US chip curbs may affect Samsung’s growth opportunities

In a recent development, the US govt imposed new chip curbs on China that may affect the growth opportunities of Samsung. KoreaHerald reports that the new US chip restrictions on China may have a limited impact on Samsung Elec.

The new HBM export ban on China may harm Samsung Elec’s growth opportunities. On December 2nd, the US announced a new set of measures to ban the export of critical chips and chip equipment, including HBM, to China.

The rules include new controls on 24 types of semiconductor manufacturing equipment and 3 types of software tools for developing or producing semiconductors, as follows:

• New controls on high-bandwidth memory (HBM)
• New red flag guidance to address compliance and diversion concerns
• 140 Entity List additions and 14 modifications spanning PRC tool manufacturers, semiconductor fabs, and investment companies involved in advancing the PRC government’s military modernization
• Several critical regulatory changes to enhance the effectiveness of our previous controls.

The HBM chips are critical components used in AI chips, for AI training and inference at scale. Products made using American technology are prohibited from export to China, given the Foreign Direct Product Rule.

Korea’s Samsung and SK Hynix and US-based Micron are the only chipmakers that make HBM chips. However, these firms will no longer be eligible to sell HBM semiconductors to China, starting December 31, 2024.

Samsung reportedly generates 20% of its HBM sales from China. It has been selling older HBM2 and HBM2E chips to China. As the company won’t be able to export the cutting-edge chips, the business may be harmed.