Shares in SK Hynix and Samsung Electronics dropped on Monday after Washington revoked authorizations that allowed them to secure US semiconductor manufacturing equipment for their chip plants in China.
The move will make it difficult for the South Korean chipmakers to upgrade their factories in China, potentially eroding their competitiveness.
SK Hynix and Samsung, which dominate the global production of memory chips that power smartphones, computers, and data centers, had, until now, benefited from exemptions to sweeping restrictions that the US has imposed on chip-related exports to China. The revocation of the authorizations is set to go into effect in 120 days.
Shares in SK Hynix slid 4.8%. Analysts estimate that 30% to 40% of its DRAM and NAND production is based in China.
Samsung is seen as less affected, with all of its DRAM production outside China. Around a third of its NAND chips are estimated to be produced in China. Its shares fell 3%.
In response to the move, SK Hynix said it would maintain close communication with both the Korean and the US governments and take necessary measures to minimize the impact on its business.
Samsung declined to comment. Samsung vice chairman Jun Young-hyun said in March that its plants in China are important not only for the company but also for the global supply of memory chips.
The announcement was made shortly after US President Donald Trump had his first meeting with South Korea's new president, Lee Jae Myung. The two sides failed to produce a joint statement, with further discussions deemed needed on South Korea's US investment plans that were agreed on in return for tariff cuts.
A trade ministry official said the issues were separate and the rescinding of the authorizations was in line with the Trump administration's policy of reexamining export controls that it thought were too relaxed under the Biden administration.
Ryu Young-ho, a senior analyst at NH Investment & Securities, said he thought the short-term impact for the South Korean chipmakers would be limited.
"Samsung and SK Hynix have planned their new production lines and processes primarily in South Korea, while maintaining the status quo in China," he said.
But he added that Washington's action could end up benefiting rivals like Micron, which rely less on China for their production sites.
Analysts also said the two companies might expand partnerships with Chinese equipment makers to better stabilize their operations in China if US machinery is not secured in time.
Shares in other South Korean chip assembly and product suppliers also retreated Monday on concerns that they too would be affected. Hanmi Semiconductor, which counts SK Hynix as a major customer, tumbled 6.3% and Hana Micron fell 2.1%.
The licensing change will likely reduce sales to China by US equipment makers KLA, Lam Research and Applied Materials.
US President Donald Trump has also threatened a 100% tariff on imports of semiconductors. While Samsung and SK Hynix could be spared due to an expected exemption for companies investing and building factories in the United States, the tariffs would most likely disrupt a complex and global supply chain.
