South Korean companies such as Samsung Electronics and SK Hynix received indefinite exemptions from the U.S. government, allowing their Chinese factories to import U.S. chip equipment without special permission.
This is undoubtedly good news for Samsung and they are indeed taking corresponding measures after obtaining the exemption. According to Business Korea, Samsung Electronics executives have decided to upgrade its Xi’an NAND flash memory factory to a 236-layer NAND process and have begun large-scale expansion.
According to sources, Samsung has begun purchasing the latest semiconductor equipment. The new equipment is expected to be delivered by the end of 2023, and will gradually introduce equipment capable of producing 8th generation NAND at the Xi’an factory in 2024. This is also seen by the industry as overcoming global NAND demand. Weakness leads to strategic steps to reduce production capacity.
Public information shows that Samsung (China) Semiconductor Co., Ltd. settled in Xi’an High-tech Zone in 2012, and Samsung Semiconductor’s Xi’an factory is the company’s only overseas memory semiconductor production base.
The factory added a second phase of the factory project in 2020 and has now developed into the world’s largest NAND manufacturing base, capable of producing 200,000 12-inch wafers per month, accounting for more than 40% of Samsung’s total NAND production.
The first factory of Samsung’s Xi’an factory invested US$10.87 billion (Note: currently about 79.46 billion CNY), and the second factory, which started construction in 2017, has invested US$15 billion (currently about 109.65 billion CNY).
Foreign media believe that there are two reasons why Samsung decided to upgrade its Xi’an factory. One of the main reasons is that the global NAND market environment does not show obvious signs of recovery, and in this case Samsung needs to maintain its global leadership in the NAND market; the other reason is the indefinite exemption just issued by the United States.
Due to severe overcapacity and severe sluggish demand in the global IT market since the end of last year, the weakness of the semiconductor market has seriously affected Samsung’s NAND business, leading to increasing inventory levels, which in turn has led to expanding losses. Even though there has been a slight improvement after slightly reducing production through the production reduction policy, Samsung still needs to upgrade its process as soon as possible.
By upgrading its latest 8th-generation NAND products, Samsung can not only ensure price competitiveness, but also better balance market supply and demand considering that 8th-generation NAND requires about 30% less wafer investment than 6th-generation NAND.
It is said that as the main production base of the 6th generation (128-layer) V-NAND, the operating rate of the Xi’an factory has also dropped significantly since Samsung announced a production reduction in April. The overall operating rate has now dropped to about 20%.
Foreign media believe that although the United States has temporarily relaxed restrictions on Chinese semiconductor equipment, this is only a temporary breathing opportunity for Samsung and SK Hynix.
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