South Korean chip giants step up China investments to combat global AI memory shortage

Samsung Electronics and SK Hynix are stepping up investments in their China wafer fabs as they race to boost supply amid a tightening memory chip market driven by demand for artificial intelligence computing, underscoring China’s continued role in semiconductor production despite US restrictions. Samsung Electronics invested 465.4 billion won (US$308.8 million) in its Xian chip plant in 2025, a 67.5 per cent increase from a year earlier, according to an annual report filed with South Korea’s Financial Supervisory Service on March 10. SK Hynix also ramped up spending, investing 581.1 billion won in its Wuxi chip plant, up 102 per cent year on year, and 440.6 billion won in its Dalian facility, a 52 per cent increase from 2024, according to its March 17 annual report. “Since building new plants typically takes three to five years, optimising operations at existing production bases in China enables a much faster supply response,” said Lee Byung-chul, a visiting research fellow at the Sejong Institute and a former Samsung Electronics executive vice-president who worked at its China subsidiary for 15 years. Samsung’s Xian facility, its only overseas memory chip fab, accounts for about 40 per cent of its NAND output. The company had previously invested 698.4 billion won in the plant in 2019, but there was a pause in spending at the facility between 2020 and 2023, local news agency Seoul Economic Daily reported. Investment resumed in 2024 at 277.8 billion won. SK Hynix’s Wuxi plant accounts for more than 30 per cent of its total DRAM output, while the Dalian facility serves as its NAND production base. Notably, the company had made no investments in either facility in 2023 before increasing its spending over the past two years. Troy Stangarone, a non-resident fellow at the Carnegie Mellon Institute for Strategy & Technology, said the investments point to a need to respond to the global shortage of AI memory, with both DRAM and NAND supply effectively sold out this year. In a report last month, Goldman Sachs raised its 2026 DRAM supply shortfall estimate to 4.9 per cent of total demand, up from 3.3 per cent, and said it expected the market to see its most severe shortage in 15 years. It also lifted its NAND supply shortfall forecast to 4.2 per cent, up from 2.5 per cent. China was also a significant end market for both companies, given its substantial share of the global personal computer and smartphone chip markets, said Park Jun-hong, a director at S&P Global Ratings. Against this backdrop of tightening supply and strong demand, China is seeking to position itself as a key partner for chipmakers. On Tuesday, Zheng Shanjie, head of China’s National Development and Reform Commission, met Samsung Electronics chairman Lee Jae-yong in Beijing and urged the company to “seize the opportunities arising from China’s continuous opening-up” and “further expand investment and cooperation in the country”. “China is an important part of Samsung’s global strategy,” Lee said in response. Lee and SK Hynix chief executive officer Kwak Noh-jung were in Beijing earlier this week for the China Development Forum, their second straight year at the event. Despite the renewed investments, Lee of the Sejong Institute said the trend may be difficult to sustain as China remains under US export controls. Previously, both companies could ship US-made chip equipment to their China plants without restrictions under Washington’s Verified End User status. However, this changed in August 2025 when Washington removed that status, meaning foreign chipmakers now need annual approvals to import US equipment into China. “This investment underscores how Korean semiconductor firms are compelled to make the most of their existing production bases in China as US export controls tighten,” said Lee of the Sejong Institute. “If the rivalry intensifies, Korean companies are likely to have no choice but to explore long-term adjustments to their production exposure in China,” he added. Still, technological developments could emerge as a variable affecting demand. Google said on Tuesday that its “Turbo Quant” algorithm can cut memory requirements to as little as one-sixth of current levels, raising concerns about softer demand and sending shares of memory chipmakers, including Samsung Electronics and SK Hynix, lower on the news.

South Korean chip giants step up China investments to combat global AI memory shortage

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Despite the renewed investments, the trend may be difficult to sustain as China remains under US export controls, say analysts

Despite the renewed investments, the trend may be difficult to sustain as China remains under US export controls, say analysts