Domestic corporations supplying materials, components, and equipment to China's semiconductor industry are accelerating product supply. This is because Chinese corporations are making massive facility investments to achieve semiconductor technology independence. As the United States strengthens its export controls on semiconductor exports to China, benefits are expected to continue for the time being.
According to the industry on the 30th, it is observed that the product supply of corporations with high sales proportion in China, such as S&S Tech, KoMiCo, TOKAI CARBON KOREA, NEXTIN, and FST, will expand this year as well. This is due to the increased facility investments by Chinese semiconductor corporations like Changxin Memory Technology (CXMT) and Semiconductor Manufacturing International Corporation (SMIC), amid tightening U.S. semiconductor export regulations against China.
Chinese memory semiconductor corporations and foundry corporations are undergoing large-scale facility investments to achieve semiconductor technology independence. As NVIDIA targets the Chinese market, export regulations are intensifying for products like the H20 artificial intelligence (AI) accelerator that circumvent U.S. government restrictions, placing them in a situation where they are fiercely pursuing the establishment of an independent semiconductor ecosystem.
According to market research firm TechInsights, the investment amount for facilities by China's largest memory corporation, CXMT, increased from $1.25 billion (approximately 1.7836 trillion won) in 2018 to $7.298 billion (approximately 10.4135 trillion won) last year. The Semiconductor Industry Association (SIA) submitted an opinion to the U.S. Trade Representative (USTR) last month, stating that the facility investment ratio against the cumulative revenue of Chinese foundry companies is about 112%, nearly four times the global average of 33%. Last year, the facility investment of China's largest foundry corporation, SMIC, was $7.33 billion (approximately 10.5 trillion won), accounting for 93% of its revenue.
An industry official noted, "Chinese semiconductor corporations are pouring funds into technology cultivation and facility investment based on government subsidies and a strong domestic market. Some processes have high material and component consumption due to low yield rates, which significantly benefits corporations supplying related products to Chinese companies."
For this reason, the performance of corporations with high sales proportions in China, such as S&S Tech (approximately 40%), KoMiCo (approximately 32%), TOKAI CARBON KOREA (approximately 23%), and FST (approximately 20%) is also improving. Last year, S&S Tech's operating profit, which supplies blank masks for the deep ultraviolet (DUV) process, was 29.5 billion won, an 18% increase from the previous year (25 billion won). KoMiCo, supplying cleaning and coating materials, recorded an operating profit of 112.5 billion won last year, soaring 240% compared to the previous year's 33 billion won. TOKAI CARBON KOREA's operating profit also rose 21% year-on-year, and FST successfully turned a profit last year.
Lee Dong-joo, a researcher at SK Securities, said, "There is a possibility that U.S. sanctions against China could expand from equipment to materials and components, but considering that the number of component types amounts to tens of thousands, the reality is that the potential is low and it won't be easy to distinguish by process. However, as China's efforts for semiconductor technology independence continue, domestic corporations are expected to benefit further."