Chip war: Micron’s assaults are less important to Samsung than declining demand

Call it diplomacy in flight. The United States wants to recruit South Korea as a chip war ally. The effort began before President Yoon Suk Yeol’s plane landed in Washington for a state visit.

The White House wants Yoon to discourage chipmakers from stuffed any supply gap in China if Beijing bans chips made by US Micron. The request underscores South Korea’s position as a technology frontier state.

Investors in South Korean chipmakers fear getting further drawn into the battle between Beijing and Washington. They are right to do it. But the dispute over Micron is not financially important to them.

China released a security review of Micron, one of the top three memory chip makers along with Samsung Electronics and SK Hynix. Any sales ban in China would be a blow to Micron. Mainland China generated about a tenth of its sales for fiscal 2022.

But the value was only $3.3 billion. That compares with Samsung’s total sales of $226 billion, about a third of which came from chips. The United States has no problem with Samsung’s existing sales to China. These stood at $34 billion in 2021.

The United States added Yangtze Memory Technologies, China’s biggest memory chipmaker, to its trade blacklist in December, limiting its access to critical technologies. This means South Korean chipmakers’ profits in the country would remain buoyant without new sales to any former Micron customers.

Micron’s shares have fallen more than a tenth in the past year. SK Hynix is ​​down a fifth and Samsung just 7 percent. This primarily reflects expectations of an industry-wide downturn. Companies stockpiled chips during the pandemic shortage. Global memory chip prices fell by a fifth in the first quarter, building on a similar drop in the previous quarter.

The forecast for chip demand growth this year is at an all-time low, with “significant oversupply” in memory chips, according to Gartner. This will influence stock prices more than the trade dispute, unless the latter escalates.

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