South Korean computer chipmaker SK Hynix said on Wednesday it might be forced to sell its manufacturing operations in China if a US crackdown on exports of semiconductor technology and manufacturing equipment to China intensifies.
SK Hynix's chief marketing officer, Kevin Noh, raised those concerns during a conference call on Wednesday after the company reported its operating profit dropped 60 per cent in the last quarter from 2021, a decline it blamed on a deteriorating business environment.
Click here to connect with us on WhatsApp
Global inflation amplified by Russia's war on Ukraine and rising interest rates imposed by central banks to counter surging prices have slowed consumer spending on the kinds of high-tech products requiring computer chips.
SK Hynix and other semiconductor makers are also navigating new US restrictions on exports of advanced semiconductors and chipmaking equipment to China. Such limits were in part imposed to prevent use of American advanced technology in China's military development.
SK Hynix said this month that the US Department of Commerce granted the company a one-year exemption from such requirements, allowing it to provide equipment and other supplies to its Chinese factories making memory chips.
Other major chip and chip-manufacturing equipment makers like Samsung and Taiwan's TSMC are thought to have also gotten exemptions.
More From This Section
SK Hynix may find it difficult to equip its manufacturing line in the eastern Chinese city of Wuxi with the most advanced chipmaking machines, including extreme ultraviolent lithography (EUV) systems, Noh said.
He said SK Hynix doesn't expect major disruptions at the plant at least until the late 2020s, but things could quickly turn for the worse if Washington refuses to extend temporary exemptions at some point and begins to fully export its export controls.
If it becomes a situation where we would have to obtain (US) license on a tool-by-tool basis, that will disrupt the supply of equipment and we could face difficulties in operating (Chinese) fabrication facilities at a much earlier point than the late 2020s, Noh said.
If we face problems that make it difficult for us to operate our Chinese fabrication facilities including the Wuxi plant, we are considering various scenarios, including selling those fabrication facilities or their equipment or bringing them to South Korea," Noh said.
He said those contingency plans would apply to a very extreme situation," and the company hopes to avoid such problems and operate as normal.
Citing an unprecedented deterioration in market conditions, SK Hynix said it would cut its investment next year by more than 50 per cent as it anticipates supply will continue to exceed demand for the time being.
The country's operating profit for the three months through September was at 1.65 trillion won (USD 1.16 billion), compared to 4.17 trillion won (USD 2.92 billion) during the same period last year. Revenue fell 7 per cent to 10.98 trillion won (USD 7.7 billion).
Some experts say that the US-China technology standoff could force SK Hynix and Samsung Electronics, another major South Korean chipmaker, to significantly modify their Chinese operations over the next few years.
Samsung, the world's largest provider of memory chips, is widely believed to have received a similar exemption from the US restrictions, although the company has not publicly confirmed it.
Noh during the call said SK Hynix's competitors have also been granted the US waivers, in a possible reference to Samsung and Taiwan's TSMC.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)