SK Hynix, Samsung fall as U.S. makes it harder to produce chips in China

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Shares of SK Hynix (OTCPK:HXSCF [https://seekingalpha.com/symbol/HXSCF]) and Samsung Electronics (OTCPK:SSNLF [https://seekingalpha.com/symbol/SSNLF]) fell on Monday after Washington revoked their authorizations to obtain U.S. semiconductor equipment for operations in China.

The move is set to go into effect in 120 days.

The U.S. Commerce Department had granted the firms waivers from broad 2022 export controls on sales of American semiconductor equipment to China. The companies will now be required to secure licenses to purchase equipment for their China operations. The federal filing also listed Intel (INTC [https://seekingalpha.com/symbol/INTC]) among those losing authorization, though the chipmaker completed the sale of its Dalian plant earlier this year.

According to the department, the U.S. plans to approve licenses for the firms to keep operating their existing plants in China, but will not allow expansions or technology upgrades.

Shares in SK Hynix fell nearly 5% in South Korea, while Samsung shed 2.6%. The South Korean chipmakers control the bulk of global memory chip output, accounting for roughly 70% of the DRAM market—crucial for data centers and AI—and 54% of the NAND market.

SK Hynix (OTCPK:HXSCF [https://seekingalpha.com/symbol/HXSCF]) stands as a major supplier of high-bandwidth memory chips to Nvidia (NVDA [https://seekingalpha.com/symbol/NVDA]). Analysts estimate that 30%–40% of SK Hynix’s DRAM and NAND output comes from China. Samsung is expected to be less exposed, as only its NAND production is based there, though still significant at about one-third.

The licensing change will likely reduce sales to China by U.S. equipment makers KLA Corp (KLAC [https://seekingalpha.com/symbol/KLAC]), Lam Research (LRCX [https://seekingalpha.com/symbol/LRCX]) and Applied Materials (AMAT [https://seekingalpha.com/symbol/AMAT]).

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