Korean chipmakers face critical trade-offs over China exports post Trump-Xi talks

SEOUL: The Trump-Xi summit in Beijing is forcing Korea’s semiconductor industry to weigh a difficult trade-off as equipment suppliers see fresh business opportunities while manufacturers fear a narrowed technology gap. This dilemma pits the potential for immediate sales in China against the long-term risk of helping Chinese firms catch up to industry leaders like Samsung Electronics and SK hynix.

According to a report by the Korea Herald, the two-day summit centers on Washington’s semiconductor export controls and Beijing’s leverage over rare earth supplies, two issues with direct implications for Korea’s chip supply chain and export outlook.

The report mentioned that Washington recently tightened restrictions on semiconductor equipment exports to China to slow advancements in artificial intelligence and high-performance computing. China is expected to use its dominance in rare earths as leverage during discussions on whether to extend the trade truce reached in October last year.

These negotiations carry significant weight for US President Donald Trump ahead of November’s midterm elections. The report noted that the US could ease some restrictions on equipment exports if Beijing agrees to purchase more American agricultural goods, energy products, and Boeing aircraft.

“If the US eases some restrictions on semiconductor equipment exports while China guarantees stable rare earth supplies, both sides could frame the outcome as a diplomatic success,” the report quoted Yeo Tae-kyung, an analyst at Hyundai Motor Securities.

Speculation regarding Nvidia’s business in China intensified after CEO Jensen Huang joined the American delegation at the last minute. This urgency follows reports that the US Commerce Department approved H200 chip purchases by approximately 10 Chinese companies, including Alibaba, Tencent, and ByteDance.

Intermediaries such as Lenovo and Foxconn reportedly received approval to sell these units, with each approved Chinese firm allowed to purchase up to 75,000 units under specific license conditions.

For Korean chipmakers, the implications are more nuanced. While H200 chips do not directly compete with Korean memory products, the approvals may signal a broader shift in Washington’s approach to technology exports.

Citing Cho Yeon-joo, an analyst at NH Investment & Securities, the report noted that any easing of restrictions tied to 14-nanometer and 7-nanometer processes would be closely monitored as Chinese firms push into advanced production. “ASML’s immersion lithography equipment, which is essential for 14-nanometer and 7-nanometer logic production, is also used in advanced DRAM manufacturing,” the report quoted Cho.

“This would be a negative scenario for Korean memory makers,” she added, arguing that China currently appears to hold stronger negotiating leverage through its control of rare earth supplies.

However, some experts believe the direct threat remains limited unless Washington allows China access to extreme ultraviolet (EUV) lithography systems. Park Jae-geun, a distinguished professor in semiconductor engineering at Hanyang University, suggested the US is unlikely to release such critical equipment.

“The key is EUV lithography equipment, and I do not think the US will allow China to access it,” the report quoted Park. “If EUV access is granted, China could significantly accelerate its catch-up in logic foundry and advanced memory chips, but that equipment is unlikely to be released easily.”

Park noted that current restrictions on DRAM production below 17 nanometers are already near the levels Chinese chipmakers have achieved. He suggested that Korean equipment makers could actually benefit if Chinese firms pursue faster mass production and turn to suppliers with extensive memory experience.

A broader easing of tensions could also support Korea’s surging exports to China, which rose 62.5 per cent on-year in April. Park Sang-hyun, an analyst at iM Securities, noted that semiconductors led this recovery and a successful summit could further boost shipments.

“Semiconductors have led the recovery in exports to China,” the report quoted Park Sang-hyun. “If the summit helps ease tensions between the US and China, it could support China’s economy and further boost Korean exports to the country.” (ANI)