Tech war: SK Hynix halts plans to upgrade chip tech at Wuxi plant due to pressure from US sanctions on China: report

South Korean chip maker SK Hynix has rowed back on plans to upgrade memory chip-making technology at its fab in Wuxi, Jiangsu province, due to pressure from the latest US tech restrictions on China, according to a report by TrendForce, a Taiwan-based consultancy that tracks supply chains.

SK Hynix's long-term strategy "involves shifting its capacity expansion back to South Korea, while the Wuxi fab caters to domestic demand in China and the legacy-process consumer DRAM market," according to the report published on Thursday.

SK Hynix did not immediately respond to a request for comment.

Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.

SK Hynix had planned to upgrade its Wuxi fab's mainstream process from 1y nanometre (nm) to more advanced 1z nm, both classified as being in the 10-nm class. But after the US imposed new restrictions on China's access to advanced chip equipment and technology, the Korean company has opted to increase the share of its legacy 21-nm production lines, TrendForce said.

If confirmed, it would represent another case where Korean chip makers, including Samsung Electronics, have reviewed their investments in China as a result of Washington's trade sanctions.

The US has asked South Korea to urge its chip makers not to fill any market gap in China if Beijing bans American semiconductor firm Micron Technology from selling its products on the mainland, according to a recent report by the Financial Times, which cited people familiar with the situation. Chinese regulators launched a cybersecurity review into Micron in March, without revealing further details.

Increased US efforts to curtail China's chip-making development come after the US Bureau of Industry and Security under the US Commerce Department in October issued a sweeping set of updates to its export control rules. These further restricted the access of China-based semiconductor companies to advanced tools, software, and even US talent, in a bid to cap China's logic chip-making at 14-nm and DRAM at 18-nm.

Foreign-owned chip foundries in China - including SK Hynix's 300-millimetre DRAM wafer fab in Wuxi - were granted a one-year grace period under the October clampdown during which they can continue to import equipment from the US. Samsung and Taiwan Semiconductor Manufacturing Co (TSMC) received exemptions around the same time.

The stakes are high for SK Hynix. The Wuxi factory is currently the largest foreign investment project in Jiangsu. This facility is also critical to the global electronics industry because it is responsible for about half of SK Hynix's DRAM chip output and roughly 15 per cent of the world's production.

"1z-nm process ... has been a work horse for Hynix and Samsung for sometime since the memory chip industry transitioned to 1-alpha process in recent years," said Sravan Kundojjala, a senior independent semiconductor industry analyst.

The 1-alpha process refers to the fourth generation of the 10-nm technology used to make advanced DRAM products at SK Hynix, following the first three generations of processes: namely 1x, 1y and 1z.

SK Hynix said in July 2021 it had kicked off mass production of its more advanced LPDDR4 mobile DRAM chips based on the 1-alpha nanometre (1a-nm) node, which for the first time adopted the ASML-made extreme ultraviolet (EUV) equipment for mass production.

Separately, SK Hynix has denied reports it is selling its flash memory fab in Dalian, Liaoning province, saying that construction will be completed on schedule.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2023. South China Morning Post Publishers Ltd. All rights reserved.