Samsung Turns to China to Boost Ailing Semiconductor Division Amid US-China Tech Tensions

Samsung's Pivot to Chinese Market

Samsung, the South Korean electronics giant, is increasingly turning to Chinese technology companies to bolster its struggling semiconductor division. This strategic shift comes as the company grapples with challenges in securing major US customers, despite substantial investments in American manufacturing facilities. Samsung's exports to China surged by 54% between 2023 and 2024, reflecting the growing importance of Chinese customers in the face of tightening US export controls 1

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Key Deals and Partnerships

In a significant move, Samsung sold more than three years' supply of logic dies, a crucial component in AI chip manufacturing, to Kunlun, a semiconductor design subsidiary of Chinese tech group Baidu 1

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. This previously unreported deal underscores the deepening ties between Samsung and Chinese tech firms. Additionally, Samsung's contract chipmaking business partnered with Kunlun to produce the Core P800, an AI chip incorporating Samsung's High Bandwidth Memory (HBM) technology 1

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Navigating US-China Tech Tensions

Samsung's increasing reliance on Chinese sales comes amid growing trade tensions between Washington and Beijing over sensitive technologies. The company is walking a tightrope as it seeks to comply with US export regulations while maintaining its business relationships with Chinese firms. A person familiar with Samsung's thinking revealed that plans to work with Kunlun on a more advanced AI chip have been put on hold due to new US restrictions implemented in January 2025 1

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Challenges in the US Market

Despite a $40 billion investment in expanding its advanced chip manufacturing and packaging facilities in Texas, supported by up to $6.4 billion in federal subsidies, Samsung's contract chipmaking business has struggled to secure major US customers. The company has been losing market share to Taiwan Semiconductor Manufacturing Co (TSMC), which is investing at least $100 billion in chip fabrication plants in Arizona 1

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Competition in AI Chip Components

Samsung faces stiff competition in the booming market for high bandwidth memory (HBM), a crucial component in AI chips. Local rival SK Hynix has taken the lead as the primary supplier of HBMs for industry giants like Nvidia, resulting in SK Hynix's quarterly operating profit surpassing Samsung's for the first time in their history 1

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Implications for the Global Semiconductor Industry

The situation highlights the complex dynamics in the global semiconductor industry, where geopolitical tensions, technological advancements, and market demands intersect. As Chinese companies eagerly seek advanced AI chips and components, Samsung's role as a major supplier raises questions about the effectiveness of US export controls and the potential need for adjustments to performance thresholds 1

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Samsung maintains that it "strictly complies with the export regulations set forth by the US government" while refraining from commenting on specific customer relationships 1

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. As the semiconductor landscape continues to evolve, the industry watches closely to see how Samsung will navigate these challenges and maintain its position in the global market.