Samsung, SK hynix Upgrade China NAND Plants to Counter Rising YMTC

SK ㅗynix's semiconductor plant in Xi'an, China. (Photo courtesy of SK hynix) Samsung Electronics and SK hynix are reportedly undertaking work to upgrade their Chinese plants to produce more advanced memory semiconductors. This is described as an effort to counter fast-growing Chinese competitors and respond to the massive demand for artificial intelligence (AI). Reuters reported on Oct. 21, citing four sources familiar with the matter, that Samsung Electronics and SK hynix are working to produce NAND flash with 200 layers or more at their Chinese plants. This is on par with the products produced at their plants in South Korea. NAND is a memory semiconductor that retains data even when the power is turned off, and is widely used in smartphones, PCs, and solid-state drives (SSDs) for AI data centers. The more layers stacked on a single chip, the higher the storage density and the lower the cost. How much to invest in their Chinese operations has become a tricky issue for South Korean semiconductor giants. This has been the case since 2022, when the United States began implementing export controls on certain semiconductor equipment to slow down China’s technological advancement. To install U.S.-made equipment, such as etching equipment, in their Chinese plants, the two companies currently must receive annual permission from the U.S. government. The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) stated last year that it had no intention of granting permission for foreign semiconductor companies to upgrade technology and expand production capacity at their Chinese plants. Such regulatory pressure restricted facility modifications and became a cause for losing market share to China’s Yangtze Memory Technologies Co. (YMTC). Executives at South Korean semiconductor companies have publicly warned that geopolitical tensions are weakening their Chinese businesses. In statements sent to Reuters, Samsung Electronics and SK hynix confirmed that upgrades are underway and are being pursued in close consultation with the U.S. government. However, they did not disclose the specific production plans that were reported for the first time. Reuters reported that it could not be confirmed to what extent U.S. authorities have granted export licenses for the equipment needed for the upgrades. The Samsung Electronics plant in Xi’an, northwestern China, accounts for about 40% of the company’s total NAND production, and two sources said it is currently making products with about 200 layers. Through an internal project, Samsung Electronics is converting the Xi’an plant into a production facility for 286-layer 9th-generation (V9) NAND. According to one source, the goal is to produce 5,000 wafers per month in December and to increase this to 40,000 wafers per month by December next year. Samsung Electronics stated that this upgrade is being conducted in compliance with U.S. export regulations, saying it is “to respond to the increasing demand from global customers, including the United States.” It added, “We are not expanding production capacity or building new manufacturing facilities.” Three sources said SK hynix is seeking to transition to producing NAND with 240 layers or more at its Dalian plant in northeastern China. One source stated that the plant currently produces 192-layer products. SK hynix secured the Dalian plant when it acquired Intel’s NAND business in 2021. The Dalian plant is the only NAND production hub for this business, which has since been renamed Solidigm, and Solidigm is preparing for an initial public offering (IPO) in the United States. One source said SK hynix has received permission to produce up to 240 layers at the Dalian plant and could request approval from the US government for the research and development (R&D) of chips with 300 layers or more. The explanation is that such R&D will help lay the groundwork for future production in the United States. SK hynix is in discussions with the Donald Trump administration regarding plans to build a new NAND plant in the United States. The BIS did not directly respond to a Reuters inquiry asking about the approval status for South Korean semiconductor companies. Instead, it advised referring to its statement from last year establishing that it would approve license applications for the operation of existing Chinese plants but would not allow production capacity expansion or technology upgrades. While Samsung Electronics and SK hynix have been deliberating over the scale of investment in their Chinese plants, YMTC has grown significantly. According to market research firm Omdia, YMTC’s market share in China’s NAND market reached 38.5% in the second quarter of this year, rising from 28% annually last year and overtaking Samsung Electronics. During the same period, Samsung Electronics’ share fell from 36% to 33.5%, and SK hynix’s share dropped from 20% to 17%. The YMTC product lineup primarily consists of 160-layer and 232-layer NAND. However, two other sources said the company is also producing small volumes of 294-layer products and is planning to produce products with 300 layers or more. YMTC did not respond to a Reuters request for comment. Outside of China, Samsung Electronics is selling NAND with up to 286 layers, and in August, it unveiled a prototype of NAND with 400 layers or more. SK hynix is selling NAND with up to 321 layers.