US regulations on China-bound chips to weigh on Samsung Electronics

Samsung Electronics' plant in Pyeongtaek, Gyeonggi Province / Courtesy of Samsung Electronics

Tightened U.S. regulations on China-bound exports of advanced artificial intelligence (AI) semiconductors are putting pressure on Samsung Electronics, as the country remains the largest market for the company's chip exports.

Following a restriction on Nvidia’s shipments of H20 AI processors to China, the Financial Times reported the United States has also required Intel to obtain a license for selling chips to Chinese clients. Industry insiders say the recent regulatory trend suggests that U.S. pressure is likely to intensify and may soon extend to directly target Chinese AI chipmakers, which could deal a blow to Samsung’s HBM business as well.

According to a regulatory filing, Samsung’s sales in China stood at 64.93 trillion won ($45.78 billion) last year, up 53.8 percent from 42.2 trillion won the previous year.

China accounted for 31 percent of Samsung’s 209 trillion won in standalone sales in 2024, making it the company’s largest market and overtaking the Americas, which recorded 61.35 trillion won in sales during the same period.

The company did not provide a breakdown of its Chinese revenue, but analysts and industry officials widely attribute the sales growth to AI-specific high-bandwidth memory (HBM), as Chinese firms preemptively increased stockpiles of the chip in the wake of the U.S. chip regulations.

Samsung’s memory chip revenue reached 84.46 trillion won last year, nearly doubling from 44.13 trillion won in 2023. The average selling price of memory chips also rose by about 63 percent year-on-year.

Huawei Atlas 800 inference server is displayed at InnoEX Fair in Hong Kong, Tuesday. Reuters-Yonhap

One of the key contributors to Samsung’s solid sales in China is assumed to be Huawei.

Market tracker SemiAnalysis said in a recent report that the Chinese tech giant was able to stockpile a total of 13 million HBM stacks, which can be used for 1.6 million Ascend 910C packages before a U.S. ban on HBM exports to China took effect on Jan. 2.

The ban is based on the U.S. Foreign Direct Product Rules, which impose restrictions on products manufactured outside the United States if they are produced using U.S. technology, software or equipment.

Due to this, the ban was initially anticipated to effectively curb Samsung’s HBM exports to China, but SemiAnalysis claimed that Samsung’s HBM chips are still being exported to China indirectly since the ban only covers raw HBM packages.

Samsung refused to confirm anything related to its clients, but industry officials suspect that the company has been able to export HBM chips to China through indirect supply chains after the U.S. export ban took effect.

According to a report by SemiAnalysis, CoAsia Electronics, which serves as Samsung’s main HBM distributor in China, sends Samsung HBM chips to other firms that incorporate them into semiconductor packages. These packages are believed to be delivered to Chinese companies, which reportedly extract the HBM chips by separating them from the packaged products.

The Nvidia logo and U.S. and Chinese flags are seen in this photo illustration created Jan. 29. Reuters-Yonhap

Against this backdrop, Washington’s latest export restrictions on Nvidia are fueling expectations that the move could significantly undermine U.S. chipmakers’ market share in China. Some observers say this could eventually lead to Huawei further solidifying its position in the Chinese market — an outcome the U.S. is likely to resist.

"If the U.S. and China continue to escalate tensions over semiconductors without backing down, the next could be measures targeting Chinese chipmakers,” an industry official said on condition of anonymity. “It remains uncertain how the two sides will shift their positions given the recent flip-flopping, but the current trend suggests that stronger regulations may be on the way.”

If the U.S. employs tighter control on HBM exports to China, Samsung is expected to suffer. Samsung reportedly sought to export its HBMs to China as part of packaged products through clients such as Nvidia, but with Washington’s recent regulation on Nvidia’s H20 shipments, the outlook has become uncertain.

Chances are also high that the Chinese government will expand its support on local memory chip makers, such as CXMT, to replace Samsung HBMs. Reportedly, CXMT recently finished developing its HBM samples and plans to begin mass production next year.