EXPORT restrictions being considered by the United States to halt China’s advances in semiconductor manufacturing could come at a substantial cost, experts say, potentially disrupting fragile global chip supply chains — and hurting U.S. businesses.

Reuters reported Monday that the United States is considering limiting shipments of American chipmaking equipment to memory chip producers in China that make advanced semiconductors used in everything from smartphones to data centers.

The curbs would stop chipmakers like South Korean giants Samsung Electronics and SK Hynix from shipping new technology tools to factories they operate in China, preventing them from upgrading plants that serve customers around the world.

Samsung and SK Hynix, which control more than half of the global NAND flash memory chip market, have invested heavily in China in recent decades to produce chips that are vital to customers including tech giants Apple, Amazon, Facebook owner Meta and Google. As well as computers and phones, the chips are used in products like electric vehicles that require digital data storage.

“Samsung’s China production alone accounts for more than 15% of global NAND flash production ... If there’s any production disruption, it will make chip prices surge,” said Lee Min-hee, analyst at BNK Securities.

The potential for fresh turmoil — the curbs have yet to be approved — comes just as a global chip supply shortage that has disrupted businesses from autos to consumer devices for more than a year is finally showing signs of easing. Supply chain adjustments and weakening consumer demand amid the slowing global economy have combined to repair damage.

But the shortage has yet to be fully resolved. Any signs of fresh disruption could rekindle supply uncertainty, triggering a price surge, as seen earlier this year when China imposed COVID-19 restrictions in Xian where Samsung manufactures chips.

Chipmaking equipment has to be installed and fully tested months before production is due to start. Any delay in shipping the gear to China would pose a real challenge to chipmakers as they seek to manufacture more advanced chips in China facilities.

“Many U.S. companies, like Apple, use Samsung and SK Hynix memory chips. No matter what strategy [the South Korean firms] end up choosing, it will have global implications,” said BNK Securities analyst Lee.

In Samsung’s memory chip operation in Xian, one of the largest foreign chip projects in China, the firm has invested a total of about US$26 billion since it broke ground on the site in 2012, including chip production as well as testing and packaging.

The tech giant makes 128-layer NAND flash products in Xian, analysts said, chips that store data in devices such as smartphones and personal computers, as well as in data centers.

The facility accounts for 43% of Samsung’s global NAND flash memory production capacity and 15% of the overall global output capacity, according to TrendForce late last year.

The U.S. curbs, if approved, could also complicate SK Hynix’s ambition to expand its presence in the NAND market where it is ranked third as of first quarter behind Samsung and Japan’s Kioxia Holdings, which was spun out of Toshiba Corp.

SK Hynix completed late last year the first phase of its US$9 billion purchase of Intel’s NAND business, including its Dalian, China NAND manufacturing facility. (SD-Agencies)