The South Korean government has assured that the Biden administration's latest semiconductor control measures against China, including restrictions on high bandwidth memory (HBM) exports, will have minimal impact on Samsung Electronics (Samsung) and SK Hynix. The measures are aimed at limiting the development of China's artificial intelligence (AI) industry.
According to Yonhap News Agency, officials from the Ministry of Trade, Industry and Energy (MOTIE) emphasized that most of SK Hynix's HBM supplies are directed towards American company Nvidia. While Samsung exports some lower-spec HBM to China, it represents a small portion of its overall HBM revenue, resulting in a limited overall impact on South Korean companies.
These export controls were implemented by the US based on national security considerations. Given its implications for the South Korea-US alliance, both countries have maintained close consultations. MOTIE indicated that they are actively communicating and gathering opinions, with both governments committed to monitoring the effects and preventing unexpected business losses.
The US Department of Commerce (DOE) has implemented the foreign direct product rule (FDPR) in this export control, requiring products manufactured in other countries to comply with export regulations if they use US software, equipment, or technology. Given the semiconductor industry's heavy reliance on US technologies, South Korean firms like Samsung and SK Hynix must comply with these rules.
However, the DOE has established that companies from countries with export control systems equivalent to the US are exempt from seeking Department permission when exporting semiconductor equipment to China. While this includes the Netherlands, Japan, and 31 other countries, South Korea is not yet among them. Nonetheless, the South Korean government continues discussions with the US regarding participation in export restrictions and improving control systems.
This suggests that South Korea could potentially receive exemption status by meeting US standards in the future. Furthermore, since the regulation only applies to direct HBM exports to China and not to HBM packaged with logic chips, the South Korean government plans to focus on permitted export methods to minimize impact.
Samsung's higher exposure
Industry analysts indicate that Samsung faces greater risks from the HBM export controls. The company currently supplies primarily mature HBM2 products to China, which reportedly accounts for about 30% of its HBM revenue. While some analyses suggest a lower percentage, Samsung's position appears more vulnerable compared to SK Hynix.
SK Hynix's HBM revenue primarily derives from HBM3 and HBM3E sales to major US tech companies, with HBM3E sales expected to surpass HBM3 by the third quarter of 2024. During the first half of 2024, 12-layer HBM3E sales volume is projected to exceed 8-layer products, with 12-layer HBM3E dominating supply in the second half.
Meanwhile, Samsung's HBM3E products await certification from its largest customer, Nvidia. The export controls have increased pressure to enhance HBM's competitiveness and boost US customer sales. In October 2024, Samsung projected HBM3E sales to reach over 10% in the third quarter and 50% in the fourth quarter, reporting successful completion of key customer quality testing phases.
In a recent organizational change, Samsung appointed Young-Hyun Jun, head of device solutions (DS), to also lead the memory business unit, generating expectations for advances in HBM3E and the upcoming HBM4 planned for release in the coming years.
