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China’s Micron Ban Adds to Asian Chipmakers’ Investment Woes

“It takes huge amounts of pre-emptive investment to be a chipmaker, and it takes five years, 10 years to break even on those investments, so putting predictability into jeopardy makes investments difficult,” an analyst said

A chip factory in Japan
A chip factory in Japan. Photo: AFP


China’s ban on the use of chips made by US-based Micron Technology in critical domestic sectors threatens to complicate investment decisions facing Asian chipmakers in the midst of an escalating Sino-US tech war.

China’s move against Micron, the biggest US memory chipmaker, was widely seen as retaliation for Washington’s sanctions over the past year to restrict Beijing’s access to key technology.

The ban is likely to benefit Micron’s key rivals – South Korea’s Samsung Electronics and SK Hynix – in the near term. But analysts say growing US-China tensions cast a shadow over the chip industry as firms need to navigate rising uncertainties that could impact their billions of dollars worth of investment decisions.


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“It takes huge amounts of pre-emptive investment to be a chipmaker, and it takes five years, 10 years to break even on those investments, so putting predictability into jeopardy makes investments difficult,” said Changhan Lee, vice chair of the Korea Semiconductor Industry Association.

“In the long term, this won’t help anybody.”

While the costs of setting up chip factories vary according to capacity, chip type and country, the semiconductor industry is one of the most capital-intensive manufacturing sectors. It requires construction of clean rooms and the purchase of sophisticated chip manufacturing tools.

Samsung, for example, spent a total of about 60 trillion won ($45.4 billion) to build two of its chip plants in Pyeongtaek, South Korea.


Caught in the cross-fire

In China, Samsung and SK Hynix, the world’s No.1 and No.2 memory chipmakers, have invested billions of dollars in their chip factories, which import some equipment such as etching machines from the United States.

When Washington announced restrictions on chipmaking exports to China last October, it issued a one-year waiver for Samsung and SK Hynix so they can import tools without having to apply for a licence, but whether that waiver will be extended is not clear.

“It’s better to set up the most efficient production base considering fixed costs and wages, but a big variable called regulation has been added. It’s more complicated,” said Kim Sun-woo, analyst at Meritz Securities in Seoul.

The White House asked South Korea to urge its chipmakers, the world’s biggest memory-chip producers, not to fill any market gap in China if the sale of Micron products were restricted. However, South Korea’s vice-minister of trade Jang Young-jin said Seoul will leave the decision to Samsung and SK Hynix, according to a report by the Financial Times on Tuesday.

“[Korean chipmakers] are stuck in the middle and being bothered by all sides,” said Kim at Meritz.


‘Accepting’ the chip war

Micron, which makes DRAM and NAND flash memory chips, is the first US chipmaker to be targeted by Beijing.

Just days before the ban, Micron announced a plan to invest up to 500 billion yen ($3.7 billion) in Japan in extreme ultraviolet technology, becoming the first chipmaker to bring the advanced chipmaking technology to Japan. Tokyo is striving to reinvigorate its chip sector, while the United States is increasingly urging its allies to work together to counter China’s chips and advanced technology development.

Micron, which generated around 11% of its revenue from chip sales in mainland China in the last fiscal year, said it looks forward to continuing to engage in discussions with Chinese authorities.

But the company did not comment on whether Beijing’s decision might also affect its investment plans for Japan in any way.

Analysts recommended accepting the rounds of Sino-US trade war as status quo, while roundabout ways of importing memory chips may emerge in response to any further geopolitical pressure.

“The US-China hegemony war is here to stay,” said Lee Min-hee, an analyst at BNK Investment & Securities.

“Now it’s chips, later it will be rare earths, raw materials… This is going to continue.”


  • Reuters, with additional editing by Vishakha Saxena


Also read:

South Korea Says New US Rules Won’t Shut Its China Chip Plants

Korean Firms Likely to See Cap on Advanced Chips in China: US

Access to China ‘Essential’ as it Develops Chips: ASML CEO

Micron Probe Fuels Fears of US Businesses in China

US-China Rivalry May Spur Decoupling of Chip Sector – BBC



Vishakha Saxena

Vishakha Saxena is the Multimedia and Social Media Editor at Asia Financial. She has worked as a digital journalist since 2013, and is an experienced writer and multimedia producer. As a trader and investor, she is keenly interested in new economy, emerging markets and the intersections of finance and society. You can write to her at [email protected]


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