What alternative manufacturing strategies might SK Hynix and Samsung pursue to mitigate the impact of restricted equipment exports to China?

Alternative Manufacturing Playbooks

With U.S. export waivers tightening, SK Hynix and Samsung are likely to lean on three “home‑grown” offsets:

1. Geographic relocation of high‑mix fabs – Both companies can shift volume‑sensitive logic and advanced‑node production to mature fabs in South Korea, Taiwan, and increasingly the United States (e.g., Samsung’s Austin “FAB 2” and the upcoming “FAB 5”). These sites already have the clean‑room infrastructure and can absorb the lost China capacity with minimal retro‑fit time, especially for 1–3 µm DRAM/ NAND nodes that still command strong demand. The move also satisfies U.S. export licensing by keeping the most advanced equipment on‑shore.

2. Utilisation of legacy tooling & “equipment‑sharing” arrangements – Instead of waiting for new EUV/immersion tools, SK Hynix and Samsung can re‑commission older 28‑nm‑class equipment that is not subject to the latest export controls. By re‑packing older generation silicon onto newer packaging (HBM2E, 3D‑XPoint, etc.) they can sustain revenue streams while preserving the high‑margin, next‑gen product pipeline for export‑free markets. In parallel, both firms may negotiate “equipment‑leasing” swaps with Chinese partners that keep the hardware physically in Korea/Taiwan but service Chinese fabs via remote process‑control software, a loophole that has been lightly tested in the past.

3. Strategic re‑design toward “China‑friendly” process nodes – A practical mitigation is to re‑target a portion of the China product mix to the 14‑nm and 20‑nm logic families that can be fabricated on older immersion lithography tools already in inventory. This reduces reliance on the most restricted EUV machines while still delivering acceptable performance for China‑based OEMs. Coupled with aggressive packaging‑in‑memory (PiM) and 2.5‑D/3‑D stacking, these nodes can command decent pricing power even without the latest node advantage.

Trading Implications

Fundamentals: The shift in fab geography and the pivot to legacy nodes will likely compress margins short‑term (cost of relocating wafer starts, under‑utilized capacity), but it also insulates earnings from a sudden Chinese demand shock. Expect a modest earnings dip in Q3‑Q4 2025, followed by a rebound as the re‑allocation stabilizes and U.S.‑centric demand (AI‑training GPUs, data‑center DRAM) picks up.

Technical: Both SK Hynix (KRX:000660) and Samsung (KRX:005930) have been testing a bullish ascending channel since the March pull‑back. The 50‑day SMA sits just above the recent low (≈ $85 for SK Hynix, ≈ $2,250 for Samsung), offering a “buy‑the‑dip” entry if the stocks break back above their 20‑day EMA with volume. A breach of the 200‑day SMA (≈ $78 / $2,150) could trigger a deeper correction, so tight stop‑losses (2–3 % below entry) are prudent.

Action: Monitor corporate disclosures for “fab‑relocation” updates and any licensing‑clearance announcements – these catalysts typically generate 3‑5 % price spikes. In the interim, a modest long position sized at 5‑7 % of portfolio exposure on each ticker, entered on pull‑backs to the 20‑day EMA, aligns with the expectation that the companies will successfully re‑tool outside China and recoup lost market share in the coming 12‑months.