With Donald Trump’s victory in the U.S. presidential election, the whole semiconductor industry, especially those Asian-based tech giants making strides in overseas expansion, are concerned about the development of the U.S. CHIPS and Science Act.

According to the latest reports by Bloomberg and Business Korea, while TSMC has finalized binding agreements for multi-billion dollar grants and loans to back its U.S. factories, Samsung and SK hynix are both concerned that potential reductions in semiconductor subsidies could result from policy amendments.

Regarding who may be receive the funding from the Biden administration soon, another report by Reuters names TSMC, GlobalFoundries and at least one other chipmaker as the lucky ones.

The Reuters report further explains that the U.S. Commerce Department recently informed Congress that at least three companies are near receiving their final awards. Under the CHIPS Act, the Commerce Secretary is required to notify the relevant committees at least 15 days before finalizing any deal over USD 10 million, according to Reuters.

TSMC More Assured as Binding Agreements Reportedly Finalized

According to Bloomberg, the CHIPS Act allocated USD 39 billion in grants, along with additional billions in loans and 25% tax credits, aimed at revitalizing U.S. semiconductor manufacturing after years of production moving to Asia. At this moment, over 20 companies are in line to receive government funding, which suggests that it is highly probable that some of the funding will be finalized under Donald Trump’s leadership when he takes office in January, 2025.

Following Trump’s previous remarks that the CHIPS and Science Act is “so bad” and House Speaker Mike Johnson’s suggestion that Republicans may try to repeal the Act if they win Congress, industry officials are eager to finalize matters quickly, both to ensure that funds begin flowing to projects meeting established benchmarks, according to Bloomberg.

TSMC’s package, announced in April, includes USD 6.6 billion in grants and up to USD 5 billion in loans to aid the construction of three semiconductor factories in Arizona, with the total capital expenditure for the site amounting to more than USD 65 billion, according to its press release.

The deal, initially announced as tentative agreements earlier this year, comes as the Biden administration pushes to disburse funds before the end of its term in January, according to Bloomberg. Though it remains uncertain when the agreements will be officially signed and the incentives revealed, the award amounts are rumored to align with the preliminary agreements.

Samsung and SK hynix More Concerned about Direct Losses if Subsidies Are Not Granted

On the other hand, South Korean memory giants Samsung and SK hynix are more concerned that whether semiconductor subsidies may be reduced due to potential cuts to the U.S. CHIPS and Science Act.

Both companies are set to receive subsidies—around USD 6.4 billion in direct funding for Samsung and USD 3.87 billion for SK hynix—on the condition that they establish semiconductor manufacturing plants in the U.S.

However, an industry official cited by Business Korea stated that while the scale of the subsidies has been confirmed, the timing of the payments remains uncertain, which is worrisome. If the subsidies are not granted, it will result in direct losses.

Samsung had planned to invest USD 44 billion to build two semiconductor plants and an advanced packaging R&D center in Taylor, Texas. However, due to its current struggles, it has reportedly delayed construction and orders for the second foundry plant in Taylor.

Furthermore, concerns are also rising about the potential negative impact on semiconductor exports due to the U.S. government’s policies toward China. According to the Business Korea report, a reduction in Chinese finished product exports to the U.S. would likely cause a decline in sales for Korean companies that export intermediate goods, such as semiconductor equipment.

Not all news is bad news, though. An industry observer cited by Business Korea notes that although China is still unable to produce advanced process DRAM, they are quickly closing the gap in general semiconductor production. If Chinese memory companies face tighter regulations, it could lead to indirect advantages for their South Korean counterparts.

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• [News] With Trump’s Odds of Winning Rising, Concerns Arise on Potential Adjustments in Chip Subsidies
• [News] TSMC’s First Plant in Arizona Achieves Early Chip Production Yields Higher than Taiwan’s

(Photo credit: TSMC)

As Samsung is reportedly scaling down its foundry and legacy DRAM production, the South Korean semiconductor giant is now said to be planning the sale for its outdated equipment in China, including the NAND Flash facilities in Xi’an, according to a report by the Chosun Daily.

The report notes that the struggling semiconductor giant is gearing up to sell old equipment from multiple front-end and back-end production lines, which could not be sold in a timely manner and have been accumulating due to pressure from Washington.

The equipment set for sale primarily consists of 100-layer 3D NAND machinery, according to the Chosun Daily. Since last year, Samsung has been transitioning its Xi’an plant to 200-layer production processes, the report notes.

According to another report by the Korea Economic Daily, following Samsung’s current mass production of its 286-layer V9 NAND flash chips, the company’s Device Solutions division is targeting the production of vertical NAND with a minimum of 400 stacked layers as early as 2026, which makes the 100-layer 3D NAND machinery outdated.

The Chosun Daily report indicates that the old machines are expected to be sold through local Chinese companies or third parties. Memory giants such as Samsung and SK hynix have traditionally sold their used equipment to external companies through brokers after replacing it with advanced machinery, with China rumored as a major buyer.

It is worth noting that following the U.S. Commerce Department’s ban in October 2022 on exporting advanced semiconductor equipment to Chinese companies, these sales have reportedly ceased. According to the report, under U.S. regulations, equipment used in DRAM production processes of 18nm or below, system semiconductors of 14nm or below, and NAND flash memory of 128 layers or above cannot be exported to China.

However, in order to secure Validated End User (VEU) status from the U.S. government, Samsung and SK hynix have rumored to refrain from selling old equipment, even those not restricted by these sanctions, the report suggests.

Once a company is included in the VEU program, it can export items specified in collaboration with the U.S. Commerce Department without a separate permit process or expiration, resulting in an indefinite waiver of U.S. export control regulations, the report explains.

Despite these concerns, following weaker third-quarter results, Samsung is set to begin extensive organizational restructuring and cost-saving measures by the end of the year. As Samsung is expected to adjust utilization rates and staffing levels on its domestic legacy lines, similar changes are anticipated for its Chinese facilities, according to senior management cited by the report.

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• [News] SK hynix and Samsung Reportedly to Reduce Legacy DRAM Production like DDR4
• [News] SK hynix and Samsung Reportedly Step up Focus on HBM4 and CXL amid Rising Chinese Competition

(Photo credit: Samsung)

As South Korean memory giants Samsung and SK hynix announced their third quarter financial reports, posting a 112% and 94% year-over-year revenue growth, respectively, the threat from increasing output of Chinese rivals such as CXMT, which drives prices down, has reportedly prompted them to significantly cut back on legacy memory chip production, according to the report by the Korea Economic Daily.

According to the report, China’s ChangXin Memory Technologies (CXMT) has been ramping up the production of older chips like DDR4 and LPDDR4X, resulting in severe price pressure in legacy products.

CXMT has expanded its monthly DRAM production capacity from 40,000 wafer sheets in 2020 to 160,000 sheets. This capacity is expected to reach 200,000 sheets by year-end and 300,000 by the close of 2025, the report said.

SK hynix to Reduce DDR4 Production to 20% of Total DRAM Output

Industry sources cited by the report noted that in a recent investor relations session with Goldman Sachs, SK hynix suggested that it plans to reduce DDR4 DRAM production to 20% of its total DRAM output by the end of the year, down from 30% in September and 40% in June.

On the other hand, according to the report, in an earnings call with analysts on last week, Kim Jae-joon, executive vice president of Samsung’s device solutions (DS) division, confirmed plans to reduce production of legacy DRAM and NAND flash chips, aligning with industry expectations that chipmakers are scaling back on conventional memory output.

HBM and eSSD Emerge as the New Focus

Instead, both memory giants highlighted in their earnings call that they would shift their focus to highly profitable premium products like HBM and enterprise solid-drivers (eSSDs).

These adjustments by Samsung and SK hynix align with strong server DRAM demand driven by major tech firms like Google and China’s Baidu investing in server infrastructure, while PC DRAM sales have remained stagnant, according to the Korea Economic Daily.

According to SK hynix, as generative AI is developing into a multi-modal1 form and global big tech companies continue to invest to develop artificial general intelligence (AGI), the demand of memory for AI servers such as HBM and eSSD has grown noticeably this year. SK hynix predicts that this trend will continue next year.

According to the Korea Economic Daily, anticipating a prolonged global over supply, SK is accelerating the upgrade of its older DRAM lines in Wuxi, China, to advanced lines for producing fourth-generation 10-nanometer 1a DRAM.

While maintaining steady NAND flash production, in the meantime, SK is increasing the operation rate at its eSSD facility in Dalian, China, to nearly full capacity, according to sources cited by the report.

On the other hand, Samsung noted that in 2025, the company plans to expand the sales of HBM3E and the portion of high-end products such as DDR5 modules with 128GB density or higher for servers and LPDDR5X for mobile, PC, servers, and so on.

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• [News] SK hynix and Samsung Reportedly Step up Focus on HBM4 and CXL amid Rising Chinese Competition

(Photo credit: SK hynix)

Amid concerns on its progress of advanced nodes, Samsung’s DS Division recorded an operating profit of 3.86 trillion won in the third quarter, marking a 40% decline from the previous quarter. Now it seems that the struggling giant plans to further scale down on foundry production, aiming to decrease operations to about 50% by year-end, according to South Korean media outlet the Chosun Daily.

The report notes that Samsung’s semiconductor division is temporarily closing down some production lines at its foundry facilities in response to weak orders from U.S. tech companies and Chinese fabless firms.

According to sources familiar with the situation cited by the report, Samsung has already closed more than 30% of its 4nm, 5nm, and 7nm production lines at Pyeongtaek Line 2 (P2) and Line 3 (P3). Furthermore, the company is said to be carefully keeping an eye on customer orders, and planning to gradually halt operations, possibly shutting down approximately 50% of its facilities by year-end.

Though the financials of its foundry business has not been disclosed separately, analysts project that the chipmaker’s foundry business suffered losses of around 1 trillion won in the third quarter, leading the company to implement cost-cutting measures by shutting down portions of its production lines, according to the report.

Instead of maintaining production lines at low utilization rates, sources cited by the report indicate that Samsung has opted to shut down operations to save on electricity costs more effectively.

The report attributes Samsung’s decision to weaker-than-anticipated orders from Chinese fabless firms, which had previously represented a significant share of Samsung’s 4nm and 5nm production volumes. U.S. trade restrictions on China’s semiconductor sector have led some Chinese fabless companies to postpone their projects ahead of the U.S. presidential election, the report indicates.

The move does raises concerns on whether the company’s technological gap with foundry leader TSMC may be widening. Lee Jong-hwan, a professor of system semiconductor engineering at Sangmyung University, observed that while Samsung seems to prioritize on memory chips, the foundry division has been sidelined, according to the report.

However, in its latest financial announcement, Samsung states that it plans to leverage the mass production on the 2 nanometer (nm) Gate-All-Around (GAA) process to win new clients. The company aims to mass produce 2nm in 2025 and 1.4nm by 2027.

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• [News] Samsung’s Chip Division Sees 40% Profit Drop in Q3 as Sales Hit Record High

(Photo credit: Samsung)

Samsung Electronics released its third-quarter earnings on October 31, reporting a sharper-than-expected profit despite a substantial decline in profits from its flagship semiconductor business. Notably, Samsung’s senior management emphasized its continued focus on high-end chip production and disclosed progress in major supply deals. This includes a potential NVIDIA certification for its HBM3E which could boost performance in the fourth quarter.

According to reports from Commercial Times, Samsung Executive Vice President Jaejune Kim addressed analysts about high-end memory chips used in AI chipsets, stating that while they previously mentioned a delay in HBM3E’s commercialization, they have made meaningful progress in product certification with key clients. As a result, they expect HBM3E sales to improve in the fourth quarter and plan to expand sales to multiple customers.

Though Samsung did not disclose client names, analysts believe this certification likely refers to NVIDIA, which commands 80% of the global AI chip market.

According to Economic Daily News, Samsung reported significant revenue growth in high-bandwidth memory (HBM), DDR5, and server storage products, with expectations for improved performance in its semiconductor business this quarter.

Although demand for mobile and PC memory chips may decline, the growth in AI is expected to sustain robust demand. Demand for AI and data center products, including memory for both AI and traditional servers, is projected to remain strong and stable through next year.

Additionally, Kim tated that the company would flexibly reduce production of traditional DRAM and NAND chips to align with market demand and expedite the shift to advanced process nodes.

The same report from Economic Daily News indicated that Samsung plans to develop and mass-produce HBM4 in the second half of this year. Next year, its memory division will focus on HBM and server SSDs, and there are hints of potential collaboration with TSMC to meet the diverse needs of HBM clients.

(Photo credit: Samsung)