Don't help China with chip shortfall, Washington tells Seoul

Samsung Electronics' chip plant in Xi'an, China [SAMSUNG ELECTRONICS]

Samsung Electronics and SK hynix should not sell chips to China to make up for the shortfall in supply following China's sanctioning of Micron, the White House has told the Korean government.

The Financial Times reported Sunday that the Joe Biden administration reached out to Seoul to ask for a cap on the chip sales, although neither government confirmed.

If the Yoon Suk Yeol government acts on the request, the push could exacerbate weaknesses at Samsung Electronics and SK hynix, which have been hit hard as a result of oversupply.

Samsung Electronics did not respond to questions about the request, while SK hynix said it has not received any request from the government.

Earlier this month, the Chinese authorities began a cybersecurity review of Micron, a U.S.-based chipmaker that generates 25 percent of its revenues in China.

Beijing cites a security threat as the reason for the probe, although the action comes as the United States and China are engaged in a brutal trade and technology war.

Before the trade dispute, China was the main memory chip market for Korean chip makers.

Samsung Electronics's sales in China have been on the decline, hit by the Beijing-Washington row and shrinking demand for semiconductors.

The chip company reported 35.6 trillion won ($26.7 billion) in sales from China last year, down 99 percent from 2021.

Chinese sales were only 11 percent of the total last year, a sharp decline from peak years when the portion reached nearly 20 percent.

On the other hand, sales in North America took 39.3 percent last year as sales generated from the region jumped by 21.5 percent to 11.9 trillion won.

The exposure of SK hynix to China is higher than the exposure of Samsung Electronics. Its sales in China stood at 12.2 trillion won in the first quarter, down 22.4 percent on year.

A Samsung Electronics plant in Xi'an, China, produces about 40 percent of the company's NAND flash output and 10 percent of the world's total. An SK hynix plant in Wuxi, China, makes up about 40 percent of the company's DRAMs, which are a major product for the company.

The U.S. sanctions against China date back to 2019 under the Donald Trump administration.

The United States imposed trade sanctions on China's Huawei and Semiconductor Manufacturing International Corporation in 2019 and 2020 over national security concerns.

More recent restrictions include rules that would make it nearly impossible for companies to supply their factories in China with technologies for the making of DRAM memory chips rated 18 nanometers or less and NAND flash memory chips with 128 layers or more.

Samsung Electronics and SK hynix received a one-year waiver from the regulation last year.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]