Hynix stuck between U.S. and China for semiconductor war

Reuters reported Wednesday that SK Hynix’s plan to overhaul its plant in Wuxi, Jiangsu Province by acquiring advanced equipment from the Netherlands is in jeopardy. “The potential setback could make SK Hynix the next victim of the geopolitical struggle between the U.S. and China,” it said. The biggest concerns of South Korean semiconductor players in the middle of the battle between the U.S. and China to seize economic hegemony might become a reality.

SK Hynix had the second largest market share in the global D-RAM semiconductor sector in the third quarter with 27 percent, following Samsung Electronics’ 44 percent. In order to hold the lead against competitors in the U.S., the E.U., and China backed by government subsidies and tax benefits, aggressive investment in cutting-edge technologies and equipment is a must. In particular, the plant in Wuxi is a key facility manufacturing half of the company’s D-RAM products. It can have a negative impact on the company’s competitiveness if the plan falls through.

The Biden administration seems to be strongly opposing the export of semiconductor equipment utilizing the technologies of the U.S. and its allies to China. The superficial reason is that it can be misused to strengthen China’s military power but the main purpose is to keep in check the ‘Made in China 2025’ plan, which aims to put the country as a leader of manufacturing both in terms of quantity and quality. The U.S. government seems to be allowing no exception as it dismissed last week its own semiconductor company Intel’s plan to increase silicon wafer production in China.

A solution to this uncomfortable situation is putting a wider gap against competitors in terms of technology and quality so that Chinese companies have no option but to buy semiconductors made by South Korean companies. Despite the circumstances, the construction of Yongin semiconductor cluster, in which SK Hynix plans to invest, is being postponed for over a year due to a delay in getting residents’ approval and licensing. The government and the political circles should pass a special law to promote the growth of the semiconductor industry along with bolder measures to provide support and ease regulations.