Samsung Electronics and SK Hynix are advancing the modernization of their NAND flash factories in China despite U.S. restrictions on semiconductor equipment exports to the country. The need to enhance the technological competitiveness of existing production bases has grown due to a surge in demand for artificial intelligence (AI) data center storage and increasing competition from China's Yangtze Memory Technologies Co. (YMTC).
According to Reuters on October 21, Samsung is converting its existing NAND production lines at its Xi'an facility from around 200 layers to 286-layer 9th generation V-NAND production. The company aims to produce 5,000 wafers per month by December this year, with a target of 40,000 wafers per month by the end of next year. The Xi'an plant is a key facility, accounting for about 40% of Samsung's total NAND production.
SK Hynix is also working to upgrade its NAND production at its Dalian plant from 192 layers to over 240 layers. The Dalian facility was acquired in 2021 when SK Hynix purchased Intel's NAND business and currently produces NAND used in enterprise solid-state drives (SSDs) for its subsidiary, Solidigm. Both companies are not reopening shuttered factories but are improving existing processes to produce advanced products.
This move comes in response to a NAND supply shortage driven by the expansion of AI data centers. As the number of AI servers increases, the demand for enterprise SSDs that store large volumes of data is rapidly rising. Market research firm TrendForce predicts that the demand for enterprise SSDs will increase by over 80% year-on-year in terms of bits this year, with NAND contract prices expected to rise by 15-20% in the fourth quarter compared to the previous quarter.
The competition from Chinese rivals is also a significant factor. According to market research firm Omdia, YMTC's market share in China's NAND sector rose from 28% last year to 38.5% in the second quarter of this year, surpassing Samsung. During the same period, Samsung's share fell from 36% to 33.5%, while SK Hynix's share dropped from 20% to 17%. YMTC has even begun producing some 294-layer products, narrowing the technological gap.
For both companies, maximizing the utilization of their existing production facilities in China is advantageous. This approach reduces investment burdens compared to building new factories and allows for more data storage in the same area by transitioning to higher-layer NAND, which can improve cost competitiveness.
However, U.S. export regulations on semiconductor equipment remain a variable. The U.S. has stated that it will allow the import of equipment for operating existing factories in China but will not grant permits for technological upgrades or capacity expansions. Samsung and SK Hynix have indicated to Reuters that they are working closely with the U.S. government to proceed with equipment improvements.
Meanwhile, Samsung has clarified that these actions are being taken within the framework of U.S. export regulations and are unrelated to capacity expansion or the construction of new factories. According to Reuters, SK Hynix has received approval to produce up to 240-layer NAND at its Dalian plant and is considering applying for additional research and development permits for products exceeding 300 layers. However, it remains unclear how many necessary export permits both companies have secured.
* This article has been translated by AI.
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