The U.S. is considering restricting exports of U.S. chip-making equipment to Chinese memory chipmakers, including Yangtze Memory Technologies Co. (YMTC), according to people familiar with the matter. Professionals analyzed that if this resolution is implemented, the businesses of South Korean chip giants Samsung Electronics (005930.KS) and SK Hynix (000660.KS) will be affected.

It is understood that South Korea has invested heavily in chips in mainland China. The chip giant Samsung has two large factories in China. In 2021, its investment in China has reached 46 billion US dollars (about 310 billion yuan). Only the production capacity of Samsung Electronics in Xi’an factory accounts for 42% of Samsung’s total flash memory, reaching 15% of the global production capacity.

Another chip giant, SK Hynix, has invested more than 20 billion US dollars (about 134.8 billion yuan) in the Chinese market, and the DRAM chips produced by its Wuxi factory have accounted for 47% of the company’s total DRAM chip output. At present, SK Hynix has acquired Intel Corp’s (INTC.O) NAND flash memory chip manufacturing business in China. According to a press release issued by Intel, Intel retained a contract to manage the operations of the China factory it sold to SK Hynix, which previously produced 144-layer QLC SSDs.

The South Korean foreign minister mentioned in a previous speech: “South Korea’s semiconductor industry chain is inseparable from China. From the acquisition of raw materials to production, manufacturing, and sales, China is inseparable from the South Korean semiconductor industry.” This is indeed the case, South Korea exports to mainland China and China Hong Kong’s semiconductor share accounts for more than 60% of the total.

The U.S. move is aimed at protecting U.S. memory chip makers Western Digital Inc (WDC.O) and Micron Technology Inc (MU.O), which together account for about a quarter of the NAND chip market.

NAND chips are so important mainly because how many gigabytes of data a phone or laptop can hold depends on how many NAND chips are included and how advanced they are. U.S. LAM Research Corp (LRCX.O) and Applied Materials (AMAT.O) are major suppliers of such tools.

It is reported that the U.S. government is still considering this matter and has not yet drafted any proposed regulations.

SK Hynix declined to comment on U.S. policy, and Samsung Electronics did not respond to a request for comment.