As Chinese chipmakers close the tech gap, South Korea races to protect its lead

China’s expanding semiconductor industry is fuelling mounting anxiety in South Korea, where a new consultancy report has warned local chipmakers to defend profitability as Chinese rivals scale up production and strengthen market share. Samil PwC, the South Korean member firm of the global consultancy, said in a report made public on Monday that Chinese competition would likely heat up first in the areas of conventional memory, mature-node manufacturing, and packaging and testing. To stay ahead, Samil PwC urged South Korean semiconductor companies to sharpen cost competitiveness in commodity memory while doubling down on cutting-edge sectors such as advanced packaging and high-bandwidth memory (HBM), which are used alongside AI processors in a stacked configuration. China still lagged in these advanced segments, where customer validation and stable, high-yield mass production remained barriers, the report noted. The warning follows remarks earlier this month by SK Group chairman Chey Tae-won, who said Chinese rivals ChangXin Memory Technologies (CXMT) and Yangtze Memory Technologies Co (YMTC) were rapidly catching up. South Korea risked surrendering market share if Chinese competitors or US rival Micron Technology expanded capacity faster, Chey warned, according to Yonhap News Agency. He also cast doubt on the efficacy of US-led export restrictions, noting that CXMT and YMTC had made steady progress despite years of technology curbs. As pressure mounts, South Korea’s leading players are moving to protect their turf. Samsung Electronics and SK Hynix were both upgrading their manufacturing facilities in China to produce more advanced NAND flash memory to counter YMTC and to meet AI-driven storage demand, Reuters reported last week. Samsung was retooling its Xian facility to fabricate 286-layer chips, while SK Hynix was preparing to produce chips with at least 240 layers at its Dalian plant, the report said, citing unnamed sources. Both companies said the upgrades were carried out in consultation with Washington. At the same time, Chinese memory specialists are pushing closer to the technological frontier. CXMT, the country’s leading producer of dynamic random-access memory (DRAM), announced plans earlier this month to debut server memory using an advanced 4F² architecture by the end of this year. The space-saving design, which packs memory cells closer together to boost density, is also under development by Samsung and SK Hynix. Data showed that Chinese memory makers were already converting technical gains into commercial share. CXMT captured 10 per cent of global DRAM revenue in the second quarter, more than double the 4 per cent a year earlier, to become the world’s fourth-largest supplier, behind Samsung, SK Hynix and Micron Technology, according to Counterpoint Research. In flash storage, YMTC ranked third globally by NAND shipment volume in the second quarter, trailing only Samsung and SK Hynix, including its US-based Solidigm subsidiary. YMTC’s share of global NAND revenue climbed to 14 per cent in the first quarter of this year, up from 9 per cent a year earlier. Counterpoint projected earlier this month that YMTC’s server-related revenue could approach 39 per cent of its total sales by 2028 – up from virtually zero in 2024 – fuelled by an expansion into storage for AI data centres. MS Hwang, research director at Counterpoint, said YMTC was benefiting from rising prices and stronger domestic order volumes, with enterprise storage presenting a lucrative channel to ride the AI wave. However, winning over international clients beyond China would remain a key test of YMTC’s ability to challenge Samsung on the world stage, he added.