Samsung Electronics and SK Hynix are evaluating etching equipment from China's Advanced Micro-Fabrication Equipment (AMEC) for potential use at their Chinese manufacturing facilities. This strategic move serves as a contingency plan against the growing uncertainty surrounding U.S. export controls. While these evaluations do not represent a commitment to large-scale deployment, they provide a critical hedge against potential restrictions on servicing, repairing, or replacing existing Western-made tools. As Washington continues to tighten controls, South Korean memory leaders are exploring alternative supply chains to ensure operational continuity within their Chinese-based NAND and DRAM production lines.
Strategic Testing of AMEC Etching Equipment
The testing of AMEC equipment began approximately two years ago, driven by mounting uncertainty regarding whether Washington would permit the continued import of U.S. chipmaking tools into China. Samsung operates a NAND flash memory plant in Xian, while SK Hynix maintains NAND facilities in Dalian and a DRAM plant in Wuxi. Both companies currently rely heavily on etching tools from U.S. firms such as Applied Materials and Lam Research.
The motivation for these trials is not necessarily to expand manufacturing capacity in China, but rather to maintain and upgrade existing production lines. There is significant concern that future U.S. restrictions could extend beyond new equipment to include the servicing and replacement of Western tools already installed in Chinese plants. By testing AMEC, these firms are establishing a potential reserve of Chinese suppliers.
While Samsung has stated it has not tested AMEC equipment for its China factories and has not considered doing so, sources indicate that the evaluation process is underway. For AMEC, securing validation from global leaders like Samsung or SK Hynix would provide a rare and powerful commercial endorsement. While Chinese suppliers still trail in advanced lithography, they have narrowed the gap in etching, deposition, cleaning, and planarisation, often offering tools at a 20% to 30% lower cost than established foreign competitors.
Navigating Evolving US Export Controls
The regulatory landscape for these manufacturers has shifted significantly. In 2023, the U.S. Commerce Department designated Samsung and SK Hynix's Chinese factories as "validated end users" (VEU), allowing certain controlled equipment imports without individual licenses. However, Washington revoked this VEU authorization in 2025, later granting only an annual license for 2026 to allow the import of specific manufacturing equipment.
This regulatory volatility creates a paradox: measures designed to constrain China's semiconductor ambitions are inadvertently creating market openings for Chinese equipment rivals. As U.S. controls tighten, Chinese suppliers like AMEC and Naura Technology are positioned to gain a foothold in foreign-owned fabs operating within China.
The competitive landscape is shifting. While Chinese makers face hurdles like lengthy qualification processes and smaller service networks, their market share is growing. Deutsche Bank estimates that Naura, AMEC, Piotech, and ACM Research could each exceed $1 billion in revenue by 2026. Together, these suppliers could capture 25% to 30% of China's projected $28 billion wafer-fabrication equipment market this year. If lithography and metrology are excluded, the share for Chinese suppliers could approach 40%.
Key Takeaways
- Samsung and SK Hynix are testing AMEC etching equipment to mitigate risks from U.S. export controls on Western tool servicing.
- Chinese equipment, such as that from AMEC, can cost 20% to 30% less than comparable equipment from established foreign suppliers.
- U.S. export controls have created a market opening for Chinese suppliers, with some expected to generate over $1 billion in revenue by 2026.
TechInsyte's Take
In our view, the testing of AMEC equipment by Samsung and SK Hynix signals a fundamental shift in how global semiconductor leaders must approach supply chain resilience. This is not a move toward abandoning Western technology, but a calculated defensive maneuver against "regulatory drift." As the U.S. moves from broad restrictions to more granular, annual licensing models, the risk that existing Western assets could become unserviceable becomes a critical operational threat. By qualifying Chinese alternatives now, these firms are buying insurance against future geopolitical volatility. This trend suggests that the "decoupling" narrative is becoming more complex; while the West seeks to isolate China, the practical necessity of maintaining production in China is forcing global leaders to integrate Chinese components into their contingency workflows.
Questions & Answers
How does the current U.S. licensing status affect Samsung and SK Hynix's operations in China?
The U.S. revoked the "validated end user" (VEU) status in 2025, replacing it with an annual license for 2026. This shift increases uncertainty, as it leaves the companies vulnerable to restrictions that could eventually target the servicing, repair, or replacement of existing Western-made equipment.
What is the primary strategic driver for testing Chinese equipment like AMEC?
The primary driver is risk mitigation. By testing Chinese tools, Samsung and SK Hynix are creating a contingency option to maintain and upgrade their existing Chinese production lines in the event that U.S. export controls prevent them from accessing Western-made tools or services.
What competitive advantages do Chinese equipment manufacturers currently hold?
Chinese suppliers have narrowed the technological gap in specific areas such as etching, deposition, cleaning, and planarisation. Additionally, they offer a significant cost advantage, with tools potentially costing 20% to 30% less than those from established foreign suppliers.
What are the potential risks for Korean chipmakers if they adopt Chinese equipment?
Beyond the technical challenges of lengthy qualification processes and smaller service networks, there are significant concerns regarding intellectual property and security. Furthermore, it remains unclear if these companies would ever consider installing Chinese equipment in their domestic (non-Chinese) factories due to these risks.
Source: REUTERS
