Chinese Government is financially supporting its manufacturers of this type of semiconductor in response to sanctions deployed by the US and its allies, so the competitiveness of Chinese companies is on the rise.
Be that as it may, the pricing strategy of not only CXMT, but also other Chinese memory chip manufacturers, such as Fujian Jinhua, is extremely aggressive. In fact, these two companies in particular are expanding their production capacity and slashing prices. Currently both sell their DDR4 chips at a 50% discount compared to integrated circuits of the same type produced by South Korean companies. As we can guess, for Samsung and SK Hynix this strategy represents full-blown aggression.
In the medium and short term, the strategy that these two South Korean companies have chosen seems very reasonable: since they cannot compete with the prices of the competition that comes from China, they have decided to focus on manufacturing the chips that their Chinese rivals cannot. mass produce. HBM and DDR5 memories. It is still early to determine how Samsung and SK Hynix would fit together a sanction that prevents them from selling HBM chips in China. Even so, it is reasonable to anticipate that, regardless of the interests of South Korean companies, it is very likely that the US Government will pressure its South Korean counterpart to ensure that these memories stop reaching Xi Jinping’s country. Ultimately, the development of the AI industry in China is at stake.
More information | DigiTimes Asia
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