The latest data released by South Korea shows that in June 2026, the country's semiconductor exports increased by 199.5% year-on-year, reaching $44.8 billion, which accounted for 43.8% of South Korea's total exports.
The South Korean semiconductor industry seems to be booming. However, an article published by the East Asia Forum in Australia on July 25 pointed out that the production and market of South Korea's semiconductor industry rely on China. Additionally, South Korea needs permission from the United States to operate factories in China. This puts this important export engine of South Korea's economy under the pressure of two major nations, potentially leading to a risk of stagnation.
The article mentions that currently, the equipment, components, and software used in Samsung Electronics’ and SK Hynix’s factories in China are subject to US export regulations. In 2023, both companies received approval from the US as “Verified End Users (VEU)”, allowing them to introduce US semiconductor manufacturing equipment into Chinese factories without needing separate permits for each application.
However, in September 2025, the United States suddenly revoked the qualifications of those two companies. In 2026, the annual licenses reissued by the United States provided temporary relief, but the requirement for reapproval each year did not restore the previous stable business environment. Korean companies still need to continuously obtain political approval from the United States for their semiconductor production in China.
For South Korea, this regulatory authority is crucial, as its semiconductor industry has a large-scale production layout in China, and its export competitiveness depends on the normal operation of these production bases.
China is South Korea's largest destination for semiconductor exports. Data shows that as of May 2026, the Chinese mainland and Hong Kong together absorbed $17.2 billion in South Korean semiconductor exports. From a production perspective, about 30% to 40% of SK Hynix's dynamic random access memory (DRAM) and NAND flash chip production is located in China. Approximately one-third of Samsung Electronics' NAND flash chips are also produced in China.
South Korean companies are increasing their investments in China. It is reported that Samsung Electronics will increase the investment in its factory in Xi'an to 465.4 billion Korean won (approximately 2.16 billion RMB) by 2025. SK Hynix has invested 581.1 billion Korean won in its factory in Wuxi, and 440.6 billion Korean won in its factory in Dalian.
The article argues that these investments indicate that, during the current AI-driven boom in storage chips, South Korean chip manufacturers are still willing to upgrade and optimize their existing Chinese factories. However, due to the impact of US export regulations, the future development of these factories faces political risks.
Although Korean companies continue to invest in China, at the same time, the Korean semiconductor industry is shifting its most sensitive and advanced next-generation chip projects more towards Korea and the United States. Semiconductor factories in Dongrean, Korea, and in Texas and Indiana, USA, are considered the core components of Korea's future semiconductor strategy.
The article analyzes that the sustainability of South Korean semiconductor companies' "dual-track strategy" also depends on whether China's demand for South Korean memory chips continues to exceed its ability to replace imports. As Chinese semiconductor technology improves, this balance may become increasingly difficult to maintain. Changxin Memory has grown into the world's fourth-largest DRAM manufacturer, and Yangtze Memory is expected to increase its global NAND flash memory market share by 5 percentage points between 2025 and 2026.
The article concludes that the pressures faced by South Korean semiconductor industry from both the US and China are fundamentally different. The risks from the US mainly affect technology and regulations, and these threats are immediate and systematic, which can be addressed to some extent through alliance diplomacy. In contrast, the risks from China are more gradual but more structural. As Chinese semiconductors become more autonomous, this could change the profitability prospects of South Korean companies in supplying chips to China and even the global market.
