The United States is going to have to give in with the two big South Koreans for fear of a possible debacle in a sector as necessary for American interests as memory in general. Micron is expanding in Japan and cannot supply the necessary chips alone for the world, so even if it doesn’t want to, The US has to extend the permit for its two Asian rivals in Chinabut it won’t be free, wouldn’t you think otherwise with Uncle SAM?
Biden does not work without a thread, everyone is clear about that today. But when it comes to South Korea and its giant companies, he will have no choice but to allow what he did not want to allow, precisely because it means doing so, or further collapsing the memory sector with China as the protagonist.
Why is the US extending permits for SK Hynix and Samsung in China?
Relations with South Korea are not really bad, but there are certain tensions that arose due to the almost total expulsion of Micron of Xi Jinping’s country. Biden was quick and took the money to Japan, where a small FAB will be created that will be the support in Asia for what Micron intends to do on American soil.
But all their companies, starting with NVIDIA and continuing with Intel and AMD, need the NAND Flash and DRAM sector to not stop, and even less so now that we are on the eve of new architectures and where the stock of chips is returning to normal.
With this panorama, the US Department of Commerce has been in open talks with Samsung and SK Hynix throughout last week and has reached an agreement with both on an issue as important as chip manufacturing tools.
And, due to the needs of American companies, the US. It will allow both Koreans to import from their headquarters to China the chip manufacturing tools they consider appropriate.
Samsung and SK Hynix will compete with Micron at a lower price
The memory sector is not going to have a happy ending for the US right now, and until India and Vietnam, along with Malaysia, have everything they need to supply a giant like Micron, the American company is going to compete at a disadvantage due to what was discussed with their own government.
SK Hynix and Samsung’s plans involve importing new cutting-edge chip manufacturing tools, which means that the world will benefit in price and performance from this, but Micron will not be able to compete in costs because the salary of the Japanese is higher, much higher, than that of the Chinese, and the production costs in the rival country are also higher. They are taller. Furthermore, Micron does not alone lead the industry in lithographic processes or technologies, not even for DRAM, NAND Flash, or HBM, not to mention GDDRx.
Has Biden just given in? As we said at the beginning, obviously not. There is a “but”, which does not seem to worry SK Hynix and Samsung too much… Until the news broke yesterday, but we are going in parts. First of all, everything said with both Korean companies has one condition: They are not eligible for CHIPS Act funding.
South Korea “was bluffing”: the R&D budget is cut for unknown reasons, a move by Seoul?
This did not seem to matter to both companies, until yesterday morning Seoul dropped the bomb: it will drastically cut the R&D budget for its companies in the face of 2024and they will fire more than 1,200 researchers. Both Samsung and SK Hynix are considered government companies at the level of TSMC in Taiwan, or Intel in the US.
Therefore, and knowing that the budget cut is set at 3.89 billion dollarsthe fact of importing cutting-edge chip manufacturing tools from China at a time where Samsung and SK Hynix They have bled economically for a year due to the memory crisis can be a bad move. Will they need Biden’s money? Did he play his US cards right thinking they could get in “through the hoop” later? We continue to inform.