SK hynix Expands Equipment Purchases for China Plants for Second Year, Accelerating Process Transition
SK hynix’s Wuxi DRAM plant in China (Photo provided by SK hynix)
SK hynix has demonstrated its determination to ‘maintain its China plants’ by increasing the scale of equipment purchases for its Chinese subsidiary for the second consecutive year. Amid prevailing observations that a gradual downsizing of the plants is inevitable due to U.S. semiconductor restrictions against China, this is interpreted as a strategy to maximize facility efficiency by introducing advanced process equipment within the permissible scope. The intention is to boost the asset value and productivity of its China plants through investments in process transition.
According to SK hynix’s business report on March 19, the amount of semiconductor equipment purchased by its Chinese subsidiary last year was recorded at 188.84 billion won. This figure exceeds the amount of equipment sold (104.583 billion won or approximately $70.1 million).
The Chinese subsidiary continued to expand equipment purchases and pursue process transitions in 2022 as well. At that time, equipment purchases amounted to 294.232 billion won, significantly surpassing sales of 110.68 billion won. SK hynix operates a DRAM plant in Wuxi, a packaging plant in Chongqing, and a NAND plant in Dalian, China.
The method being used involves bringing outdated equipment back to Korea for sale and transferring equipment from its Korean plants to China. While sales volumes were larger from 2020 to 2021, the structure has shifted over the past two years, with purchases now exceeding sales as process transitions have begun in earnest.
Korean memory companies are currently banned from bringing Extreme Ultraviolet (EUV) lithography equipment into their plants in China due to U.S. sanctions. With regulations tightening, particularly under the Donald Trump administration, there was even talk of revoking the ‘Verified End-User (VEU)’ status of Chinese plants owned by Korean companies. Currently, limited imports are permitted through an annual equipment export approval system.
The Wuxi DRAM plant, facing a ban on EUV equipment imports, is pursuing a transition from the 1z to the 1a process. For the past two years, it has been working to enhance process efficiency by bringing outdated equipment to Korea for sale and transferring equipment from its Korean facilities. The Wuxi DRAM plant accounts for about 40% of SK hynix’s total DRAM production.
Since the EUV process is essential for producing 1a DRAM, SK hynix has opted for a method where the EUV process is performed in Korea, and the remaining processes are completed in Wuxi. Through this approach, the company is transitioning the Wuxi fab’s process from the existing 1z to 1a, and it is analyzed that the scale of equipment purchases has expanded in this process. SK hynix stated that the sale and purchase of semiconductor equipment are being conducted to improve production efficiency.
An industry official explained, “This process transition is being carried out to secure profitability in response to the growing demand for Artificial Intelligence (AI) memory,” adding, “It is a strategy to maximize the utilization of its China plants amidst U.S. regulations.”
Kim Eun-jin
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